Isn't that every day at a job in an At-Will state in the US?

Also if you quit of your own volition while the unions are negotiating you get nothing. If you wait until the unions are done negotiating and get laid off you get several month of severance pay. In fact quitting while layoffs are being discussed has to be among the dumbest financial decision you can make.

The incentives to keep doing a good job are your intrinsic motivation to do a decent job, your professional reputation and receiving good references for your upcoming job applications. Doesn't the american approach of showing employees the door right after being fired to a poor transfer of their responsibilities?

If employers fear that, they can do something that's called "Freistellung" in Germany - basically, employees don't have to work any more but still get paid just the same until the employment contract expires.

Your paycheck?

You can still be fired on the spot if you are not doing your job. Though it might require a warning depending on the jurisdiction.

> Aren't you in a weird limbo for months/years on end where you don't know if your position will be terminated?

At least in Finland the legal requirement for the negotiations is 2 weeks and usually they take exactly that long. It can be even shorter if both sides agree.

The 2 week period also works well in a lot of low paying fields where you are paid every 2 weeks. Basically meaning that everyone knows they are getting their next paycheck in full (outside of a proper bankruptcy which is pretty much the only way out of these rules)