Labour Market and Labour Market Policy in the Eastern Part of Germany: New Approaches and New Links to Structural Policy

ABSTRACT: After unification, East German GNP dropped severely, total employment fell to about two thirds of the former level. Long-term labour market prospects remain poor. From the very beginning up to now, labour market policy (short-time work, early retirement schemes, work creation measures, further training and retraining) absorbed much of the surplus labour supply. Regulations were changed to allow for‘“mega-measures” (contrasting the traditional individual approach). A new co-financing model links work-creation measures more closely to regional structural policy. A labour market infrastructure was built up in a short time, including new elements such as‘“employment promotion companies” and‘“reconstruction agents“.     

Benchmarking Labour Market Performances and Policies

The recent EU initiatives on employment policy and the “Luxembourg employment strategy” underscore the relevance of benchmarking as an instrument for improving labour market performance and labour policy effectiveness. This paper presents the major results of a research project aimed at exploring the application of benchmarking techniques to convergence between the European labour markets. After synthetically describing the development of benchmarking techniques in the private and the public sectors, the paper addresses the crucial question of defining labour market performance and presents the possibility of creating labour market performance and policy benchmarks through the construction of efficiency frontiers. A second possibility explored is the radar-chart approach, a presentation technique that allows both for single dimension and overall performance monitoring. The paper then faces the problem of broadening the scope of benchmarking from the identification of benchmarks to the understanding of performance gaps through more comprehensive analytical tools. In this area, useful contributions are provided by the employment systems and the transitional labour markets approaches. The concluding section stresses the role of normative decisions, as well as the possible political challenges implied by a thorough application of benchmarking techniques to labour market convergence.     

Labour Policy in the Federal Republic of Germany: Challenges and Concepts

ABSTRACT: This paper describes how German labour policy, both employment policy and active labour market policies, has developed between 1974 and 1987. Government intervention for full employment in a welfare state, a cooperative system of industrial relations, an active labour market policy, and a comparatively efficient system of vocational and adult education did not prevent the loss of full employment in 1974. But persistent labour market slack until today has not fundamentally changed the climate of relative political and social calm. The basic concepts, programmes and specific measures of labour policies pursued in the FRG are surveyed with special reference to their costs and effects on employment and the structure of unemployment. The challenges to labour policy stem from three complete business cycles around a slightly falling trend in employment and the bad prospectives of the German labour market until the year 2000. Four major measures of labour market policy now reduce registered unemployment by about 400,000 in the mid 1980s. Total costs of unemployment amounting to 57 billion DM per year offer financial alternatives to create jobs and to reduce working hours. Finally, actual proposals under discussion in Germany are examined in order to combat unemployment in a determined commitment to full employment immediately.     

Employment Protection and Labour Market Segmentation: the Fiftieth Anniversary of the “Cassa Integrazione Guadagni”

Abstract. This paper analyzes the evolution of the Cassa integrazione guadagni (CIG), according to 7 different theoretical models, which offer a classification for the different cases of application that have developed since its introduction, as well as for the many policy targets pursued by the Public Authorities. Then an assessment of the economic role of CIG is attempted, divided into three separate sections. The first is aimed at evaluating the economic long-term effect on macro performance, where the crucial balance is between a “crowding-out effect” on private investment and a “profit-maintenance effect” by lowering the effective wage rate. The second section approaches the employment consequences of the CIG by examining a second crucial balance: that between the protection granted to the employed and the obstacles raised for the employment of the non-employed (above all, freezing workers' turnover). This issue is tackled too in terms of the insider-outsider theory, showing the possible relevance of CIG in segmenting the labour market and keeping the wage rate dynamics. Finally the paper briefly examines the profound revision of the CIG recently approved by the Italian Parliament, aimed at avoiding excessive costs while enhancing labour mobility.     

Subjective Measures of Employment Opportunities and Interregional Migration

Abstract. Empirical studies of interregional mobility routinely use regional unemployment differentials to characterize economic incentives to move between regions. In this paper, we present a new regional labour market indicator computed from survey data in which respondents are asked to evaluate local employment opportunities in their resident municipality and surroundings. The subjective measures of satisfaction with local employment opportunities have positive and significant impact on interregional migration flows, also when controlling for traditional measures of regional labour market conditions, including the regional unemployment rate. Contrary to most European studies, we find that regional labour market conditions have a strong effect on interregional migration flows.     

Ethnic Minority Women in the Scottish Labour Market: Employers' Perceptions

This paper contributes to an under‐researched area through investigating employers' perceptions of ethnic minority women in the Scottish labour market. Adopting a social constructionist approach which acknowledges agency and structure and incorporates insights relating to organizational and social group culture, the study highlights the influence of individual (micro), organizational (meso) and contextual (macro) factors on ethnic minority women's participation in the labour market. The paper is based on qualitative research involving Scottish employers in the public and private sectors to examine perceptions and practices related to the employment of ethnic minority women. Institutional commitment to equality issues is questioned, although individual instances of engagement with key equality issues were sometimes evident. Proactive recruitment strategies and career support for ethnic minority women and men were not in evidence, and there was low awareness of the unique position of ethnic minority women in employment and society. We argue that these findings call for a multi‐level approach to advancing human resources management policy, practice and research within a wider socio‐political environment in which the responsibilities and duties of public sector organizations are clarified and more support is provided for organizational promotion of equal opportunities.     

A Stock-Flow Model to Analyse and Forecast Labour Market Variables

ABSTRACT: In confronting problems of employment and unemployment, students of the labour market, and economists in general have focused mainly on the determination of the level of such variables. Much less attention has been paid to such questions as: how many persons have entered the area of employment and the labour force in various time periods, and how many have exited; their sex and age distribution; and the determinants of the level and structure of flows amongst the various labour market conditions. Yet it appears superfluous to underscore the relevance of such questions. To illustrate, suffice it to recall that in Italy, the present level of employment is essentially the same today as it was in 1961‘; but this has not prevented whole generations of young people from 'stably’entering the employment area, albeit with varying degrees of difficulty in different periods. As for the numerous statistical surveys of labour market flows in a range of countries, and as for the works of job search theorists², it should be observed that such surveys and analyses essentially concern conjunctural phenomena. Consequently, these authors have paid no attention to the distinction between short-run turnover and generational turnover, or to the extremely singular characteristics of the statistical data on flows. An attempt to construct labour market models that present an integrated version of the 'structural’aspects of the market in terms of stock and flows is therefore lacking. The present study sets forth various objectives and is divided into two parts. In the first, an analysis of several controversial terminological aspects of the concepts of stock and flow is presented, and an attempt is made to point out those theoretical structures which have been responsible for the long-prevailing neglect of the labour market flows, particularly long-run flows. Then the problem of defining the concepts of short-run and generational turnover will be confronted in light of an analysis of the statistical methods used in the surveys; finally, a methodology for measuring generational flows is proposed. In the second part of the paper a model based on generational flows, as previously defined, will be presented together with a computational procedure capable to produce long run estimates of alternative scenarios of labour demand and supply and of the structure of employment by sex and age. A brief summary of some of the empirical results obtained applying our model and forecasting procedure to the Italian labour market will also be discussed in the final part of the paper.     

Uncertainty,Flexibility Gap and Labour Demand in the Italian Economy

In this paper we analyse the effects of changes in the degree of uncertainty of the economic system and in the “flexibility gap”, deriving from the combined evolution of the degrees of uncertainty and flexibility of the economic system (in particular, labour market flexibility), on regular and irregular labour demand. On the basis of a simple qualitative model, we give a partial interpretation of some stylized facts of the Italian economy during the last decades. We argue that the low uncertainty and flexibility gap in the 1950s and 1960s, their remarkable increases in the 1970s, their inadequate reduction in the 1980s and the new increase of uncertainty and flexibility gap in the first half of the 1990s, have had a considerable influence on the quantity and quality of the “investment in employment” of Italian economy. The higher degree of uncertainty and the inadequate degree of flexibility of the Italian economic system are likely to have contributed towards the lower regular employment rate, compared to the main industrialized countries, and to high irregular employment. An adequate economic policy for reducing the uncertainty of the economic system together with a structural economic policy for increasing the flexibility of the economic system (in particular, an active labour policy for increasing the flexibility of the labour market), would be likely to produce positive effects on the quantity and quality of labour demand, contributing towards reducing unemployment.     

Labour Market Policy and Employment Growth in Sweden

ABSTRACT: In this paper, the author outlines the Swedish employment situation and traces the history of the labour market policy it generated, from its earliest development at the turn of the century, through to the Rehn-Meidner model, and then examines the various reactions and criticisms against it. It goes on to look at the trends and developments of the labour market in the‘80s, and concludes by making a speculative analysis on if and how the labour market policy has had an effect on the participation of various sectors of the population in the labour force, and if it has influenced unemployment in the Swedish labour market.     

The Changing Informal Labour Market in Brazil: Cyclicality versus Excessive Intervention

Although following an anti-cyclical behaviour over the last decade, Brazil's informal sector seems to have grown recently as a response to excessive government intervention in the productive system. Despite high inflation and sluggish economic performance, Brazil continues to live with low unemployment and only sporadic social unrest. A substantial informal sector is thought to be acting as a cushion to help minimize labour market instability. This paper reviews the main concepts and methodologies proposed in the literature, summarizes the results obtained by different authors, and presents some additional information on the recent informalization of the Brazilian labour markets.     

Caring for Preschool Children in Urban Brazil

ABSTRACT: This paper examines modes of child care choice for young children in urban Brazil. Analysis of child care in developing countries is rare, in spite of its relevance to many policy issues. We model child care choice as a function of characteristics of the child and the mother, including the mother's predicted wage and probability of employment, the presence of other young children and potential caregivers. The results highlight the importance of the institutional structure of the labour market and the formal child care market and reveal policy-relevant information regarding the allocation of child care responsibility among household members.     

The Economics of Equal Value

Equal pay for work of equal value has come to be seen as the policy most likely to reduce the gender earnings gap. This paper explores the theoretical basis for widespread undervaluation of women's work and argues that institutionalised discrimination in the labour market also affects internal pay and grading structures. Recent recognition of the scope for discretion in pay determination undermines the “market forces” argument against equal value. The current wage structure reflects an outdated model of social and family organisation. Much poverty is now the result of women seeking economic independence in a market which rewards them as subordinate family members. However, the main obstacles to equal value lie in labour market institutions. The increasing fragmentation of pay bargaining and moves to performance-related pay will reduce rather than promote the relationship between pay and job content.     

Labour Flows as Determinants of the Wage–Price Spiral: An Empirical Analysis for The Netherlands

This study presents an empirical analysis of the influence of labour market flows on wage and price formation. A system of wage, price and employment equations after Nickell (Oxford Bulletin of Economics and Statistics 49: 103–128, 1987) is estimated, including labour flows as indicators of labour market tightness in the wage equation. An impulse response analysis using this system shows how changes in the flow of layoffs (flow from employment to unemployment) may be the basis of short‐run Phillips curve effects in The Netherlands     

More Jobs Through Less Employment Protection? Evidence for West Germany

ABSTRACT: In reaction to growing criticism of the allegedly negative employment effects of job protection regulations (lay-off and dismissal restraints), the West German government in 1985 introduced new legislation facilitating the conclusion of temporary (i.e. fixed-term) work contracts in order to stimulate employment growth (‘Employment Promotion Act 1985‘AZPA). The research unit ‘Labour Market and Employment‘ at the WZB has evaluated the employment and labour market impact of the new legislation for the period 1985-1988, and apart from providing a detailed analysis of the socio-economic and institutional diversity of job arrangements covered by the category of temporary (i.e. fixed-term) employment, the project‘s focus has been on the impact of minor changes in the institutional frame- work as effected by the EPA on firms‘ employment policies, as well as on the overall level of employment. Results show that like in most other European countries the temporary work force in Germany has considerably grown over the past years in both absolute and relative terms, this increase, however, being largely due to cyclical factors as well as medium-term structural changes on the supply and demand side of the labour market rather than to changes in the regulatory framework as effected by the EPA. The impact of the new regulations on firms‘ hiring decisions and on the overall number of hirings in the total economy have to be regarded as rather modest, in fact amounting to not more than an estimated 25,000 additional hires per year or roughly 0.5|X% of all employment contracts concluded in the private sector. This marginal positive impact on firms‘ employment decisions, however, is counterbalanced by unintended substitution effects and an increase in involuntary quits arising from them when labour demand declines. Even under the overall positive employment development given in the period under investigation the net employment effects of the EPA temporary work legislation thus are shown to be at best marginal. In case of a deterioration of the overall economic situation, however, the increase in temporary job arrangements supported by the new legislation is likely to lead to accelerated workforce adjustments by firms and thus over time to result in a depression of the overall level of employment. From a theoretical point of view, the findings suggest that measures aiming at de-regulating labour relations such as the EPA largely fail to modify essential behavioral parameters of economic actors in economic environments which for decades have adjusted to a relatively high level of welfare state regulation, as has been the case in Western Germany.     

Labour Policy and Determinants of Employment and Wages in a Developing Economy with Labour Shortage

Using data from a sample of 1,099 workers, this paper investigates the determinants of employment and wages for workers in the United Arab Emirates. The paper further examines the wage distribution and the decomposition of the wage gap between the public and the private sectors. Results of the study are consistent with the dual labour market theory and indicate that the labour market in the United Arab Emirates is segmented based on sectors (public versus private) and types of workers (nationals versus non‐nationals). The study concludes with a discussion of the implication of these findings for the effectiveness of labour and economic policy.     

Informal Caregiving and Women's Work Choices: Lessons from the Netherlands

This paper focuses on the effects of Dutch long‐term care and labour market policies on women's labour market participation and informal caregiving decisions. Labour market participation and informal caregiving are estimated jointly through a multivariate dynamic binary probit on European Community Household Panel data. Under Dutch policy, informal care decisions appear to be independent of household non‐labour income and no significant impediment seems to hinder the contemporaneous practice of work activities and care. However, past informal care provision still slightly reduces the probability of currently working and vice versa, leaving room for policy improvements to enhance labour market participation.     

The New International Migrations and the Changes in the Labour Market

Abstract. The article intends to point out some of the main changes that are taking place in the structure of the labour market in Europe and the role played by the recent waves of immigration from Third World countries. The main features of these new migratory flows are that they involve a much larger number of states, both as sending and as receiving countries. Secondly the majority of the migrants workers tend to hold secondary labour market jobs or to work in the informal sector. These two aspects make today's international migrations very different from the intraeuropean migratory waves that concerned a much lower number of countries and were directed towards industrial areas.     

Temporary Workers in Italy: Who Are They and Where They End Up

Abstract. Temporary work has been an important component of employment growth in Italy since the early 1990s. This paper focus upon labour market transitions of temporary workers in order to test whether temporary work enhances the subsequent labour market chances. We use propensity score matching to compare subsequent employment outcomes of people who have recently acquired a temporary job with those of people who remained unemployed. Individuals' hetero geneity explains a good amount of the raw differences in the subsequent labour market status of temporary workers and the comparison group. Yet there appears to be a sizable net gain from experiencing a temporary work. Our benchmark average estimate is a 30 percentage points rise in the ‘satisfactory employment’ chances 1 year after the start of the temporary work experience. The net gains are the largest for females and adult people and the areas with low unemployment; moreover, gains are the largest for the most recent years in our sample and for those people who were (according to the propensity score estimates) either least or most likely to exit from unemployment.     

Kind of Black: The Musicians' Labour Market in Italy

It is estimated that only 5 per cent of musicians in Italy are regularly employed. In an attempt at understanding such a peculiar situation, we build a theoretical model of the musicians' labour market in which we embed the main institutional features of the Italian system. The presence of taxation encourages the formation of a black labour market for musicians and discourages talented agents from becoming full‐time musicians in all second‐best economies. In Italy both tendencies are particularly strong, and exacerbated by the peculiarities of the pension system for musicians. These inefficiencies might be corrected by a twofold policy: the reform of the pension system, highly desirable but unlikely to be politically feasible in the current Italian institutional setting, and the introduction of a sufficiently large unemployment benefit for musicians, step that has a general interest for any second‐best economy and not only for the case of the musicians' labour market, and that might instead be viable under certain circumstances.