Explaining the German Employment Miracle in the Great Recession – The Crucial Role of Temporary Working Time Reductions

Alexander Herzog-Stein, Fabian Lindner and Simon Sturn

No 114-2013, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: This paper investigates the reasons for the exceptionally robust performance of the German labour market during the Great Recession. While GDP dropped by more than five per cent in 2009, employment remained constant and started to increase soon after. We compare this recession to other major recessions in Germany and analyse to what extent changes in hourly productivity and working time cushioned their impact on employment. We find that reductions in hourly productivity played a significant role in all recessions while working time reductions helped to safeguard jobs only occasionally. However, in the Great Recession, temporary working time reductions were amply used to stabilise employment. Using a time series model, we show that the reduction in hourly productivity during the Great Recession is predictable with historical data, while the reduction in working time was unexpectedly pronounced. Using detailed information on instruments for the adjustment of working hours, we show that new instruments which have been established in the decade before the Great Recession have been heavily used to reduce working time in the Great Recession. We argue that the development of these instruments was only possible within the framework of corporatist industrial relations.

Keywords: Germany; Great Recession; employment miracle; working time reduction; labour hoarding; internal labour market flexibility; working time accounts; short time work (search for similar items in EconPapers)
JEL-codes: E24 E32 E37 J20 J50 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2013
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:114-2013

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