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The German Labour Market Miracle

Published online by Cambridge University Press:  26 March 2020

Jens Boysen-Hogrefe  and
Dominik Groll
Jens Boysen-Hogrefe*
Affiliation:
Kiel Institute for the World Economy, Germany
Dominik Groll*
Affiliation:
Kiel Institute for the World Economy, Germany
*
e-mail: jens.hogrefe@ifw-kiel.de
e-mail: dominik.groll@ifw-kiel.de
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Abstract

This paper lays out the various reasons for the exceptional performance of the German labour market during and after the Great Recession of 2008/9. The reference point of our analysis is provided by an empirical model of both total hours worked and employment. We conduct dynamic simulations of the crisis period to assess how surprising the reaction of the labour market really was. We argue that the most important precondition for the minor reaction of employment during this crisis was the pronounced wage moderation observed in the years before, which constitutes a distinct difference to all other recessions in Germany. Beyond that, the flexibility of adjusting working time, which has increased considerably during the past ten years, facilitated a tendency to labour hoarding. In contrast, short-time work plays a minor role in explaining the difference from previous recessions, since this instrument has always been available to firms in Germany and its use has not been extraordinary compared with earlier recessions.

Keywords

Labour marketGreat Recessionemploymentwage moderationshort-time workE24E37J23J30
Type
Research Articles
Information
National Institute Economic Review , Volume 214 , October 2010 , pp. R38 - R50
Copyright
Copyright © 2010 National Institute of Economic and Social Research

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Footnotes

∗

We would like to thank Nils Jannsen, Carsten-Patrick Meier, Simon Kirby and two anonymous referees for very helpful and enlightening comments. We also thank Olga Antonova for highly valuable research assistance.

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