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The Unexpected Appearance of a New German Model

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  • Eichhorst, Werner

    () (IZA)

Abstract

Most Continental European labour markets and welfare states underwent a substantial transformation over the last two decades moving from a situation of low employment and limited labour market inequality to higher employment, but also more inequality. Germany is a case in point as it exhibits growing employment figures and growing shares of low pay and non-standard work. Furthermore, the German labour market has been remarkably resilient during the recent crisis. How can this be explained? The paper claims that changes in labour market institutions such as unemployment benefits, active labour market policies and employment protection play a major role, but changes in industrial relations at the sectoral level and individual firms' staffing practices are equally important in explaining actual labour market outcomes. Regarding labour market institutions, the pattern found in Germany shows sequences of de- and re-regulatory reforms of employment protection and increasing or decreasing unemployment benefit generosity, both mostly addressing the margins of the labour market, i.e. 'outsiders', and contributing to a growing dualisation of the employment system. The institutional status of 'insiders' was hardly affected by legislative changes. This dualisation trend was reinforced by micro-level dynamics in industrial relations and company employment practices where we can observe growing reliance on mechanisms of internal flexibility for the skilled core work force and increasing use of non-standard types of employment in less specifically skilled occupations.

Suggested Citation

  • Eichhorst, Werner, 2012. "The Unexpected Appearance of a New German Model," IZA Discussion Papers 6625, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6625
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    References listed on IDEAS

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    1. Hemerijck, Anton & Eichhorst, Werner, 2009. "Whatever Happened to the Bismarckian Welfare State? From Labor Shedding to Employment-Friendly Reforms," IZA Discussion Papers 4085, Institute for the Study of Labor (IZA).
    2. Werner Eichhorst & Michael Feil & Paul Marx, 2010. "Crisis, What Crisis? Patterns of Adaptation in European Labor Markets," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 61(Supplemen), pages 29-64.
    3. Spermann, Alexander, 2011. "The New Role of Temporary Agency Work in Germany," IZA Discussion Papers 6180, Institute for the Study of Labor (IZA).
    4. Eichhorst, Werner & Marx, Paul, 2009. "Reforming German Labor Market Institutions: A Dual Path to Flexibility," IZA Discussion Papers 4100, Institute for the Study of Labor (IZA).
    5. Eichhorst, Werner & Marx, Paul, 2010. "Whatever Works: Dualisation and the Service Economy in Bismarckian Welfare States," IZA Discussion Papers 5035, Institute for the Study of Labor (IZA).
    6. Eichhorst, Werner & Grienberger-Zingerle, Maria & Konle-Seidl, Regina, 2006. "Activation Policies in Germany: From Status Protection to Basic Income Support," IZA Discussion Papers 2514, Institute for the Study of Labor (IZA).
    7. Eichhorst, Werner & Marx, Paul & Tobsch, Verena, 2009. "Institutional Arrangements, Employment Performance and the Quality of Work," IZA Discussion Papers 4595, Institute for the Study of Labor (IZA).
    8. Ulf Rinne & Klaus Zimmermann, 2012. "Another economic miracle? The German labor market and the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-21, December.
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    Cited by:

    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 967-1015.
    2. World Bank Group, 2014. "Balancing Flexibility and Worker Protection," World Bank Other Operational Studies 23024, The World Bank.
    3. Economides, George & Moutos, Thomas, 2017. "Minimum wages in the presence of in-kind redistribution," CEPIE Working Papers 08/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    4. Rinawi, Miriam & Backes-Gellner, Uschi, 2015. "Occupational Skills and the Evolution of Wages," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112801, Verein für Socialpolitik / German Economic Association.
    5. David Marsden, 2015. "The Future of the German Industrial Relations Model," CEP Discussion Papers dp1344, Centre for Economic Performance, LSE.
    6. Dingeldey, Irene & Kathmann, Till, 2017. "Einführung und Wirkmächtigkeit des gesetzlichen Mindestlohns in Deutschland: Institutionelle Reformen und gewerkschaftliche Strategien in einem segmentierten Tarifsystem," Schriftenreihe Institut Arbeit und Wirtschaft 21/2017, Institut Arbeit und Wirtschaft (IAW), Universität Bremen und Arbeitnehmerkammer Bremen.
    7. Giuseppe Bertola & John Driffill & Harold James & Hans-Werner Sinn & Jan-Egbert Sturm & Ákos Valentinyi, 2013. "Chapter 3: Labour Market Reform and Youth Unemployment," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 73-94, February.
    8. Daniel Feser & Till Proeger, 2017. "Asymmetric information as a barrier to knowledge spillovers in expert markets," International Entrepreneurship and Management Journal, Springer, vol. 13(1), pages 211-232, March.
    9. Wanger, Susanne, 2017. "What makes employees satisfied with their working time? : The role of working hours, time-sovereignty and working conditions for working time and job satisfaction," IAB Discussion Paper 201720, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    Germany; flexibility; labor market reforms; employment growth; dualisation;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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