Causes for the fall of german unemployment and the role of minijobs
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German unemployment rates declined substantially in the last 10 years. What are the causes? It is not because a very high economic growth or demographic influences, but institutions (Kurzarbeit and Zeitsparkonten) and the reforms/wage moderation which might have been effective.
Causes for the fall of german unemployment and the role of minijobs
- 1. Michel van Smoorenburg Michel.vansmoorenburg@uwv.nl Public Employment Service The Netherlands Causes for the fall of German unemployment - The role of Mini-jobs?
- 2. Whats a Mini-job? Maximum 450 a month In most cases 15 to 20 hours a week No taxes No contributions for social security by employees From 1-1-2013 there is a choice to join pension (21% does)
- 3. Unemployment rate 2004-2014 (eurostat) 0 2 4 6 8 10 12 14 2 0 04 M 0 2 2 0 04 M 0 5 2 0 04 M 0 8 2 0 04 M 1 1 2 0 05 M 0 2 2 0 05 M 0 5 2 0 05 M 0 8 2 0 05 M 1 1 2 0 06 M 0 2 2 0 06 M 0 5 2 0 06 M 0 8 2 0 06 M 1 1 2 0 07 M 0 2 2 0 07 M 0 5 2 0 07 M 0 8 2 0 07 M 1 1 2 0 08 M 0 2 2 0 08 M 0 5 2 0 08 M 0 8 2 0 08 M 1 1 2 0 09 M 0 2 2 0 09 M 0 5 2 0 09 M 0 8 2 0 09 M 1 1 2 0 10 M 0 2 2 0 10 M 0 5 2 0 10 M 0 8 2 0 10 M 1 1 2 0 11 M 0 2 2 0 11 M 0 5 2 0 11 M 0 8 2 0 11 M 1 1 2 0 12 M 0 2 2 0 12 M 0 5 2 0 12 M 0 8 2 0 12 M 1 1 2 0 13 M 0 6 2 0 13 M 0 9 2 0 13 M 1 2 Netherlands Germany EU28 France Belgium United Kingdom
- 4. Relationship between economic growth (X) and growth unemployment rate (Y), 2003-2013
- 5. Actual and forecasted unemployment rate in Germany by the Law of Okun Not economic growth but something else explains the positive development
- 6. Relationship between economic growth (X) and growth unemployment rate (Y), 2003-2013 Japan Turkey UK Finland Slovakia Slovenia Romania Portugal Poland Austria Netherlands Malta Hungary Luxembourg Lithuania Cyprus Italy Spain Greece Ireland Estonia Germany Denmark Czech Republic Bulgaria Belgium EU28 -15 -10 -5 0 5 10 15 20 -1 0 1 2 3 4 5 6 Average economic growth 2003-2013 GrowthUnemploymentrate2003-2013 Seletion of countries with almost the same economic growth
- 7. A demographic cause? (Countries with almost the same economic growth 2003-2013) -5% -1% -1% 0% 2% 2% 3% 3% 3% 4% 15% 7% 3% 14% 12% 6% 7% 9% 6% -6% 5% 16% -10% -5% 0% 5% 10% 15% 20% Germany Finland Norway Belgium France EU28 United Kingdom Netherlands Croatia Hungary Spain Growth unemployment rate 2003-2013 Active population 2003-2013 Germany has the same growth of the active population as Hungary, France, UK and the Netherlands but a much better development of the unemployment rate
- 8. The real reason: Germans labour market reforms Hartz I, II, III (2003-2004): Introduction Job Centres Mini-jobs allowed for more than 15 hours a week Training vouchers Deregulation temporary work Restricted access to unemployment benefit Hartz IV (2005) Shorter duration unemployment benefits Low social assistance Ein-euro-Jobs, Ich-AG Other measures Age for pensioning from 60 to 67 Kurzarbeit during 2008/2009 Zeitsparkonten
- 9. How many mini-jobs? From 4 million in 2002 to about 7,5 million in 2013 20% of the active population Especially in catering (48%), retail (30%), other business service (30%), culture, recreation and other service (45%), agriculture (25%), transport & storage (23%). An increasing share of elderly employees with a mini-job (27% between 50-65; 12% 65 or older) 62% female
- 10. Critiques Very low wages, working poor Exploitation: less vacation, unpaid extra work, unpaid trial days etc. No social security/no pension Only one out of seven will get a real job after the minijob Displacement of real fulltime jobs
- 11. Effect mini-jobs on unemployment Not that big: The growth of mini-jobs was mainly under the Nebenjobs (now 2,8 million) Displacement of former fulltime jobs But: All reforms together had a huge influence Especially: - Kurzarbeit en Zeitsparkonten in 2008/2009 - The lack of a minimum wage, wage moderation German job miracle
- 12. Current situation German labour market Strong export position, growth world economy New: growing inland consumer demand But: Legal Minimum wage 8,50 euro > 1-1-2015 When 63 years old and 45 working years you can retire without deduction Declining population 15-65 years Labour market shortages can stop economic growth
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Editor's Notes
- Hartz I,II,III: Job centres: The Hartz IV reform merged the federal level unemployment agency with the local level welfare administration. This facilitated a better, case-oriented approach to helping unemployed people find work and improve their situations. The plan's objective is to reduce caseloads from 400 unemployed persons per agent to not more than 75 (aged 25 or less), or not more than 150 persons over the age of 25. For difficult cases, dedicated case managers may be deployed. Legally, however, the agencies remain separate. Hartz IV: This part of the reforms brought together the former unemployment benefits for long-term unemployed ('Arbeitslosenhilfe') and the welfare benefits ('Sozialhilfe'), leaving them both at approximately the lower level of the former Sozialhilfe (social assistance). The level for a single person was 374 per month for a single person (known as the Regelsatz). This was subsequently raised to 391 per month, in 2013.[1] Added to this is the financial assistance with housing and health care. Couples can receive benefits for each partner including their children. Prior to 2005, between 12 and 36 months (depending upon the claimant's age and work history) of their full unemployment benefit (60 to 67% of the previous net salary) were followed by the Arbeitslosenhilfe (unemployment assistance), amounting to 53 to 57% of the last net salary). Since 2008, eligibility for the full unemployment benefit (renamed Arbeitslosengeld in 2005 and commonly referred to as Arbeitslosengeld I in everyday German to contrast it with the lower benefits discussed below) has been restricted to 12 months in general, 15 months for those aged 50 or older, 18 months for those 55 or older and 24 months for those 58 or older.