The Labour Market Triangle

The Labour Market Triangle

Employment Protection, Unemployment Compensation and Activation in Europe

Globalization and Welfare series

Edited by Paul de Beer and Trudie Schils

Currently, European governments are being challenged to find an optimal social policy strategy that fosters 'flexicurity’, whereby a flexible, well-functioning labour market is achieved, whilst protection for workers is maintained. This fascinating book presents an in-depth study of the particular combination of unemployment insurance, employment protection and active labour market policies prevalent in seven European countries. The editors explore the formal laws and regulations, as well as the administration and implementation of social policy, paying special attention to the role of the social partners. The country comparison shows that the combination of social policy instruments is important to labour market performance, but that multiple optimal mixes already seem to exist.

Chapter 6: Germany

Bernhard Ebbinghaus and Werner Eichhorst

Subjects: economics and finance, labour economics, social policy and sociology, comparative social policy, labour policy


Bernhard Ebbinghaus and Werner Eichhorst INTRODUCTION: PARTIAL DEPARTURE FROM PASSIVE EMPLOYMENT POLICIES High unemployment has been a central predicament of Germany since the mid-1970s, particularly intensified since unification in 1990. The persistent unemployment problem has been linked by critics to generous unemployment benefits, soaring labour costs and a rigidly regulated labour market. In fact, German statutory employment protection for regular employment contracts is relatively high and compulsory social insurance provides earnings-related unemployment benefits, given a sufficient contribution period. The 2005 reform that replaced the earnings-related long-term unemployment assistance with a means-tested flat-rate minimum income support scheme was a major break with Germany’s long tradition of status maintenance. This reform was part of a broader policy shift towards activation also involving an overhaul of active labour market policies and organizational reforms of labour market administration. However, regarding employment protection only some liberalization measures at the margin of the labour market occurred. In terms of governance, social security, labour market policies and employment protection are mainly based on national legislation, though leaving some role for the social partners. In the area of labour market policy, the employers and trade unions had a substantial role in the tripartite self-administration before the reorganization of the Federal Employment Agency (Bundesagentur für Arbeit or BA) which now restricts their responsibility to supervision only (Trampusch 2002; Bieber et al. 2005). German employment protection is legislation-driven and relatively universal, collective bargaining on employment regulation is not very important except for sector-wide agreements supplementing dismissal protection, firm-level employment...

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