"In 2003–05 a series of labour-market reforms was undertaken in Germany: more experience was required to qualify for unemployment benefits, the duration of benefits was cut for the older unemployed, the follow-on benefit was merged with the less generous welfare programme, the onus of job search was put on the unemployed person for the first time, sanctions for refusing job offers were enforced, private firms were recruited to help place the unemployed, the employment agency was reorganised and temporary work agencies deregulated."
"These reforms would have been expected to lower unemployment, and there is some evidence that they did. If their effects occurred with a lag extending into the recession, the reforms could have moderated the employment decline. There is some evidence consistent with this – the Beveridge Curve continued to shift in throughout the recession, while the share of long-term unemployed continued to decline throughout the recession – but it is impossible to judge the likely magnitude of the effect."
" In the export-driven expansion of 2005–07, firms hired significantly less than that expected, given the extent warranted by GDP and wages the missing employment increase in the 2005–07 boom was equivalent to 40% of the missing employment decline in 2008–09, and that more than half of the missing employment increase was attributable to firms’ pessimistic expectations. Firms hesitated to hire in the boom, as they feared it would not last, and when eventually the recession they feared arrived, they had less need to fire than in previous recessions."
"Worker bargaining power has declined in Germany since reunification. This is reflected by a decline in union membership and coverage of union agreements, increasingly decentralised wage bargaining, and union concessions such as the use of working-time accounts. One causal factor is likely the emergence of Eastern Europe as a competing location for manufacturing production. Since 2001, average hourly wages have stagnated in real terms. Assuming an ‘off-the-shelf’ estimate of labour-demand elasticity with respect to wages of 0.7 – we show that if wages had continued rising at the pace of the 1990s (1.12 log points per year), employment would have declined much more in the recession – by an amount equal to 20% of the missing employment decline."
"... missing hires in the 2005–07 expansion relies on pessimistic firm expectations, and the increasing cost of adjusting employment at the extensive margin, which make expected future determinants of labour demand more important in the determination of current employment plans."
"... manufacturing is the industry with the missing employment increase in the boom and the missing employment decline in the recession. "
