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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 2 Outline The employment targets of the EES Germany‘s labour market performance East Germany The ageing society and older workers German policy responses The ECE member countries in comparison Age-related employment: the youth and the elderly Conclusions

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 3  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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 4 Performance of the German Labour Market (1): GermanyEU-15EU-25 Overall rate Female rate (2003) Source: Eurostat Employment rates, 2004

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 5 Overall Employment Rates, 2004, in Comparison Source: Eurostat

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 6 Performance of the German Labour Market (2): GermanyEU-15EU-25 Overall Rate Female Rate Source: Eurostat Unemployment rates, 2004

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 7  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 Performance of the German Labour Market (3):

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 8  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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 9 The East German Labour Market (1):  Persistent differences in employment rates…

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 10 The East German Labour Market (2):  … and unemployment rates…

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 11 The East German Labour Market (3):  … 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)

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 12 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 13 Source:IAB-Kurzbericht No. 11/2005

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 14 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 15 Employment of Older Workers (2)  The Gender aspect: Few younger women working  Few older women working - Employment rate 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 16 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 reforms Proactive concept, simplification and cutbacks in benefits Reorganisation of PES Moderate liberalization Increasing bargaining at company level German Policy Responses... (1)

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 17 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 unemployed New projects  Liberalisation of fixed term contracts (52+ instead of 58+) = De facto Liberalisation of dismissal

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 18 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: they are competent Pro-age Germany has developed a more comprehensive strategy …

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 19 …but persisting lack of consistency  Employers use old age part-time work to reduce jobs. …are not ready to engage older workers.  The statedid not close the path of early retirement. did not yet introduce an anti-discrimination law. … as a consequence of economic and political conditions.

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 20 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 21 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 > 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.

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 22 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 23 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 24 ECE member Countries (1): Real Growth and GDP per Head LVEELTHUSKPLSICZDE Real GDP 2004 (1995=100) GDP per Head, 2004 (in Euros, Prices of 1995)

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 25 ECE member Countries (2): Employment Rates, 2004

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 26 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 27 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.

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 28 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.

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 29 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

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 30  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)

Institut für Arbeitsmarkt- und Berufsforschung (Institute for Employment Research) Bundesagentur für Arbeit (Federal Employment Agency, Germany) 31 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)