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Reforming German Labor Market Institutions: A Dual Path to Flexibility

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  • Eichhorst, Werner

    ()
    (IZA)

  • Marx, Paul

    ()
    (University of Southern Denmark)

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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Bibliographic 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
Date of revision:
Handle: RePEc:iza:izadps:dp4100

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

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