The German Labor Market: Still Adjusting Badly?

40 Pages Posted: 31 Jul 2006

See all articles by Werner Eichhorst

Werner Eichhorst

Institute for the Study of Labor (IZA)

Lutz Kaiser

IZA Institute of Labor Economics; DIW Berlin, German Institute for Economic Research

Date Written: July 2006

Abstract

In the late nineties, Germany was often seen as a laggard with respect to labor market and welfare state reforms with institutional inertia being reflected in notoriously sluggish employment growth and rising unemployment. Recent years, however, saw a complex sequence of reforms with regard to labor market-related institutions such as labor market regulation, social benefits, active and activating labor market policies and attempts to reduce the burden of payroll taxes and - last but not least - a series of changes in collective bargaining. The paper shows if and to what extent labor-market related reforms in Germany have in fact contributed to overcoming structural weaknesses of a Continental European "welfare state without work" and creating an institutional setup more conducive to strong employment growth and lower unemployment. We provide a detailed institutional analysis of the most relevant reforms in both public policies and collective bargaining and evaluate their effects on labor market structures and dynamics that can be identified so far. In particular we focus on the development of different types of employment and raise the question whether these upcoming non-standard forms of employment may be sustainable with respect to the future of the German labor market.

Keywords: Germany, labor market policy, labor market reforms

JEL Classification: J32, J68

Suggested Citation

Eichhorst, Werner and Kaiser, Lutz, The German Labor Market: Still Adjusting Badly? (July 2006). IZA Discussion Paper No. 2215, Available at SSRN: https://ssrn.com/abstract=921056

Werner Eichhorst (Contact Author)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Lutz Kaiser

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

DIW Berlin, German Institute for Economic Research

Mohrenstraße 58
Berlin, 10117
Germany

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