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September 18, 2017

Labor market issues in the German election

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Unemployment benefits
In Germany, unemployment has fallen from 11% in 2005 to 5.6% today. The governing parties, unsurprisingly, regard the low unemployment rate as validation of their policies, and unemployment is not a major issue for the upcoming election.

The Christian Democratic Union/Christian Social Union (CDU/CSU) aims at further reducing the unemployment rate to 3% by 2025. It wants to focus, in particular, on the long-term unemployed; however, it does not provide concrete information on how it plans to achieve this. The Social Democratic Party (SPD) is focused on training the unemployed and promises to extend the payment of unemployment benefits for the duration of training programs.

The liberals, the Free Democratic Party (FDP), object to any extension of unemployment benefits. Instead they want to subsidize firms which invest in training their employees. The Left Party (Die Linke) proposes a significant increase in welfare payments, without any sanctions. They also propose a cut in the standard work week to 30 hours (while keeping income at the same level, of course), not only for the benefit of current employees, but also to reduce unemployment. This policy is surely ill-advised given that work-sharing attempts have proven to be unsuccesful in the past.

Alliance ‘90/Green Party (Bündnis 90/Die Grünen) want to transform unemployment insurance into employment insurance. This may also be used by the employed for further training. The eurosceptic and populist Alternative for Germany (AfD) suggests the introduction of Bürgerarbeit (community work), with the long-term unemployed carrying out tasks of public value for 30 hours per week, paid for within the social insurance system.

Employment contracts and atypical employment
Employment reached a maximum in 2017. However, more than 20% of employees are in atypical employment (marginal employment, temporary agency work, fixed-term employment, part-time employment below 21 hours, or a combination of these). Since April 2017, after nine months in a company, temporay agency workers must receive the same wage as permanent workers. The SPD wants to equalize pay from the first day of employment, while the AfD demands that temporary agency workers be treated the same as permanent workers after six months and that there should be a limit of no more than 15% of temporary agency workers or contract work per firm. The Green Party and the Left even demand a wage bonus, in the case of the Left by 10%!

The SPD, the Green Party, and—in the most rigorous way—the Left want to reduce fixed-term contracts, particularly those without a specific purpose. The FDP takes a totally different viewpoint. Since temporary work or fixed-term employment could serve as an important stepping stone into regular work, it proposes cutting regulations for temporary agency workers and would prohibit limitations on temporary agency work or fixed-term employment. The FDP also wants to extend the maximum income from mini-jobs—generally characterized as part-time with a low wage—from €450 to €540 per month. Since holders of mini-jobs cannot claim health or unemployment insurance payments, the Green Party and the Left want to convert them into jobs subject to social security contributions. Clearly, these are two sides of the same coin. While employees would benefit from being within the social security system, these jobs become more expensive for employers so that firms’ demand for such jobs will decrease. The Left also wants to ensure that employees can claim a minimum of 22 contracted hours per week, which would surely kill some jobs.

The minimum wage
The existence of a statutory minimum wage at the federal level, introduced in 2015 and increased at the beginning of 2017, is not a controversial issue. The Green Party and the Left want to abolish all current exemptions from the minimum wage. At the same time, the Left wants to increase the minimum wage to €12, i.e. by 36%, and in the personal care sector to as much as €14.50. While the SDP plans to abolish the exemption of the long-term unemployed from the minimum wage, the FDP wants to impose an exemption on refugees.

The corporate gender gap
After an intensive public debate about the underrepresentation of women in leadership positions, since 2016 publicly quoted and fully co-determined (curently just about 100) companies in Germany are legally subject to a 30% female quota on supervisory boards. The SDP argues that leadership positions in the private as well as in the public sector should be filled equally with women and men and the CDU/CSU aims at establishing this goal in the public sector by 2025. As a concrete measure, the SPD plans a binding quota for all personnel activities of universities at the federal level. The Green Party wants to extend the law to a gender quota of 50% for all publicly listed and co-determined (about 3,500) companies. The Left calls for a 50% quota for the supervisory as well as the management boards of all private companies. While the FDP supports increasing the leadership participation of women, it opposes any form of gender quota. This is also strongly the case for the AfD.

Labor market policy
All in all, the suggested labor market policies of the main parties are not extensive. Most suggestions come from the Left, which strongly calls for government intervention. There is some accordance with the Green Party, which, though, has a much less rigorous view. The FDP, on the other side, opposes regulation. The AfD reveals a less liberal view than one may have expected. The currently governing parties, the CDU/CSU and the SPD, have not announced far-reaching changes in labor market policy.

Related article:
The labor market in Germany, 2000–2016, by Ulf Rinne and Hilmar Schneider

Related video:
Der deutsche Arbeitsmarkt

Please note:
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.