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Reforming German Labor Market Institutions: A Dual Path to Flexibility

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Author Info
Eichhorst, Werner () (IZA)
Marx, Paul () (IZA)

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Abstract

Germany has always been one of the prime examples of institutional complementarities between social insurance, a rather passive welfare state, strong employment protection and collective bargaining that stabilize diversified quality production. This institutional arrangement was criticized for being the main cause of inferior labor market performance and increasing fiscal pressure on the welfare state while at the same time inhibiting institutional change. However, over the last 15 years, a sequence of institutional reforms has fundamentally modified the functioning of the German labor market and increased both flexibility and job creation capacities through two intimately linked processes that redefined the line between inactivity, the flexible and the standard segment of the labor market. On the one hand, policy changes facilitated the expansion of flexible or 'atypical' jobs, whereas increasing flexibility of the standard employment relationship resulted from wage moderation and working time flexibility. While at the outset of this reform sequence German had a small, but relatively egalitarian labor market, the number of jobs, but also their diversity has increased.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4100.

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Length: 33 pages
Date of creation: Mar 2009
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Handle: RePEc:iza:izadps:dp4100

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Related research
Keywords: Germany; labor market reforms; atypical employment; standard employment relationship;

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Find related papers by JEL classification:
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anke Hassel, 2003. "The Politics of Social Pacts," British Journal of Industrial Relations, Blackwell Publishers Ltd/London School of Economics, vol. 41(4), pages 707-726, December. [Downloadable!] (restricted)
  2. Karl Brenke & Werner Eichhorst, 2008. "Leiharbeit breitet sich rasant aus," Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 75(19), pages 242-252. [Downloadable!]
  3. Peter Berg, 2008. "Working Time Flexibility in the German Employment Relations System: Implications for Germany and Lessons for the United States," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 15(2), pages 111 - 132. [Downloadable!]
  4. Tito Boeri & Axel Börsch-Supan & Guido Tabellini, 2001. "Would you like to shrink the welfare state? A survey of European citizens," Economic Policy, CEPR, CES, MSH, vol. 16(32), pages 7-50, 04. [Downloadable!] (restricted)
  5. Gilles Saint-Paul, 2002. "The Political Economy of Employment Protection," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 672-701, June. [Downloadable!] (restricted)
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  1. Eichhorst, Werner & Marx, Paul, 2009. "From the Dual Apprenticeship System to a Dual Labor Market? The German High-Skill Equilibrium and the Service Economy," IZA Discussion Papers 4220, Institute for the Study of Labor (IZA). [Downloadable!]
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This page was last updated on 2009-11-23.

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