A perspective on the German 'job miracle' : labour market outcomes and welfare after the labour market transformation

Abstract

In the wake of the recent economic crisis, unemployment rates in many countries have notably increased and the question of how to promote employment and combat unemployment has become a central and difficult matter for policy-makers. In the light of these challenges, Germany is commonly considered a role model for tackling the problem of unemployment. Even as recently as a decade ago, Germany faced persistently high unemployment and its labour market institutions were regarded as a symbol of inflexibility. Today, the unemployment rate in Germany is remarkably low and not even the vast GDP drop in the recent 'Great Recession' has hampered this exceptional labour market performance. This striking change in the German labour market even led to the Nobel Prize winner Paul Krugman coining the term 'German job miracle' in order to describe the evolution of the German labour market. The aim of this study is to shed light on this 'job miracle' in Germany.