European Economy. Economic Papers. Germany's growth performance in the 1990's

Figure 3.17 : Labour market turnover and employment
Source : Bundesanstalt für Arbeit, AMECO
A potentially forceful explanation for the somewhat increased labour market flexibility is the
long term shift in the composition of employment, away from manufacturing with very
standardised forms of employment and powerful trade unions towards the services sector with a
higher share of ‘atypical’ employment. For example, the use of fixed term contracts has become
more widespread in Germany over the 1990s: 9% of workers had fixed-term contracts in 2000,
compared to 7.5% in 1991. The increase in the use of fixed term contracts was much stronger in
France, which could partly explain the catching-up in terms of turnover (cf. Blanchard/Landier
(2001)). At the same time, work in temporary work agencies is increasing fast, although the
share of workers employed by such agencies remains, at 1.1% of dependent employment, still
quite low in an international comparison (Konle-Seidl and Walwei (2001), (2002)).
The regulation of work contracts in Germany, as measured by the OECD indicator of EPL
strictness, is less severe than in France or Italy, but much more rigorous than in the UK. For the
rules defining permanent contracts (such as procedural requirements, notice and severance pay,
standards of and penalties for unfair dismissals) the indicator finds more strictness than for the
regulations characterising (renewals and maximum duration of) temporary contracts (Table
3.19). Still, there is a concern that the use of temporary contracts is a substitute for “normal”
contracts which offer insufficient flexibility rather than an indicator of increased flexibility by
itself. The fact that the ranking of the incidence of temporary contracts among France, Germany
and the UK is the same as the ranking of EPL strictness would rather support the latter
interpretation.
changes without a spell of registered unemployment are disregarded (lack of suitable data), although certainly
very relevant.
49
Even if the rising unemployment rate is controlled for, a small but significant trend towards higher turnover is
discernible for West Germany over the period 1964-1994. For reunified Germany, labour market turnover
seems to increase at a rate of around 6% per year (again, the unemployment rate was controlled for).
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
Turnover rate (W)
Unempl rate (W)
Turnover Rate (D)
Unempl rate (D)

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