"The impossible gets done at once; the miraculous takes just a - - PowerPoint PPT Presentation

Matthias Knuth

"The impossible gets done at once; the miraculous takes just a little longer."

Labour market reforms and the German "jobs miracle" European Economic and Social Committee Workers' Group Extraordinary Meeting 6-7 March 2014, Athens

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2 4 6 8 2 4 6 8 10 12 14 rate of GDP change against previous year (per cent) unemployment rate (per cent) rate of GDP change unemployment rate average growth rate of period

Average yearly unemployment rate (left-hand scale) and changes in GDP (right-hand scale, adjusted for price) 1971-2012

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Working-age population, employment (covered by social insurance), volume of work, average weekly hours

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25 30 35 40 45 50 55 60 25.000 30.000 35.000 40.000 45.000 50.000 55.000 60.000 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 (billions of) hours thousands

population 15 - 64 numbers of persons in gainful emloyment employment covered by social insurance volume of work (right-hand scale) average weekly hours (right-hand scale)

Most relevant institutional changes 2002-2005

• deregulation of temporary agency work
• deregulation of crafts: in some, master craftsmanship no longer

required for running an enterprise

• re-regulation and political/institutional endorsement of 'mini-jobs'
• reorganization of the PES in order to offer more effective labour market

related services

• invigoration of the 'work first' principle for jobless benefit recipients
• retrenchment of earnings-related benefits for jobless people:
• replacing unemployment assistance by flat-rate minimum income benefits

('Hartz IV', 'unemployment benefit II')

• shortening maximum unemployment benefit duration for older workers
• phasing-out early retirement...
• ... which used to entail unemployment as an entry ticket
• erosion of collective agreement coverage and of works council

representation...

• ...in the absence of a legal minimum wage

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Collective agreements (CA) and existence of works councils (WC) in western and eastern Germany (as a percentage of workers

covered in companies with five or more employees)

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4 7 6 6 7 9 8 8 5 8 9 9 10 10 9 10 6 6 6 6 7 6 6 6 9 8 10 9 10 9 10 11 39 37 37 36 32 30 31 29 25 25 23 22 19 18 18 15 28 25 24 24 23 22 21 21 21 16 15 16 16 18 13 16

2 1 1 1 1 2 1 1 5 3 4 4 4 4 3 3

21 24 25 27 30 31 32 34 35 38 40 41 41 42 47 45 20 40 60 80 100 1998 2000 2002 2004 2006 2008 2010 2012 1998 2000 2002 2004 2006 2008 2010 2012 west Germany east Germany per cent

neither CA nor WC company-based CA / no WC sectoral CA / no WC sectoral CA / with WC company-based CA / with WC no CA / with WC

Annual flows between unemployment and employment (left-hand scale) and average annual level of employment (right-hand scale), 1998-2012

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25.000 27.000 29.000 31.000 33.000 35.000 37.000 39.000 41.000 43.000 45.000 2.500 2.700 2.900 3.100 3.300 3.500 3.700 3.900 4.100 4.300 4.500 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 numbers employed (thousands) transitions (thousands)

numbers employed unemployment --> employment employment --> unemployment

Rates of transition from unemployment to employment by duration of preceding unemployment – West Germany 1998 – 2011 (direct job creation schemes exluded)

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Source: Ursula Jaenichen & Thomas Rothe, Beschäftigungsstabilität und Entlohnung nach Arbeitslosigkeit 1998 bis 2010, WSI- Mitteilungen 3/2014 (forthcoming) – unemployed between 25 and 54, gliding 3-month-averages of seasonally adjusted monthly values, excluding data from fully municipalized jobcentres

< 6 months 6-<9 months 9-<12 months 1-<2 years 2 years and more

Employment of men and women in standard and atypical jobs: absolute numbers and percentages, 1991-2012

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5 10 15 20 25 30 35 40 5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 pPer cent thousands women in atypical employment men in atypical employment women in 'standard' employment men in 'standard' employment total percentage of atypical employment percentage of atypical employment, men percentage of atypical employment, women Source: Federal Statistical Bureau; part-time ≥ 20 hrs./week  'standard employment'

Labour turnover and the economic cycle

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– 8,0 – 6,0 – 4,0 – 2,0 0,0 2,0 4,0 6,0 8,0 0,050 0,055 0,060 0,065 0,070 0,075 0,080 0,085 0,090 12341234123412341234123412341234123412341234123412341234123412341234 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 quarterly year-on-year GDP change labour turnover rate

quarterly year-on-year GDP change quarterly labour turnover rate

Source: Giannelli, Gianna Claudia; Jaenichen, Ursula; Rothe, Thomas (2013): Doing well in reforming the labour market? Recent trends in job stability and wages in Germany (IZA Discussion Paper, 7580).

Yearly median daily wages (price-adjusted) in newly entered full-time jobs , west Germany

10 all men all women men after unemploy- ment women after unemploy- ment

Source: Jaenichen, Ursula; Rothe, Thomas (2014): Beschäftigungsstabilität und Entlohnung nach Arbeitslosigkeit 1998 bis 2010, WSI-Mitteilungen 3/2014 (forthcoming).

Conclusions

• trend reversal on German labour market primarily attributable to

demographic change, slow-down in productivity and expansion of part-time jobs

• resilience during crisis 2008/2009 due to traditional virtues of 'co-
• rdinated capitalism', not to reforms
• reforms did 'activate' the short-term unemployed but failed to

adequately address long-term unemployment

• apparently good labour market performance tends to cover up

downsides (most of which developed before the reforms):

• increasing shares of 'atypical' employment (though recently halted)
• wage stagnation, increasing wage inequality, growing low-wage sector
• erosion of collective bargaining coverage more important than
• vert deregulation
• decline in quality of job offers is stalling labour turnover:

 functioning of German labour market as an allocation mechanism has deteriorated as a result of 'flexibilisation'  skills shortages resulting from demographic ageing cannot be addressed adequately

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