The German labor market response in the world recession – de-mystifying a miracle

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Abstract This paper aims at analyzing the astonishingly mild response of the German labor market to the severe demand shock that occurred in the aftermath of the financial crisis. It stresses the role of institutions such as workingtime accounts which create a large scope for a buffering capacity within the firm. It is argued that labor market reforms and the behavior of social partners have strengthened the adjustment possibilities when facing a temporary slump. The crisis mainly affected export-oriented manufacturing firms in Germany's thriving regions. Before the crisis those firms were the engines of growth and suffered from a shortage of qualified professional workers. Moreover, training costs are relatively high and dismissals would entail a significant loss in firm-specific human capital. Supported by the generous short-time work schemes, these factors contributed to the high willingness of crisis-stricken firms to pursue a strategy of massive labor hoarding. By contrast, the comparatively high employment protection does not seem to play a major role in explaining the adjustment behavior of German firms in the current crisis. Terms of use: Documents in JEL classification J2 · J6J. Möller (u) IAB,

Temporary agency work and the Great Recession

“…The former was facilitated by a reduction of overtime, the use of working-time accounts, and governmentsponsored short-time work schemes. 8 The latter reflected "labour hoarding", as firms feared the prospects of later costly and difficult recruitment of (skilled) personnel in the subsequent recovery (Möller, 2010). Of the adjustment mechanisms listed above, short-time work has attracted particular attention.…”

“…8 Möller (2010) estimates that the total reduction in working time was equivalent to that of 1.39 million workers with average working hours, with the reduction in overtime accounting for 285,000, working time accounts for 244,000, and short-time work schemes for 360,000 thereof, respectively. Note that the reduction in the number of temporary agency workers stated above might well be larger in terms of "workers with average working hours" as the fraction of of full-time workers is larger in the temporary agency sector than in the overall economy.…”

“…the German labour market performance in the Great Recession (Bellmann et al, 2015;Burda and Hunt, 2011;Boeri and Bruecker, 2011;Bohachova et al, 2011;Möller, 2010)). 2 These studies, however, do not focus on the role of temporary agency employment as a potentially stabilizing factor.…”

The Aggregate Effects of the Hartz Reforms in Germany

“…Its extremely favorable performance -sometimes referred to as the German labor market "miracle" (Möller 2010) -has attracted a great deal of attention in the literature (Sala et al 2012). Following Şahin et al (2012), panel data could be used in order to measure the magnitude of the sectoral and/or geographical mismatch in the German labor market.…”

A Sequential Decomposition of the Drop in Collective Bargaining Coverage

“…In particular, it may result in lower wage levels and growing wage inequality because unions tend to compress the wage distribution from below. 2 Germany is an interesting case to study because it underwent a remarkable transition from being considered as the "sick man" of Europe to experiencing a "jobs miracle" (European Commission 2002;Krugman 2009;Möller 2010;Dustmann et al 2014). In Germany, collective agreements dominate the entire process of setting working conditions -not only for union members.…”