The hitherto longest and most serious period of unemployment in the history of the

Transcription

1 Eva Barlage Lawyer European Affairs and International Social Policy Department Confederation of German Employers Associations The hitherto longest and most serious period of unemployment in the history of the Federal Republic of Germany is still continuing. On one hand, 3,94 million persons were unemployed in September 2002 on average, corresponding to an unemployment rate of 9,5 per cent. On the other hand, 1,5 million positions are currently vacant of which many can not be filled. Recent changes in the labour market or employment structure to be mentioned in this article focus at the aim of combating this fact. Before explaining the German strategies against unemployment, the term unemployment should be clarified. Its statutory definition is as follows: unemployed is a person who has no work, who is seeking employment and is available for work, and who has finally registered as being unemployed. New labour market legislation A new legislation aiming at boosting employment levels in Germany s flagging labour market came into force on 1 January 2002 ( Reform of Labour Market Policy Instruments Job-Aqtiv-Gesetz ). The main aim of the new legislation is to improve labour market performance, in the context of a deteriorating economic climate and levels of unemployment. The main areas covered by the new law are set out below.

2 Active labour market policy One of the main general aims of the new legislation is to replace reactive strategies with preventative and active strategies. The focus of active labour market strategies also ties in with the European employment strategy, now in its fifth year of operation. In the case of placements, Offices of the Federal Employment Service ( Arbeitsämter ) will build up a picture of each individual, taking into account work experience, qualifications and skills and any other relevant information in order to match the individual to the work or work experience placements that are available. If, after six months of unemployment, an individual has not been found work yet, the employment offices efforts will be intensified, and the possibility of using a third party will also be considered if individuals have been unemployed for six months, they have a statutory right to request placement through a third party. Employment of women and equal opportunities The new legislation includes a number of measures designed to reconcile work and family life, stating that this is an issue which affects both women and men. In order to increase the employment levels of women, female participation in labour market measures should correspond at least to the proportion of unemployed women in the future. The legislation also makes clear that both men and women who return to the labour market after an absence will be able to participate in job-creation measures, even if they have no right to claim unemployment benefits, as long as they have in the past been employed for at least a year in a job that was subject to social insurance payments.

3 Training The German vocational training system operates on a dual basis, comprising stateand company-level based training. The new legislation aims at improving the general level of training. To encourage employers training efforts, financial support is given by the state. Job rotation The new law introduces the concept of job rotation. Thus, employers who release an employee to attend a training course and replace him or her with an unemployed person are eligible for a state subsidy covering between 50 and 100 per cent of the pay of the replaced worker. Temporary work The new law extends the maximum length of temporary contracts from 12 to 24 months. Nevertheless, from the 13 th month, the agency must grant the temporary worker the same employment terms and conditions, including pay, as those in place in the user company. Measures to create employment Former waiting times of six months for participation in an employment-creation measure ( Arbeitsbeschaffungsmaßnahme ABM ) are abolished if the measure is necessary for the development of the unemployed person and no other labour market measure is available. Under ABM schemes, workers who are difficult to place are given temporary employment, funded by the federal employment service. However, to ensure that existing jobs will not be threatened, the schemes apply only to work which is socially useful and which either would not be done at all or might

4 only be given low priority without job-creation schemes. Those schemes are usually run by local authorities and charity organisations. Structural measures The definition of measures taken to improve the structure of companies ( Strukturanpassungsmaßnahmen ) is widened and the scheme extended to the end of December Employment insurance The basic system of unemployment benefits ( Arbeitslosengeld ) has not been changed: unemployment benefits are paid as a percentage of former pay for a certain period to those who have been in employment for a year and have paid into social insurance funds. Unemployment assistance ( Arbeitslosenhilfe ) is paid to those who do not qualify for unemployment benefits or whose entitlement has expired, and replaces a lower proportion of former pay. Reactions Although the new law has introduced some remarkable innovations, it also brings a wide range of elements that are counterproductive and will raise costs. Therefore, the Confederation of German Employers Associations ( Bundesvereinigung der Deutschen Arbeitgeberverbände BDA ) has a number of reservations. The extended coverage of social insurance will increase costs for social insurance funds and thereby jeopardise reductions in unemployment insurance contribution. BDA is of the opinion that all measures leading to an increase of contributions to unemployment insurance funds are counterproductive. Further, the

5 extension of job-creation measures will increase the federal employment services costs unduly when this extension should fall into the responsibility of local authorities. As a whole, the new law can not contribute to the reduction of supplementary labour costs that is needed as soon as possible. Hartz commission In the course of its efforts to reduce unemployment, the German government is attempting reforms of the domestic labour market and social insurance regulation. Realising that steps have to be taken to combat this weakness, the government set up a commission to look at possible ways to reduce unemployment in February Led by Peter Hartz, the personnel director of Volkswagen, the 15-member commission has been deliberating for several months, with draft proposals widely leaked along the way. The final report was issued on 16 August Its main goal is the ambitious target of halving unemployment from around four million to two million by 2005, using a range of active labour market measures and provisions. Some of the major principles of the Hartz commission s proposals should be mentioned. Creation of jobcentres One of the centrepieces of the commission s report is to reform the Federal Employment Service ( Bundesanstalt für Arbeit BA ). All of the 181 local employment offices of the BA will be turned into jobcentres. It is hoped that these jobcentres will act as a clearing house, matching the supply of, and demand for, labour. Further, all functions relating to jobseeking will be integrated into these jobcentres. This includes counselling and advisory services, youth services and some elements of social services. It is hoped that this will move the BA s functions away

6 from the administration of unemployment benefits towards more active labour market policies. More rapid placement Employees receiving notice of redundancy will be required to register with the local employment office of the BA immediately, so that efforts can be made to find a new job for the employee before they actually become unemployed. The delay of registering cuts unemployment benefits between 7 and 50 a day, depending on income. Further, offices will be streamlined. Local employment office staff will receive bonuses for reaching targets in term of placement. It is hoped that all these measures will enable the average time spent unemployed to be reduced from 33 to 22 weeks. Unemployment benefits Although unemployment benefits will not be cut, they will be restructured. The commission in proposing that there should be three types of benefits. First of all, there should be an unemployment benefit (Arbeitslosengeld I), which matches the current benefit (Arbeitslosengeld) in terms of level and duration and is financed out of social security funds. Further, the second benefit (Arbeitslosengeld II) will replace unemployment assistance. Finally, anyone who is not entitled to unemployment benefits will receive a social benefit (Sozialgeld), which replaces the previous social assistance benefit (Sozialhilfe). By implementing this conflation of social assistance benefits and unemployment assistances, administrative efforts shall be reduced and more transparency shall be created. A better coordination shall lead into more rapid placements.

7 Temporary agencies Independent personal agencies, attached to each office of the BA, will hire out unemployed people to employers in order to enable unemployed people to gain a foothold in the labour market. Unemployed people will be obliged to accept employment offers through these agencies. During the probationary period, which must not be longer than six months, they will be paid at a rate equivalent to unemployment benefit. Thereafter, they will be paid according to yet-to-be-negotiated collective agreements covering these agencies. Mentioning temporary agency work, one has to focus on the European Commission s proposal concerning working conditions for temporary workers as well. Those proposals also include the principle of non-discrimination for temporary workers. However, this principle as shaped by the European Commission is not compatible with the ideas set up by the Hartz commission. As the German government is in favour of the principle of temporary agencies as worked out by Hartz and representations of interests are also pronouncing their qualms, but meet with opposition, the principle of non-discrimination turns out to be highly controversial. It is still uncertain whether it will be sustained in the existing manner or not. Me plc structures The report introduces a range of measures designed to reduce participation in the informal economy by encouraging unemployed people to become self-employed. Central to this is the creation of a so-called me plc ( Ich-AG ) structure, seen as the first step to full self employment. All unemployed people who want to become selfemployed will benefit from subsidies from local employment offices for three years.

8 The commission is of the opinion that there needs to be no extra money inserted into the BA budget to finance the range of new measures on offer, as the savings made by reducing unemployment should be enough to fund the measures. It is estimated that these savings will amount to some 13.5 billion per year by As far as implementation of the reforms is concerned, Chancellor Schröder had announced that this would take place as soon as possible. Now, after the general elections in Germany, it is pronounced that this might take place at a later time. Reactions Employers have been critical as to the report. In order to express the Confederation of German Employers Associations, point of view, Dieter Hundt, president of the BDA, has stated that the reforms do not go far enough and regrets the fact that the commission s original proposals have been somewhat watered down in the final report. The BDA believes that these reforms barely scratch at the surface of what is necessary in terms of labour market reform, particularly in the areas of encouraging people to get off benefits and into the labour market. Nevertheless, it praises some individual proposals, such as the proposed deregulation of the temporary agency sector or increase of pressure for a more rapid placement. The six leading German institutes for economy that analyse the domestic economic situation have recently supported BDA s observations, and share the view that the proposals made by the Hartz commission do not replace more serious reforms. They do not share the commission s hope of halving unemployment just by transposing the proposed amendments. Additional efforts are needed. Even the European Commission in its assessment of the European employment strategy, issued in July

9 2002, mentioned that much remains to be done to remove a number of weaknesses in order to reach the Lisbon target of a 70 % overall employment rate by The report has been supported by the German Chancellor, Gerhard Schröder and his Social Democratic Party ( SPD ). The head of the BA, Florian Gerster, has stated that the goal of halving unemployment by 2005 is ambitious. He has expressed disappointment that the commission s original intention of general cuts to unemployment benefits have not been included in the final report. The trade unions welcomed the Hartz commission s overall philosophy of reducing unemployment has been welcomed. The German trade union confederation ( Deutscher Gewerkschaftsbund DGB ), has issued a statement praising the commission s aims and characterising this as a real opportunity to make social progress. However, one will see whether this opinion will be upheld or not when the reforms are actually going to be implemented. In order to combat unemployment and to reach an accelerated economic growth in Germany, framework conditions have to be adapted as to strengthening the German labour market. In order to give support, BDA has started the initiative BDA-projob.de. By this initiative, BDA does not want to issue solutions being already set up in advance, but to find ways to strengthen the German labour market. The overall concept was worked out by experts from economy, politics, science and the media. By means of BDA-pro-job.de, BDA has presented a master plan for a new labour market constitution. It comprises measures to improve labour law flexibility in order to reach a greater freedom to create more jobs. Further, it contains methods to promote employment by

10 giving assistance to unemployed which sets up demands, too. Additionally, it sets up measures so as to improve prerequisites in order to reduce the high amount of low skilled workers who are currently unemployed. Conclusion The labour market problems in Germany are to a significant extent the result of too much regulation. Germany needs to follow the road of de-regulation. German law has to provide a flexible framework in order to be an efficient tool to respond to the increasing need of flexibility of both, companies and workers. The focus is on finding a solution somehow in between flexibility and employment security. BDA and many others have analysed reasons for the hitherto longest and most serious period of unemployment in the history of the Federal Republic of Germany and given recommendations how to solve this problem. So why don t we start implementing the relevant measures!