2012 TheImpactofLabourMarketReformsa
- (Klinger & Rothe, 2012) ⇒ Sabine Klinger, and Thomas Rothe. (2012). “The Impact of Labour Market Reforms and Economic Performance on the Matching of the Short-term and the Long-term Unemployed.” In: Scottish Journal of Political Economy, 59(1). doi:10.1111/j.1467-9485.2011.00570.x
Subject Headings: Long-Term Unemployment; Short-Term Unemployment, German Labour Market, German Unemployed Population.
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Abstract
As a reaction to high and persistent unemployment in Germany, the largest labour market reforms in post-war history were implemented between 2003 and 2005. We analyse the impact of the reforms and its coincidence with an economic expansion on the efficiency of matching out of unemployment. Especially focussing on searcher heterogeneity, we estimate a system of stock-flow matching functions for short-term and long-term unemployment (three-stage least squares) on the basis of administrative data. In sum, the reforms increased matching efficiency for both groups, but the effect was larger for the long-term unemployed. The interaction of reforms and economic expansion, however, was not influential.
1. Introduction
The German labour market had suffered from high and often persistent unemployment for many years. In 1997, unemployment amounted to its highest value after reunification at 11.4 percent according to national statistics (coming from 7.7 percent in 1992). Between January 1998 and June 2009, about 1.45 million people were long-term unemployed on average in each month. This counts for nearly one third of the average monthly stock of 3.96 million unemployed. At its peak in 2004, long-term unemployment had risen up to 1.8 million (Figure 1).
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2. Recent labour market reforms in Germany
As a reaction to high and persistent unemployment in Germany the then government established the Hartz Commission in 2002 in order to modernize labour market institutions. The suggestions of the commission resulted into four laws that came into force in three waves. Each of the Hartz I to IV Reforms again consisted of various components (see Table 1 for an overview and the timing). Jacobi/Kluve (2007) summarize them into three core elements that may influence the job-finding probability of short-term as well as long-term unemployed workers:
- . Higher effectiveness and efficiency of labour market services and policy measures, for instance by re-organizing the Federal Employment Agency, by outsourcing of placement services into the private sector, or by choosing measures of active labour market policy that promised to be more effective.
- . More activation and higher self-responsibility of the unemployed, for instance by new start-up subsidies, by targets on re-integration efforts, by re-configuring the unemployment benefit and social assistance system towards less or shorter benefit entitlement and higher claims of search effort.
- . Labour market deregulation, for instance concerning temporary agency work, fixed term contracts, and employment protection.
All these parts of the Hartz Reforms pursue different strategies but they all serve to fulfil the commission ´s aim to reduce unemployment via the flow variables: The number of outflows could be raised if the unemployed search for jobs more intensively and if barriers for job creation in enterprises are reduced. As a consequence, unemployment duration and, thus, the stock of unemployment shall decrease (Hartz et al. 2002: 270). Some components of the Hartz Reforms do not produce more outflows from unemployment but help to reduce inflows into unemployment and long-term unemployment. For instance, a worker is now obliged to inform the local employment agency if a dismissal is imminent (Hartz I), otherwise the unemployment benefit will be frozen for up to twelve weeks (since January 2006).
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| Author | volume | Date Value | title | type | journal | titleUrl | doi | note | year | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2012 TheImpactofLabourMarketReformsa | Sabine Klinger Thomas Rothe | The Impact of Labour Market Reforms and Economic Performance on the Matching of the Short-term and the Long-term Unemployed |