Social partners divided on measures to fight unemployment

Figures release at the end of November 2012 by Germany’s Federal Employment Agency showed a year-on-year rise of 38,000 in the number of unemployed. Although German unemployment rates remain relatively low at 6.5%, unions are pressing for more job creation funding, and employers want to see more flexible forms of employment. Meanwhile, research suggests that reintegration of the long-term unemployed into the labour market can be hampered by excessive wage expectations.

Background

On 29 November 2012, the Chair of the Board of the Federal Employment Agency (BA), Frank Weise, said in a press release (in German) that the German labour market was stable. In November, unemployment decreased by 2,000 on the previous month to around 2.57 million, leaving the German unemployment rate unchanged at 6.5%. However, the figure was still 38,000 higher than for the same period in 2011.

The slowing economy also seemed to have had an impact on companies’ search for workers. BA’s figures showed 451,000 job offers were registered with its services in November 2012. This was a decrease of 41,000 jobs in comparison to the same month the previous year.

However, the demand for skilled workers was still high. According to BA statistics, experts in the fields of mechatronics, electrical engineering, logistics and car manufacturing were in particular demand.

The search for skilled workers was one aspect of a discussion among the social partners on the improved exploitation of hidden reserves in the German labour force. The talks addressed the issue of how to best reintegrate the unemployed into the primary labour market.

Getting the unemployed back to work

Both sides of industry voiced strong opinions on the BA’s unemployment figures. The German Confederation of Employers’ Associations (BDA) and the Confederation of German Trade Unions (DGB) agreed on the need to improve integration of the unemployed into the labour market. However, they did not agree on how best to achieve this goal.

Though the labour market in Germany was stable, BDA Chair Dieter Hundt warned in a press statement (in German) on 9 November 2012 against relaxing efforts to create more employment. He said the long-term unemployed and poorly qualified needed more chances to participate in the labour market.

On the issue of how better integration into the labour force could be achieved, Mr Hundt said flexible employment forms were a potential option. He said temporary agency work and fixed-term jobs lowered the barriers to the labour market and could help reintegrate those who had no vocational qualifications or work experience, or who had experienced long spells of unemployment.

Mr Hundt added that in the past few years flexible employment had created several hundred thousand jobs for unemployed and poorly qualified workers. Flexible forms of employment needed to be recognised more fully for the benefits they brought, he said, instead of being labelled ‘precarious’.

Warning from the unions

When the new labour market figures were released, however, the DGB took the opportunity to urge the government to act. DGB Executive Board Member Annelie Buntenbach warned in a press article (in German) of the possible negative impacts on the labour market of the European recession. The union umbrella organisation called on the German Federal Government to provide more investment for job creation and to ease regulation of short-time work.

Specifically, the DGB called for the entitlement period for short-time work to be prolonged beyond the current maximum of six months.

The DGB also recommended providing BA with better funding. It said local employment services and job centres needed the means to provide more continuous training and so combat the shortage of skilled workers.

New study on unemployment

Research by the Cologne Institute for Economic Research (IW Köln) has probed deeper into the causes of unemployment and particularly long-term joblessness.

IW Köln analysed the link between unemployment and the wage expectations of the unemployed, and published its findings in an IW Köln Trends report published in December 2012, Wage claims in Germany: Recent empirical findings (in German).

Using data from the German Socio-Economic Panel (SOEP), the analysis showed that unemployed workers expected to earn an average of €7.47 per hour in a new job in 2010. Taking into account further costs for the employer, such as social security contributions, this would equal an hourly gross wage of €10.76.

However, these expectations do not necessarily correspond to actual wage levels. As the researchers highlighted, excessive wage expectations can hamper the reintegration of the unemployed into the labour market. Between 2007 and 2010, those unemployed workers whose wage expectations exceeded actual wage levels by only 9% found it easier to find a new job than those demanding higher wages.

The analysts conclude that the unemployed need to adapt their wage expectations to the current market conditions. The long-term unemployed, in particular, need to lower their wage expectations if they are to get back into the labour market.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)