Germany’s Labour Market Policies

Abstract

Germany has become one of the most competitive economies in the world. Only a decade and a half ago it was widely derided as stagnant, and ridden by political paralysis in reforming its labour market policies. However, in 2002, the discovery of manipulated statistics in the German Employment Agency opened a window of opportunity to break the stalemate in corporatist policymaking. In response, the government convened a commission to design labour market policy reforms: the Hartz Committee, named for its chair, Peter Hartz. Including experts, politicians, and members from interest groups in the commission enabled the government to promote the ‘Hartz Reforms’ on the basis of expertise and compromise. Their focus was on creating incentives for seeking employment. Job search assistance and monitoring gained importance, whereas ineffective job creation and early retirement schemes were abolished or reduced. These activating reforms successfully tackled structural unemployment and increased the overall employment rate. Their success in strengthening economic resilience was demonstrated during the 2008 economic crisis, when in combination with other measures such as the extension of short-time work, and controlled unit labour costs, they led Germany’s labour market through the deep recession.

Was it worth it? The impact of the German minimum wage on union membership of employees

“…The slow growth of jobs in the labour-intensive personal service sector was a reason that a large part of the population remained inactive. This problem worsened when after the 1990 German reunification, the adopted West German labour market regulations excluded large parts of East Germany’s often low-skilled workforce since their productivity stayed behind their wages (Eichhorst and Marx, 2011: 76; Spohr, 2019: 288). In the 1990s, employers increasingly withdrew themselves from the social partnership (Haipeter, 2012: 388).…”

“…In the 1990s, employers increasingly withdrew themselves from the social partnership (Haipeter, 2012: 388). From the mid-1990s onwards and accelerated by the 2002–2004 Hartz reforms, the erosion of the German inclusive collective bargaining system generated a sizeable low-wage sector, in which pay was determined unilaterally by the employers (Bosch, 2018: 30; Spohr, 2019: 292).…”