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The Two German Labour Market Miracles: Blueprints for Tackling the Unemployment Crisis?

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Abstract

The article reviews the factors underlying Germany's exceptional labour market performance since 2005. It attributes labour market turnaround to powerful social reforms strengthening labour supply and effectiveness of public employment services, assisted by cooperative social partners moderating wage growth. In the great recession, ongoing transition to low-unemployment equilibrium, peculiarities in the export cycle, and private arrangements supporting labour hoarding, rather than discrete policy changes, kept employment at unpredicted levels. While these features scarcely transfer to other circumstances, the policies that evidently lifted Germany to lasting higher employment levels may provide valuable blueprints for countries struggling with current structural unemployment crises.

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Notes

  1. See, for example, Wunsch (2005) for a more detailed overview of the labour market development after German unification.

  2. See Eichhorst et al. (2010) for a detailed description of the changes in the German unemployment insurance system.

  3. The group of non-unemployed employable long-term unemployed includes participants in active labour market programmes, individuals in minor employment, individuals aged 58 and above, individuals in education and individuals who need to give care to children or relatives.

  4. A serious drawback is that due to the two competing administrative systems reliable time series information for the entire long-term unemployed does not exist.

  5. Jacobi and Kluve (2007) survey the empirical evidence on the effectiveness of labour market services and policies before and after the reforms. Eichhorst and Zimmermann (2007) is another excellent survey focusing on active labour market instruments.

  6. This subsidy scheme and an earlier one, the so-called bridging subsidy (‘Überbrückungsgeld’), in 2006 were merged into one, less-well designed scheme, the so-called start-up subsidy (‘Gründungszuschuss’). See Caliendo and Kritikos (2009) for a critical review.

  7. At least in the cases where employer organizations have supported the minimum wage, one may reckon that other aspects like impairing competition from outsiders play a role.

  8. See Caliendo (2009) for a review of the measures that have fostered labour supply.

  9. See Rinne and Zimmermann (2011) for a helpful survey.

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Authors and Affiliations

  1. Centre for European Economic Research (ZEW), P.O. Box 103443, Mannheim, D-68034, Germany

    Holger Bonin

  2. University of Kassel, Faculty of Economics and Management, Kassel, D-34109, Germany

    Holger Bonin

  3. IZA, Schaumburg-Lippe-Strasse 5-9, Bonn, D-53113, Germany

    Holger Bonin

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Bonin, H. The Two German Labour Market Miracles: Blueprints for Tackling the Unemployment Crisis?. Comp Econ Stud 54, 787–807 (2012). https://doi.org/10.1057/ces.2012.39

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