In January 2000, the Confederation of German Employers' Associations, BDA, published a paper calling for fundamental changes in labour market policy. These proposals are aimed mainly at reducing jobseekers' allowances and restricting job-creation measures, with the aim of placing greater pressure on unemployed people to enter the labour market. The DGB trade union confederation rejects these proposals, arguing that it is not the amount of benefits but the lack of jobs which hinders unemployed people from finding new jobs.
In January 2000, the Confederation of German Employers' Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) presented a paper in which it calls for fundamental reforms in labour market policy. These proposals are embedded in a fundamental criticism of the current economy policy, which is not seen as providing a framework for necessary changes. According to BDA, labour is too expensive and inflexible, social security contributions and taxes on investments and jobs are too high and the whole system is over-regulated, with the result that it is very difficult for firms to create new jobs. Therefore the employers demand lower wages, decentralisation and flexibility, considering labour market policy to be central to these reforms. The government is criticised for extending the so-called active labour market policy in order to seek success in creating employment, instead of translating the idea of structural reforms into public policy. The employers' association views this strategy as having little impact on employment - on the contrary, the negative consequences on the "normal" labour market are alarming.
BDA proposals
BDA states that the costs of the expansion of labour market policy are being paid through taxes and contributions and thereby create unemployment instead of removing it. Therefore the central thrust of its new paper is to reduce costs through the restriction of active labour market policy on the one hand and the lowering of expenses for passive labour market policy - ie the payments of benefits - on the other hand. Employment offices should concentrate on their basic duties instead of influencing the labour market through the creation of jobs. This could lower the costs for unemployment insurance, which have been at the high level of 6.5% gross national income for 10 years. Concerning payments to unemployed people, BDA supports the principle that recipients should be entitled to these benefits only if they have made contributions to the unemployment insurance scheme. A strict observance of this principle could stabilise the system, which BDA considers to be unbalanced, since there is a wide difference between contributions and benefits.
The concrete proposals concerning unemployment benefit (Arbeitslosengeld) are:
- restriction of unemployment benefits to 12 months;
- reduction of unemployment benefits to 60% of the last net pay;
- employees should be obliged to announce themselves as job-seekers as soon as they receive notice of their forthcoming dismissal, in order to enhance the probability of finding a new job; and
- in accordance with a decision of the previous government, the existing regulation that unemployed people who are not available for the labour market are nevertheless entitled to unemployment benefits should be abolished on 31 December 2000. BDA emphasises that the present government must implement this decision.
Furthermore, BDA proposes the abolition of unemployment assistance (Arbeitslosenhilfe) as soon as possible. This is justified by a criticism of the existence of two separate systems, supplementary benefit (Sozialhilfe) and unemployment assistance. Unemployment assistance is paid either after the expiry of unemployment benefit or if the applicant has worked a minimum of 150 (in special cases 240) days liable to social security contributions (to be entitled to unemployment benefit, recipients must have worked 360 such days within three years). While supplementary benefit is available for an unlimited time period, the latter is limited in time for one year. The employers' associations criticise the fact that the two systems – unemployment assistance and supplementary benefit - follow a different logic concerning the obligation of unemployed to accept a new job which is laid down in the social security code (Sozialgesetzbuch). Recipients of unemployment assistance are placed on the same level as recipients of unemployment benefit who are allowed to refuse a job when the pay is less than their last regular job. This is not the case for recipients of supplementary benefit who have to accept any job as long as there are no important personal reasons like the necessity of childcare which prevent it. The BDA wants to put unemployed people under pressure by controlling their availability for new jobs. They are in favour of the previous government's regulation that unemployed persons are obliged to give a quarterly report of their attempts to get new employment. The new government has changed this law in August 1999, announcing that these reports are sufficient if submitted every six months. According to the BDA this has been a step backwards and should be replaced immediately.
As mentioned above the criticism of the passive labour market policy is only one aspect of the BDA-paper. The other proposals aim at changes to the active labour market policy as job creation schemes (Arbeitsbeschaffungsmaßnahmen, ABM) and measures for structural adaptation (Strukturanpassungsmaßnahmen, SAM). In the long run the BDA demands the abolition of ABM. Instead of ABM a new instrument which is linked to SAM should be introduced. According to the employers' associations ABM entail the following problems:
- through the linkage of ABM to collective agreement it gains the appearance of regular employment while it is de facto special employment with specific social rights;
- ABM are in direct competition to regular jobs, as in the sector of landscape gardening;
- in some projects the number of persons who work in ABM is more important than the content of the measure;
- because of the definition of ABM as additional work, some unnecessary measures are supported.
The last aspect the employers' associations mention is the need for a new organisation principle for the federal and the regional labour offices. In detail they demand real parity between employers' and employees' representatives, self-government with autonomy concerning budget and contributions and an adequate financing of active labour market policy.
In a press release (http://www.dgb.de/cgi/a/pms.cgi?id=854#top) the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) rejected the proposals of the BDA to abolish unemployment assistance. While demonstrating that the average unemployment assistance is only DEM 915 per month Ursula Engelen-Kefer, vice-chairwoman of the DGB, argued that it is not the amount of benefits which hinders unemployed persons from finding new jobs but that the lack of jobs is the key problem. She repudiated reproaches by the employers' association that unemployed do not want to find jobs. In addition the idea of replacing unemployment assistance by supplementary benefit is not viable for the local governments as they would be unable to pay it.
Commentary
The recent proposals by the BDA do not really represent something new, because the argument that the welfare state principle with its high individual benefits is partly responsible for the high number of unemployed, comes up in most debates on the future of work and labour costs. Although it is remarkable that this time the BDA is presenting a concrete approach which not only demands for lower costs but also structural change in basic ideas of the German welfare model. This might be the reason why the paper attracts attention.
It is, however, difficult to understand why the BDA expects improvements from uniting unemployment assistance with supplementary benefits. The argument that just the existence of two systems does not make sense is poor, taking into account that promotion of employment is dependent on the individual right either to unemployment assistance or unemployment benefit. More likely it seems as if the BDA want to put the unemployed under pressure to accept any job which is offered to them.
The other point is that ABM are of significant relevance for the labour market policy. According to the Federal Labour Office (Bundesanstalt für Arbeit) 174,202 of a total of 203,548 involved in job creation measures have been unemployed for longer than 12 months. Furthermore about three quarters of all ABM are to be found in east Germany. It might be true that the regular figures of the unemployment situation in Germany look better than they are, because those persons who are clients of active employment market policy do not show up in the unemployment statistics, but at the same time many of them find are able to find a job perspective through these measures.
(Alexandra Scheele, Institute for Economic and Social Research, WSI)