Reevaluating the German labor market miracle

Michael Burda and Seele Stefanie ()
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Seele Stefanie: INSM GmbH, Berlin, Germany

German Economic Review, 2020, vol. 21, issue 2, 139-179

Abstract: From 2003 to 2018, employment in Germany increased by 7.3 million, or by 19.3 % – growth not observed since unification. This “labor market miracle” was marked by a persistent and significant expansion of both part-time and low-wage jobs and a deterioration in pay for these jobs, while total hours hardly increased; overall wage growth returned only after 2011. These developments followed in the wake of the landmark Hartz reforms (2003–2005). A modified framework of Katz and Murphy (1992) predicts negative correlation of wages with both relative employment and participation across cells in the period following these reforms. In contrast, wage moderation alone should generate positive association of wages and participation. Our findings are most consistent with a persistent, positive labor supply shock at given working-age population in a cleared labor market. An alternative perspective of labor markets, the search and matching model, also points to the Hartz IV reforms as the central driver of the German labor market miracle.

Keywords: German labor market miracle; Hartz reforms; part-time work; wage inequality (search for similar items in EconPapers)
JEL-codes: E24 J21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (13)

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DOI: 10.1515/ger-054-19

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