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Reacting to the Crisis France and Germany. Common Themes Both countries: earnings-related social security post WW2 extend cover to self-employed, agriculture.

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Presentation on theme: "Reacting to the Crisis France and Germany. Common Themes Both countries: earnings-related social security post WW2 extend cover to self-employed, agriculture."— Presentation transcript:

1 Reacting to the Crisis France and Germany

2 Common Themes Both countries: earnings-related social security post WW2 extend cover to self-employed, agriculture & professions in 1960s Less industrial employment (1990s): more early retirement struggle with mass unemployment (1990s) –? Consequence of rising labour on-costs –Cut contributions: more tax (breach ECB regulations) Falling fertility (replacement ratio problems)






8 Major differences Structural: –Federal Germany; centralised France –French has bipartite funding: German tri-partite –Germans have separate schemes for 5 risks Political: –French battles over control of social security –different attitudes to female employment & family allowances –German reunification

9 France: origins and principles Planned economy (Monnet): modernise; reward CP & contain Germany 1952: SMIC (minimum wage) = first national reform Social security: –local funding and democratic administration –horizontal solidarity (‘insured’ = employed) supplementary rights: –industrial agreement (pensions: ARRCO & AGIRC: unemployment: UNEDIC) –mutuelles cover ‘ticket moderateur’ (health)


11 French problems 1967: central control over local caisses emerging deficits –health: doctors will not agree standard fees –unemployment rises (1980s) : social exclusion –higher social insurance contributions reduce offers of permanent job contracts conflicts over ‘flexibilisation’




15 French reforms: from Bismarck to Beveridge? RMI: state funded revenue for unemployed (25+): inc. social security contributions CSG: state funding for social security private supplementary pensions restructured 1995: Juppe Plan –hospital finance nationalised –family allowances means-tested –public sector pension reform rejected by strikes


17 France: the shift to the right Jospin government (socialist) introduces: – 1997 youth employment programme –1999-2000: 35 hour week 2002 elections: right wing administration (Raffarin) = ‘flexibility’ + help for private sector –From RMI to RMA (state support for ‘activity’) –Attacks on 35 hour week & benefits restructured (UNEDIC) –Public sector pensions restructured (in spite of mass strikes summer 2004 and 2009)


19 Instability in face of crisis May 05: de Villepin takes over as PM from Raffarin (French reject EU constitution) Nov 05: Paris suburban riots Apr. 06: de Villepin CPE (new youth employment contract): mass protest. Summer 06 Sarkozy elected president – liberal agenda on labour law


21 W.Germany: origins & principles Post 1945 de-Nazification: decentralisation & reversion to Bismarckean ideal Two-tier system: separate entities (no cross-over) –Social policy: co-determination: wage protection and status guarantees via (5) social insurance schemes. –Welfare state: local housing and social assistance ‘Social market economy’ (workplace partnership) Separation of federal / Lander / industry powers under constitution (subsidiarity) = Basic Law

22 W.Germany: post-war development CDU domination (until 1970s) = little change 1957: state pensions: 60% previous salary 1961 rights to social assistance guaranteed 1964-74 slow introduction of child benefits 1976: married women permitted to work (on condition that family obligations are met)

23 Re-unification (1989) GDR welfare centralised + citizen-based (‘right to work’ = no unemployment) GDR economy ‘restructured’: – 5 new Lander created: same social security as FDR – Currency conversion on parity :1Ostmark = 1 D/mark. –Rising social dependency: 50% jobs in old GDR disappear (1990-92) –1993: Solidarity Pact: FDR social security contributions raised: unemployment rises 1994-98: cuts in pensions and health insurance



26 Political outcomes Germany elects SPD coalition (Schroeder) –More Federal support for training / apprentices –Negotiated ‘flexibilisation’ –Central control over ‘self administrated’ funds –Focus on demographic crisis – Riester pension reform 2001. 2005: new cuts in unemployment support Nov. 2005 Angela Merkel elected Chancellor

27 German focus on pension reform Riester 2001. –Subsidised private pensions (conversion of earnings in return for lower state pension) –To be offered by all employers –Proportion of soc. ins contribution diverted to personal pension pot Results (2005) – middle classes take advantage –Lower income earners lose out – especially women



30 Unemployment: Hartz reforms German UI benefits very high and of long duration Conversion of ALMP policies (2003-5): Hartz Reforms introduced by Schroeder Tackle unemployment across the board (ie long term claimants and social welfare claimants) Introduction of New Public Management Deregulation of labour market (mini-jobs: midi- jobs etc.)


32 Conclusions: economic outcomes German major industrial companies haven’t relocated, in spite of high labour on-costs. German unions much stronger than French (in private sector) : constitutional protection French (right-wing) government - able to restructure welfare without further conflict? Both countries equivocal about EU expansion (immigrant (cheap) labour) Both Germany and France in breach of Growth and Stability Pact.

33 Conclusions: trajectories of social reform 1980s: increase contributions (worsens labour market problems) = consolidation 1990s: retrenchment – health, pensions and unemployment benefits 2000s: individualisation: labour market activation (longer working lives: women into work) All points to influence of EU and EMU (Maastricht)


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