Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur...

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research)

Bundesagentur für Arbeit (Federal Employment Agency, Germany)1

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

persons

Presentation for the conference on ‘The European Employment Strategy – Opportunities and Limits for the New Member States'

Budapest, 20th October 2005

Susanne Kraatz, Thomas Rhein



Outline

The employment targets of the EES

Germany‘s labour market performanceEast GermanyThe ageing society and older workers

German policy responses

The ECE member countries in comparisonAge-related employment: the youth and the elderly

Conclusions



Achieving full employment ->

Overall 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

The European Employment Strategy (EES) as Part of the Lisbon Agenda



Performance of the German Labour Market (1):

Germany EU-15 EU-25

Overall rate 65.0 64.7 63.3

Female rate 59.2 56.8 55.7

55-64 41.8 42.5 41.0

15-24 (2003) 44.0 39.7 36.7

Source: Eurostat

Employment rates, 2004



Overall Employment Rates, 2004, in Comparison

75,7

73,172,1 71,6

65,0 64,763,3

56

5860

6264

66

6870

7274

76

DK NL S UK DE EU -15 EU - 25

Source: Eurostat




Germany EU-15 EU-25

Overall Rate 9.5 8.1 9.0

Female Rate 10.5 9.3 10.2

55-64 12.8 6.8 7.0

15-24 15.1 16.6 18.6

Source: Eurostat

Unemployment rates, 2004



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 Germany‘s society




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

Aspects of German Labour Market Problems



The East German Labour Market (1):

Overall Employment rates

50,0

55,0

60,0

65,0

70,0

75,0

1991 1993 1995 1997 1999 2001 2003

Persistent differences in employment rates…




Unemployment (national definition)

0,02,04,06,08,0

10,012,014,016,018,020,022,0

West Germany

East Germany

… and unemployment rates…




… 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)



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



Projections of the potential labour force in Germany

20,0

25,0

30,0

35,0

40,0

45,0

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Scenarioswith increase of activity rates and annual net

migration of:

+300.000

+200.000

+100.000

no net migration

"Basic" scenario with constant activity rates, no net migration

Source:IAB-Kurzbericht No. 11/2005



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 70‘s: „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 90‘s



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



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-balance

Labour market reformsProactive concept, simplification and cutbacks in benefits

Reorganisation of PES

Moderate liberalization

Increasing bargaining at company level

German Policy Responses... (1)



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 -> 63

Active Labour Market policy: Training, Subsidies for older unemployedNew projects

Liberalisation of fixed term contracts (52+ instead of 58+)= De facto Liberalisation of dismissal



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 …



…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.



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 culture:The loss of confidence



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

Postulate of equal living conditions-> wages growing faster than productivity.

Fast economic, political and social union in 1990-> breakdown of the East German

economic structures.

The costful program „Reconstruction East“ -> did not solve structural problems

…. new regional disparities between the two halves of Germany.



East Germany (2) Labour market policy:From 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



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



ECE member Countries (1): Real Growth and GDP per Head

LV EE LT HU SK PL SI CZ DE

Real GDP 2004 (1995=100)

173 172 165 144 144 144 141 121 113

GDP per Head, 2004 (in Euros, Prices of 1995)

2800 3600 2300 4900 4000 3900 10900 5000 26500



ECE member Countries (2): Employment Rates, 2004

0

10

20

30

40

50

60

70

Overall EmploymentRate

Female EmploymentRate

Employment Rate 55-64



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.

ECE member Countries (3): Increasing heterogeneity



ECE member Countries (4): Youth employment as a Challenge

The youth employment rate 2004:

Frontrunners -> Latvia (31 %), Czech Republic (30%)

Estonia and Slovenia (29 %)

Laggards -> 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.



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“ –> Comprehensive action plans

most of the implementation to come.



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



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

Conclusions (1)



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

Conclusions (2)

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