The German labour market in a comparative perspective with special reference to the employment of ol

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The German labour market in a comparative
perspective with special reference to the
employment of older persons
Susanne Kraatz, Thomas Rhein
Presentation for the conference on The European
Employment Strategy Opportunities and Limits
for the New Member States' Budapest, 20th
October 2005
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Outline The employment targets of the
EES Germanys labour market performance East
Germany The ageing society and older
workers German policy responses The ECE
member countries in comparison Age-related
employment the youth and the elderly Conclusion
s
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The European Employment Strategy (EES) as Part of
the Lisbon Agenda

• Achieving full employment -gtOverall employment
  rate of 70 Female employment rate of 60
  Older workers employment rate of 50 -
  raising the average exit rate by five years
• Improving quality and productivity at work
• Strengthening social and territorial cohesion

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Performance of the German Labour Market (1)
Employment rates, 2004
Source Eurostat
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Overall Employment Rates, 2004, in Comparison
Source Eurostat
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Performance of the German Labour Market (2)
Unemployment rates, 2004
Source Eurostat
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Performance of the German Labour Market (3)

• Slight improvement in terms of (un)employment
  after 1997, but rising unemployment since 2001
  and steady fall in standard (full-time,
  permanent) jobs
• Employment rates below EU targets and other EU
  countries, especially for older workers
• Situation for younger people still relatively
  good
• Unemployment is conceived as the biggest problem
  of Germanys society

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Aspects of German Labour Market Problems

• Low growth rates
• High (non-wage) labour costs (social
  charges)West Germany 32 East Germany 19
  Slovenia 9 Slovak Rep. 3 (2002)
• Growing international competition
• Too much regulation, e.g. employment protection,
  too generous social benefits (disputed)
• Problem groups and regions- East Germany-
  Older people- Unskilled workers

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The East German Labour Market (1)

• Persistent differences in employment rates

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The East German Labour Market (2)

• and unemployment rates

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The East German Labour Market (3)

• despite massive East-West migration - More
  than 3 million East Germans went West since 1989,
  mainly young people - Net emigration since
  1989 more than 1.5 million persons
• and huge financial West-East Transfers -
  Almost 1.3 billion Euros between 1991 and 2003
• High female labour force participation
• Lower wages than in the West
• but also low productivity, apart from some
  regions - East German GDP per Head at 64.3 of
  West level (2004)

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The Greying of the Labour Market

• Declining birth rates and rising life
  expectancy
• constitute the big challenge of the future -
  not only for Germany, but also for other European
  countries
• and will lead to a shrinking and ageing
  workforce

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SourceIAB-Kurzbericht No. 11/2005
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Employment of Older Workers (1)

• Increasing employment of older workers will be
  crucial to meet the demographic challenge
• Poor employment performance of older workers
  also constitutes a threat for financing social
  security
• West Germany Early-Exit Culture since the
  70s Older workers should give way to the
  youth
• Early exit from working life via different
  channels - Pre-retirement, early retirement,
  unemployment insurance, also in East Germany
  since the 90s

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Employment of Older Workers (2)

• The Gender aspect Few younger women working ?
  Few older women working - Employment rate 55-64
  - male 48.8 female 29.8 (2004)
• The skills aspect Low labour force
  participation of the low- skilled, who retire
  early
• But Rising awareness (supported by the European
  Employment Strategy) that the burden of early
  exit will be too high in the future

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German Policy Responses... (1)
Agenda 2010 A comprehensive reform package
(2003) Tax reform lower rates for all Health
care, pension reform stabilisation of labour
burden Family and gender policy work-life-balanc
e Labour market reforms Proactive
concept, simplification and cutbacks in
benefits Reorganisation of PES Moderate
liberalization Increasing bargaining at company
level
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German Policy Responses (2)New strategies for
older workers

• Beginning paradigm shift From early to late(r)
  exit
• Pensions 1. Financial incentives
• 2. Gradual increase of age for early
  retirement
• (unemployment, part time work) 60 -gt 63
• Active Labour Market policy
• Training, Subsidies for older unemployed
• New projects
• Liberalisation of fixed term contracts (52
  instead of 58)
• De facto Liberalisation of dismissal

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German Policy Responses (3)New strategies for
older workers

• Employability Strategy for Lifelong Learning,
• INQUA
• Part-time work for a smooth transition
• Family policy To close the gender gap for the
  future
• Change of attitudes Campaign 50 - they are
  competent
• Pro-age
• Germany has developed a more comprehensive
  strategy

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but persisting lack of consistency

• Employers use old age part-time work to reduce
  jobs.
• are not ready to engage older workers.
• The state did not close the path of early
  retirement.
• did not yet introduce an anti-discrimination
  law.
• as a consequence of economic and political
  conditions.

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Why bigbang reforms are not possible in
Germany

• Federalism Joint-decision trap Frequent
  elections
• Coalitions In the search of stable majorities
• Party system The dilemma of Catch-all parties
• Interest groups Strong interest groups, lack of
  consensus
• Political cultureThe loss of confidence

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East Germany (1) What is different from ECE
countries?

• Postulate of equal living conditions
• -gt wages growing faster than productivity.
• Fast economic, political and social union in 1990
• -gt breakdown of the East German
• economic structures.
• The costful program Reconstruction East
• -gt did not solve structural problems
• . new regional disparities between the two
  halves of Germany.

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East Germany (2) Labour market policyFrom
special to more equal Responses

• Special Responses
• Transitional allowances and benefits
• (Re-)training offers
• Subsidized employment ABM, SAM
• Since 2004 only few special measures left (BSI)
• ... smoothing, not solving the problems of
  unemployment

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East Germany (3) The search for alternative
solutions

• The individuum Migration, commuting or
  inactivity.
• The companies Less collective agreements.
• The state Discussing the model of a
  special economic zone.
• resembles ECE countries

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ECE member Countries (1) Real Growth and GDP
per Head
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ECE member Countries (2) Employment Rates, 2004
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ECE member Countries (3) Increasing
heterogeneity

• Frontrunners join or pass (East-)Germany
• Overall Employment Czech Republic
• Older Baltic States, Czech Republic
• Unemployment Hungary and Slovenia
• laggards (Poland, Slovakia) are loosing ground.
• Even greater heterogeneity concerning older
  workers
• Apparently following the international pattern
• The stronger the labour market, the better the
  chances for all.

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ECE member Countries (4) Youth employment as a
Challenge

• The youth employment rate 2004
• Frontrunners -gt Latvia (31 ), Czech Republic
  (30)
• Estonia and Slovenia (29 )
• Laggards -gt Poland (21 ) and Lithuania (22 )
• Is much lower than in East Germany (44 ).
• higher employment rate of older does not harm
• the chances of the young.

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Strategies for older workers in ECE Countries (1)

• A glance at the Czech Republic and Estonia
• Reforming the pensions was crucial.
• The often underestimated role of Gender
• Active Labour Market Policies
• Discrimination of older unemployed
• Employability and soft measures
• gt Comprehensive action plans
• most of the implementation to come.

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Strategies for older workers in ECE Countries
(2)Similarities and differences

• Similar solutions, similar risk as in
  (East-)Germany
• One-sided instead of comprehensive practice
• Differences
• Etatism bears problems of implementation
• Networking across levels and actors has to be
  evolved

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Conclusions (1)

• Strong differences in GDP per capita between ECE
  countries and Germany
• but catching-up is under way (new Celtic
  Tigers?)
• ECE countries are far from being a homogeneous
  group
• East Germany financial transfers and labour
  emigration are not sufficient to overcome the
  transformation crisis

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Conclusions (2)

• Some assets of ECE member countries
• Labour costs are low
• Less regulation of the labour market
• Political structures are less sclerotic
• Elite consensus about Europeanization
• Common challenges- Low employment rates, high
  unemployment (not everywhere!)- Ageing society ?
  Need for a lifecycle approach to work, as
  proposed by the Employment Guidelines of the
  EU- Comprehensive approach towards employment of
  older workers is needed