German labour market in stable condition

In March 2012 the Institute for Employment Research released data that show measures used to combat the global financial and economic crisis are no longer needed to stabilise the German labour market. The number of short-time workers has plummeted since 2009, and the trend of reducing hours accumulated in employees’ working time accounts has stopped. However, despite a comparatively low unemployment rate of 7.4%, the social partners are divided on current developments.

Background

When the global economic and financial crisis hit Germany, several labour market instruments helped to stabilise German employment. The measures mainly consisted of extending short-time working schemes (DE0904039I, DE0909029I), reducing working hours saved up in employees’ working time accounts and exercising wage restraint in collective agreements concluded during the crisis. These measures are thought to have spared the German labour market a drastic rise in unemployment. The latest data from the Institute for Employment Research (IAB) now indicate they are no longer in widespread use.

Latest labour market data

The IAB has recently analysed the latest available working time data. In press statements from 1 March 2012 and 22 December 2011, it analysed working time developments during the past couple of years. The IAB data show the following main trends.

  • Between the fourth quarter of 2008 and the first quarter of 2010, working time accounts were reduced by an average of 12 hours. However, the hours saved in working time accounts began rising again in spring 2010. By the end of the third quarter of 2010 an average of 6.9 hours per employee had been saved. This figure actually rose by another 3.6 hours in 2011.
  • The number of short-time workers is also declining. Short-time work peaked in May 2009, when nearly 1.5 million short-time workers were registered at the Federal Employment Agency (BA). In 2011, an average 150,000 employees were registered for this scheme, a considerable drop.
  • In 2011, full-time and part-time employees worked an average of 1,330 hours. This compares to only 1,296 average working hours in 2009.

Rise in employment and productivity

The IAB researchers attribute these positive developments to the rise in employment and the increase in productivity in 2011. The latest data collected in February 2012 by the BA show the unemployment rate was, at 7.4%, comparatively low. In February 3,110,000 people were registered as unemployed. This 26,000 increase in unemployment compared to January can be attributed to the usual seasonal decline in employment during the winter months. However, during the same month in 2011, 203,000 more people were out of work. This suggests that the German labour market can currently be considered to be in a stable condition.

Position of social partners

The Confederation of German Trade Unions (DGB) criticised the current labour market situation when the latest labour market figures were released by the BA. Executive Board Member Claus Matecki agreed that the German labour market was stable but stressed that many employees were neither generating enough income to stimulate domestic demand nor had enough planning certainty.

In addition, Mr Matecki drew attention to the lower wages paid for temporary agency work and welcomed the efforts of the German Metalworkers’ Union (IG Metall), one of the DGB’s member unions, to win equal pay for agency workers. At the beginning of the current collective bargaining round, IG Metall announced a campaign for greater codetermination rights for works councils on behalf of temporary agency workers employed in their establishments. Finally, Mr Matecki also called on the Federal Government to take more decisive steps to regulate temporary agency work.

The CEO of the Bavarian Industry Association (vbw), Bertram Brossardt, welcomed the latest labour market figures. He acknowledged the slight drop in employment and emphasised that this decrease was due to the seasonal weakness of the labour market. While Mr Brossardt stressed that the German labour market was in fine shape, he also pointed to possible pitfalls that could hamper its recovery. Against the backdrop of the struggling euro and the financial crisis, he called for further measures to loosen German labour market regulations.

Amongst other things, Mr Brossardt warned against the negative effect of a minimum wage that might threaten collective bargaining autonomy and lead to job cuts. In contrast to the unions, he highlighted the advantages of temporary agency work, saying the use of such workers allows companies to adapt their manpower needs to their economic situation. He also suggested that agency work gives the long-term unemployed and low-qualified workers an opportunity to return to the primary labour market.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

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