From “Sick Man” to “Miracle”

Abstract

What explains Germany’s exceptional labor market performance during the Great Recession of 2008-09? Contrary to accounts that emphasize employment protection legislation or government policy (i.e., short-time work), this article argues that actions by firms—embedded in ever-changing coordinative institutional structures—were crucial. Firms chose to keep rather than shed labor, a strategy induced by (i) a “toolkit” of flexible labor market instruments that had evolved incrementally over the past thirty years; (ii) wage restraint and successful internal restructuring of firms during the past decade, which fueled an export boom before the crisis. Firms thus had some margin for maneuver, using internal flexibility to protect their investment in skilled workers. These and other institutional changes driven by firms reflect a process of successful adaptation to external economic challenges, but did not fundamentally undermine Germany’s coordinated form of capitalism. The result is not a new German model that was purposefully designed; instead German firms slowly discovered new ways to cope with economic challenges.

Youth Unemployment in Advanced Economies in Europe: Searching for Solutions

“…Before the crisis, these sectors comprised between 65-75 percent of youth 8 Some authors have noted that German unemployment rates declined after the crisis because firms hoarded labor given their prior experiences with labor shortages. Instead of layoffs, German companies resorted to a decrease in average hours worked per worker, facilitated by reforms that increased working-hour flexibility at the firm level in the form of the short-time work scheme (Kurzarbeit) and by much greater wage bargaining flexibility (Reisenbichler and Morgan, 2012). 9 SMEs are defined as firms with less than 250 employees, turnover of less than 50 million euros, or a balance sheet of less than 43 million euros.…”

‘ModernizeandDie’? German social democracy and the electoral consequences of the Agenda 2010

“…is seen as a prerequisite for Germany's current economic success (Eichhorst et al, 2010;Reisenbichler and Morgan, 2012). At the same time, the reform represents a clear and quite unexpected (see Kitschelt, 2003;Kitschelt and Streeck, 2004) departure from the traditional German social policy model (Kemmerling and Bruttel, 2006;Fleckenstein, 2008;Hassel and Schiller, 2010).…”

Youth Unemployment in Advanced Europe

“…Even in those cases, some studies have found that the Okun's law holds for measures of hours worked. For instance, instead of layoffs, German companies resorted to a decrease in average hours worked per worker(Reisenbichler and Morgan, 2012).13 Not surprisingly, the magnitudes differ somewhat fromBall et al (2013) because our analysis focuses on specific age groups of the unemployed.©International Monetary Fund. Not for Redistribution…”