DP12846 The Fall in German Unemployment: A Flow Analysis
|Author(s):||Carlos Carrillo-Tudela, Andrey Launov, Jean-Marc Robin|
|Publication Date:||April 2018|
|Keyword(s):||Germany, Hartz reforms, Income inequality, mini-jobs, multiple job holding, non-participation, part-time work, unemployment|
|JEL(s):||J21, J31, J63, J64|
|Programme Areas:||Labour Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=12846|
In this paper we investigate the recent fall in unemployment, and the rise in part-time work, labour market participation, inequality and welfare in Germany. Unemployment fell because the Hartz IV reform induced a large fraction of the long-term unemployed to deregister as jobseekers and appear as non-participants. Yet, labour force participation increased because many unregistered-unemployed workers ended up accepting low-paid part-time work that was offered in quantity in absence of a universal minimum wage. A large part of the rise in part-time work was also due to the tax benefits Hartz II introduced to take up a mini-job as secondary employment. This has provided an easy way to top-up labour income staggering under the pressure of wage moderation. The rise in part-time work led to an increase in inequality at the lower end of income distribution. Overall we find that Germany increased welfare as unemployment fell.