Theses *

Changes to the labor market and social policy are necessary but have long-term consequences!

1. Not only the instantaneous consequences of the transformation and structural changes to the East-German labor market had to be dealt with, but also the remaining long-term repercussions to companies, personnel structure and workforces still have to be come to terms with. Therefore the reunification has built a long-term challenge to the East German labor market.
2. After the reunification in 1990, as well as the introduction of the economic, monetary and social union with the old Federal Republic of Germany, the eastern German economy was immediately confronted with the harshness of the world market. The shock of the reunification and the weaknesses of the GDR economy that emerged with the monetary unification, led to a decrease in employment of about 40 percent and the creation of mass unemployment within a very short period of time. In addition, rapid economic structural change happened which, on the one hand, led to an increase of employment in the construction industry and service sectors, and on the other hand to a decrease of employment in the manufacturing sector as well as in agriculture and forestry. The associated massive changes in the standards of quality and the reduction of employment necessitated an investment in education and socio-political measures in great dimensions. This policy was successful inasmuch as it restricted migration to West Germany and opened new perspectives of employment for many people in East Germany in their home towns. However, some of these measures had negative long- or short-term consequences (3 and 4).
3. The phase of the fundamental transformation of the East German economy, in which many new jobs were created, lasted only a few years. An extensive closure of operational staff structures subsequently happened, leading to many employees that were able to continue working in their companies during the first years hardly managing an entrance into new gainful employment. In comparison, those who were discharged early found jobs in the new structures and remained there longer, often until today. In the situation of a fast conversion, measures taken for the labor market (such as short-time work zero and job creation measures) have often become traps, since they keep the affected people from using the short time window of relatively open structures and the resulting new chances. This window of time was already closing in 1992.
4. Another measure to mitigate job reductions from the years of transformation in a socio-political way was the so called “aged retirement” that enabled employees from the age of 55 years onwards to retire early. The shrinking companies made extensive use of this opportunity . Whole age groups vanished from companies. In the following years, after the retirement limit had been increased again, the replacement need dropped rapidly as a result of fewer regular transfers from employment into retirement. Consequently, personnel structures with homogeneous age groups formed that rarely exchanged information with the external labor and training market. The long-lasting combination of a closed company system of employment and an oversupply of qualified workforces on the labor market led to routines and practices that have been proven to be downright dysfunctional after 20 years, for example low wages as a locational factor and a lower level of collective bargaining coverage in East Germany, missing experience in personnel management especially when using the external labor market and in-company vocational training, as well as an increasing number of precarious jobs. The necessary changes due to the return of staff turnover after more than 20 years necessitated a considerable effort to learn for all involved parties.
5. In conclusion, great success was achieved over difficulties in the transformation of the East-German labor market, in a situation with high unemployment through the modification of qualification standards, supported by labor market and socio-political instruments. However, there were measures taken that, on one hand, were appropriate in the beginning situational upheaval, but contributed, on the other hand, on a long-term basis, to a process that made many labor market entrants – companies as well as employees – slow or un able to adjust new conditions.

Genesis of the results of the Collaborative Research Center 580 *

The theses mentioned above are related to the following research projects of the Collaborative Research Center 580::