Hartz IV and the consequences

Abstract

"Given the evidence presented above, the answer is a 'No, but...'. Some key elements of the German model such as the dual training system and long tenure -- were not affected by the reform. Some elements were strengthened, and some elements were weakened. Labour relations proved to be really strong during the crisis, and social partnership was extremely helpful for organising the high level of within-firm flexibility. This fact was particularly true for the export-oriented manufacturing firms, which through labour market reforms and a long period of wage moderation have reached a high level of international competitiveness. Heike, the export orientation based an a strong manufacturing sector was even strengthened by the direct and indirect effects of the reform. The main element for the German model being substantially weakened through the reforms is solidarity. Traditionally, the German economy was run under a rather low level of earnings inequality. At the same time, at least the important group of trained workers enjoyed quite a comfortable social security network. Social security, however, has deeply changed. Workers are much more in danger of losing their social status in quite a short period of time. Given the regulatory framework alter the reforms, workers are much more pressed to accept unfavourable working conditions and low-paid Jobs. lt comes as no surprise that wage inequality has increased sharply. Moreover, social permeability has also decreased over the years. The heritage of education (Bildungsvererbung) is of major concern for critics of the German system. These concerns lead to segmentation tendencies in the society, which are an increasingly important topic in the political debate. In the past, solidarity was a key element of the German model. lt is possible that -- if no counteraction measures are seized -- the menace of an increasingly divided society would be a strong challenge to the survival of the German model. Currently, initiatives for introducing a statutory minimum wage receive growing support. Overall, one can argue that the deep labour market reforms in Germany were necessary as a painful cure to stop the harmful trend in the rise of systemic unemployment. However, the dark side should not be forgotten. A challenge for the future is mitigating the damages that an increasing amount of segmentation has inflicted and the German model" (Author's abstract, IAB-Doku) ((en))

Cite article

Möller, J. (2014): Hartz IV and the consequences. Did the labour market reforms destroy the German model? In: S. Collignon & P. Esposito (Hrsg.) (2014): Competitiveness in the European economy, p. 129-142.