Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy
Income support systems, labor market policies and labor supply: the German experience
Abstract: In view of the demographic trends, most EU countries face
the problem of a declining work force in the future. Understanding the
interaction between income support systems (such as unemployment benefits,
social assistance, early retirement and pension systems) and total labor
supply is of crucial importance to combat problems and ensure economic
growth in the future. The German labor market has been plagued by high and
persistent unemployment in the last two decades in combination with a
relatively low labor force participation of women. This created a situation
where labor market reforms were unavoidable. The speed and depth of the
reforms are remarkable, mainly aimed at activating people by increasing
their incentives to take up work. The aim of this paper is to give a brief
overview of the German income support systems and labor market polices,
their recent reforms and—where already possible—effects of these reforms.
Overall, Germany seems to be on the right track. The recent reforms helped
to tackle some labor market problems but also created high political
unrest. It remains to be seen how future governments react to worsened
economic conditions in light of these experiences.
Keywords: Unemployment; Labor force participation; labor supply; benefit systems; public policy; (follow links to similar papers)
JEL-Codes: J26; J38; J68; (follow links to similar papers)
35 pages, December 15, 2009
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