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Labour Market Institutions in GERMANY: Current Status and ongoing Reforms

Labour Market Institutions in GERMANY: Current Status and ongoing Reforms. Paper prepared for the conference “The Social State in Armenia”, organised in cooperation of the DAAD and the CRRC Yerewan, 24.-26 th February 2006 in Tsahkazdor/Armenia

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Labour Market Institutions in GERMANY: Current Status and ongoing Reforms

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  1. Labour Market Institutions in GERMANY: Current Status and ongoing Reforms • Paper prepared for the conference “The Social State in Armenia”, organised in cooperation of the DAAD and the CRRC Yerewan, 24.-26th February 2006 in Tsahkazdor/Armenia • Dr. Silke BothfeldEconomic and Social Research Institute • Hans-Böckler-Foundation, Düsseldorf Dr. Silke Bothfeld

  2. Structure • I. Introduction • II. Three main areas of labour market regulation including ongoing reforms 1. Labour Law 2. Collective Bargaining 3. Active & Passive Labour Market Policies • III. Summary • Driving forces • Unsolved questions Dr. Silke Bothfeld

  3. I. Introduction • Problem High and rising unemployment despite good economic performance • Question How to characterise and how to explain recent labour market reforms? • Hypothesis The German institutional model becomes more heterogenous and show tendencies of erosion but does not follow to a unitary model Dr. Silke Bothfeld

  4. I. Standardised Unemployment Rates Dr. Silke Bothfeld

  5. II. Three areas of labour market institutions – basic principles • Labour Law Relative high social protection & democratic participation on company level • Collective bargaining Centralised wage-setting system as guarantee for sustainable development of wages • Labour Market Policy Maintenance and support of high quality labour supply Dr. Silke Bothfeld

  6. II. Labour Law: Contradictory changes • Dismissal protection: Deregulation • Working-time Regulation: Mixed perspective • Co-Determination: Enhancement of employees participation • Sick pay: Symbolic battle • Parental leave: Fundamental adjustments Dr. Silke Bothfeld

  7. II. Labour Law: Coverage by works councils Dr. Silke Bothfeld

  8. II. Labour Law: Effects on Gender relations Dr. Silke Bothfeld

  9. II. Collective bargaining: Core element of labour market regulation Dr. Silke Bothfeld

  10. II. Collective bargaining: Coverage by collective agreements Dr. Silke Bothfeld

  11. II. Collective Bargaining: Tendencies of Erosion? „Controlled decentralisation“ of collective bargaining by use of opening clauses Decrease in trade union membership: From 11,8 in 1991 to 6,8 Million members 2005; membership rate of 20% in 2005 Increase in share of low-wage-earners and increasing wage dispersion Dr. Silke Bothfeld

  12. II. Labour Market Policy: The Activation Strategy • Economic rationale: • To increase effectiveness of expenditure (budget containment) • Avoid „poverty trap“ (eliminate negative incentives for transitions into paid employment) • Political rationale • To avoid „free-riding“ behaviour and misuse of social benefits • Public responsibility for the provision of more effective instruments for re-integration into paid employment • Assumption about causes for unemployment (individual/ structural) • Assumption about economic and social behaviour of citizens Dr. Silke Bothfeld

  13. II. Active Labour Market Policy: Policy Mix • Further Training and Qualification • cuts in expenditure for training measures & reorganisation of training sector • increasing mismatch? Promotion of non-standard forms of employment • deregulation of mini-jobs, promotion of self-employment and development of marginal social employment • substitution of standard employment & pressure on wage bargaining • Enhancement of consultancy and placement • systematic institutionalisation of private placement agencies & • Re-organisation intensification of placement service for l.t.u.e. •  quicker re-integration into paid employment? Dr. Silke Bothfeld

  14. II. Unemployment Insurance: Paradigmatic change • Stronger obligations for recipients • early registration; stricter criteria for employments that unemployed must accept •  Increasing pressure on unemployed to take up employment • Cuts in benefits • reduction of benefit duration for unemployment benefit; for l.t.u.e. wage replacement benefit is reduced to flat-rate benefit •  Partly dramatic decrease in life standard for l.t.u.e. • Merger of system of unemployment & social assistance • integration of former social assistance recipients into labour promotion measures; stricter account of household income & assets; sticter obligation to accept marginal employments •  Increase in perception of social insecurity & increasing pressure to take up any employment Dr. Silke Bothfeld

  15. III. Summary: Different speed of change in the three areas & its driving forces Dr. Silke Bothfeld

  16. III. Outlook: Remaining questions • What will the regular employment status be like? • Adjusted standard, maintenances of present regular employment standard or no standard at all? • What level of social security do we need? • Basic provision, maintenance of principles of equivalence and solidarity, or generous universal benefits? • How can social standards be defined and social policy programmes be formulated in future? • Scientific based & technocratic (closed-shop) commissions, „old“ neo-corporatist decision making or new forms of social participation & democracy Dr. Silke Bothfeld

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