What are the long-term unemployed prepared to impose upon themselves? : wage concessions made by Unemployment Benefit II (ALG II) recipients

Abstract

"This paper, building on previous evaluations by Christensen on wage demands by the unemployed in Germany, examines the wage requirements of recipients of Unemployment Benefit II (ALG II). Unlike Christensen, the analyses here are not based on the German Socio-Economic Panel (SOEP). Instead, cross-sectional data are used that have been provided by the Institute for Employment Research (IAB) from a survey that focuses on living conditions and social security issues ('Lebenssituation und Soziale Sicherung') of recipients of ALG II. The survey was conducted shortly after the reform of unemployment benefit and social assistance in Germany. We were especially interested in finding out whether the unemployed have become more prepared to reduce their wage demands since the introduction of the German Social Code II (SGB II) compared to the period up to 2000 (cf. Christensen). To do so, the paper focuses on the ratio between wages paid before unemployment and reservation wages, the dependency of this ratio on the duration of unemployment as well as the factors that determine the reservation wage level.<br> Analyses of the most recent IAB survey of ALG II recipients demonstrate that their willingness to accept lower wages has not (yet) increased significantly since the introduction of SGB II. Descriptive results show that the reservation wage level tends to be independent of the recipient's current employment status. Instead, the wage level demanded is rather determined by whether the recipient lives on his or her own or in a multi-person household. The indicated reservation wage level increases with the number of children in the household. Taking the reservation wage ratio (RWR) as a basis - as in Christensen's study - it emerges that respondents state they are prepared to accept employment only if they receive, on average, a net hourly wage rate increase of 13% compared to the level that they were paid prior to unemployment. Another outcome is that the RWR does not decrease in line with the duration of unemployment. A recipient's personal circumstances are also fundamental to the reservation wage level in the multivariate estimations. The wage received before unemployment is the most significant indicator.<br> The present results must be considered preliminary for two reasons: firstly, there is still potential for more detail in the multivariate analyses. Secondly, due to initial difficulties in implementing the new SGB-II-based legislation on the part of the responsible bodies, it is unlikely that the available data as yet fully reflect the impacts of the reform, in particular with respect to indications on reservation wages. Ultimately, we will only be in a position to learn more about the preparedness of ALG II recipients to reduce wage requirements when we have access to data on the issues in focus over a sequence of several years, which is planned by the IAB." (Author's abstract, IAB-Doku) ((en))

Cite article

Bender, S., Koch, S., Meßmann, S. & Walwei, U. (2008): Was muten sich Arbeitslose zu? Lohnkonzessionen von ALG II-Empfängern. In: Sozialer Fortschritt, Vol. 57, No. 3, p. 75-85. DOI:10.3790/sfo.57.3.75