1. No category

Mini- and Midi-Jobs
in Germany
Effects of Marginal Employment
on Unemployment
Anita Fichtl
FORES Policy Paper 2015:3
2
Table of Contents
1. Låga löner, små effekter
2. Preface
3. Introduction
4. Institutional overview of the Hartz reforms in Germany
5. Marginal Employment: Mini- and Midi-Jobs (Hartz II) in Germany
Definition and reforms
Facts and figures
Who are the mini-jobbers?
Where do they work?
What kind of jobs do people do as mini-jobs?
6. Literature review on Hartz reforms and reducing unemployment
Did the Hartz reforms reduce unemployment?
The contribution of Mini-jobs (Hartz II)
Stepping stone or dead end?
Substitution effects
7. Conclusion
8. References
4 6 8 9 16 16 22 25 28 33 37 37 41 43 46 49 51 List of Figures:
Figure 1: Regular and marginal employees in Germany, September 2014 ................. 22 Figure 2: Marginal Employment in Germany, 2000 - 2014 ......................................... 24 Figure 3: Marginal Employment in Germany: sex, age and education, in %,
September 2014............................................................................................................. 26 List of Tables:
Table 1: Core elements of Hartz reforms I-IV*, structured into direction of impact**:
...................................................................................................................................... 12 Table 2: Regulations on Marginal Employment (‘Mini-Jobs’) .................................... 17 Table 3: Development of contributions to social insurance system and taxes for minijobs and total rates of contributions to pension insurance since 2003, in % of gross
wage .............................................................................................................................. 20 Table 4: Employees – Classification of Economic Activities, September 2014............ 30 Table 5: Employees – Classification of Occupations, September 2014 ....................... 33 Table 6: Literature review: Did the Hartz reforms reduce unemployment? ................ 38 Table 7: Literature review: The contribution of mini-jobs (Hartz II) .......................... 42 3
1. Låga löner, små effekter
Svensk sammanfattning: De senaste tio åren har arbetslösheten sjunkit betydligt i
Tyskland. Nivåerna har hållit sig låga även under de senaste årens ekonomiska kris. En
vanlig förklaring är de arbetsmarknadsreformer som genomfördes 2003–2005, de så
kallade Hartz-reformerna. Reformerna var omfattande, med bland annat stöd för
anställning av äldre, starta-eget-bidrag, avreglering av tillfälliga anställningar och
nedskärningar i arbetslöshetsförsäkringen.
En del av det andra steget i Hartz-reformerna (Hartz II) var mer generösa regler för
minijobb (”mini-jobs”), en lågbeskattad anställningsform. Med nuvarande regelverk är
det anställningar där lönen inte överstiger 450 euro i månaden, eller anställningar som
kan ha högre lön men varar maximalt tre månader eller 70 arbetsdagar per år. En
anställd kan även ha ett minijobb utöver en ordinarie anställning.
Den totala skatten är lägre än för reguljära anställningar. Arbetsgivaren betalar 30
procent skatt och sociala avgifter, vilket är en högre andel än den normala. Å andra
sidan betalar arbetstagaren ingen skatt och bara en låg pensionsavgift. Detta ger
möjlighet till låga löner, så att kostnaden för skatter och avgifter ändå blir låg för
arbetsgivaren. Dessutom är administrationen enklare än för andra jobb. Skatter och
avgifter betalas till en federal myndighet i stället för till några av de cirka 300 privata
försäkringsbolag och 700 skattemyndigheter som finns i Tyskland. För att undvika
skarpa marginaleffekter över 450 euro i månaden finns även midi-jobs, där vanliga
skatteregler fasas in mellan 450 och 850 euro.
Det är få som har minijobb med högre månadslön än 450 euro utifrån regeln om
korttidsanställningar. Däremot har nu 14 procent av alla anställda på tysk
arbetsmarknad minijobb under 450 euro/månad som sin enda anställning. 8 procent har
ett minijobb under 450 euro parallellt med en reguljär anställning. Båda grupperna
växte direkt efter att de nya reglerna infördes, därefter har den senare fortsatt att växa.
Totalt har antalet minijobb ökat från 5,6 till 7,8 miljoner sedan 2003, en ökning som
motsvarar 6 procent av alla anställda.
Minijobbare används ofta vid produktionstoppar och för arbete på kvällar och helger.
De får ofta lägre timlön än andra anställda även om de utför motsvarande
arbetsuppgifter. 61 procent av minijobbarna är kvinnor. Bara 5 procent har en högre
utbildning, hälften har en yrkesutbildning och resten har okänd eller ingen
yrkesutbildning. De finns i många olika branscher: tillverkning, kontor och
administration och välfärdstjänster är de största.
Forskning och utvärderingar av Hartz-reformerna ger inga entydiga svar på hur viktiga
de har varit för positiva tyska utvecklingen, och inte heller finns någon enighet om
vilka delar som i så fall varit viktiga. Tyskland har under samma period haft
återhållsamma löneökningar, vilket kan vara en annan viktig förklarande faktor.
4
Det finns ett mindre antal studier specifikt om minijobb. Några har undersökt om
jobben är språngbrädor vidare till reguljär anställning, utan att kunna visa en entydig
sådan effekt. Andra har undersökt substitutionseffekterna, det vill säga i vilken
utsträckning minijobb har tillkommit i stället för andra anställningar, och sådana
effekter tycks finnas.
Utifrån att forskningen inte kan visa tydliga effekter ens av hela reformpaketet är det
sannolikt att effekten av just minijobb har varit liten. Även om det är uppenbart att
antalet minijobb har ökat väsentligt efter reformen, så går det inte att utesluta att
många av de jobben annars hade funnits i reguljära former. En tänkbar slutsats är att
minijobben har lett till en ökad sysselsättning, eftersom många av de anställda är
studenter, äldre och tidigare hemmafruar. Däremot har den sannolikt inte haft någon
större effekt på arbetslösheten, eftersom dessa grupper förmodligen annars inte hade
sökt jobb i någon större utsträckning.
Den här rapporten är en del i Fores projekt om hur automatisering påverkar framtidens
arbetsmarknad och jämlikhet. Under arbetets gång har Sverige tagit emot fler
asylsökande än någonsin, och det är tydligt att frågan om jobb för personer med låga
kvalifikationer har bäring även på diskussionen om hur dessa personer ska komma i
arbete.
5
2. Preface
Work on this policy paper started out as part of Fores’ project on how automation
affects the future of jobs and equality. A pattern that has emerged across Europe in
recent years is that automation reduces the number of employees in occupations that
have been in the middle of the income distribution, both in industrial and service jobs.
Instead, we see an increase in high-income jobs and more low-paying service jobs, in
areas such as hotels, restaurants and household services.
The Swedish labour market has a low percentage of jobs with low qualification
requirements. If the development goes in a direction that those jobs are more important
to keep employment up, we may have something to learn from other countries that
have a higher proportion of such jobs. Germany is a country that in many ways
resembles Sweden, and has increased the employment rate significantly over the past
decade after a number of reforms. Most important in this perspective would be the
“mini-jobs” reform, which has a reputation of having led to an increase in low-paying
jobs, while the tax rules allows the employee to still get a reasonable compensation.
Right from the start it was clear that the mini-jobs are not only interesting in a
discussion about automation, but also when thinking about persons with a background
as refugees or family immigrants, who often find it difficult to establish themselves on
the Swedish labour market. During the project, Sweden has had a record influx of
refugees, and a significant proportion have an education level that is shorter than
Swedish elementary school. A rule of thumb on the Swedish labour market is that it is
hard to get a job without secondary education. Some of the newly arrived can of
course raise their education level, but it is not realistic for everyone. Thus, there is
another very strong reason to see what other countries have done to get a functioning
labour market for jobs with low formal qualifications.
The purpose of looking at mini-jobs was of course to find an example that Sweden
could be inspired by. Unfortunately, it can hardly be argued that the research supports
that. It is not clear that the reform has led to reduced unemployment – possibly that
more students, former housewives and older persons have entered the labour market.
The number of mini-jobs has increased, but it may have been at the expense of regular
jobs that would otherwise have been created.
It is possible that mini-jobs had a greater impact than what the research has been able
to show. The reform is difficult to investigate because it was part of a larger package
of labour market reforms. Moreover, wage increases were very restrained during the
period, which should have led to higher employment. There has been no obvious way
to separate out the effects of mini-jobs.
The conclusion is nevertheless that mini-jobs are not an obvious example for Sweden
to follow. This is of course a lesson as important as any. It is also worth reading the
6
entire research summary in this policy paper, as it provides an overview of research on
the whole reform package Germany implemented in 2003–2005. We hope that it can
serve as a basis for an important discussion on the labour market for people with low
qualifications.
Fores project on automation, future jobs and equality is conducted both with our
European umbrella organization of liberal think tanks, European Liberal Forum (ELF),
funded by the European Parliament and with Swedish government funding for debate
on the future of Europe, through the Swedish Agency for Youth and Civil Society
(MUCF). This policy paper is funded with support from MUCF, for which we are very
grateful.
Stockholm, 15 November 2015,
Andreas Bergström
Deputy Director, Fores
.
7
3. Introduction
Unemployment is a central problem in many economies. Both achieving and
maintaining prosperity for the population at large necessitates high levels of
employment. Thus, reducing unemployment is a key policy challenge and will
continue to be at the heart of the public debate for years to come. In Germany,
unemployment has fallen significantly in the last 10 years and, most remarkably, high
levels of employment could be sustained throughout the financial crisis and the great
recession. One popular explanation for the performance and resilience of the German
labour market is the successful implementation of a series of labour market reforms
between 2003 and 2005, the so-called Hartz reforms, which helped the German
economy to regain competitiveness. Being the sick man of Europe in the early and
mid-2000s (Economist 20041), Germany became Europe’s economic powerhouse. The
Hartz reforms played a crucial role in the liberalization of the inflexible German
labour market. By stimulating labour, supply and demand as well as the efficiency of
the matching process, the Hartz reforms contributed to a sustained reduction of
unemployment in Germany throughout the last decade. But were the Hartz reforms
really a “Wunderreform”2 (miracle reform), as the Economist discussed in March
2013?
This report summarizes and discusses the effects of the Hartz reforms in detail with a
special focus on Hartz II, which affected mainly marginal employment3 in Germany.
To what extent did the Hartz-reforms and particularly the reform of the so-called miniand midi-jobs (Hartz II) contribute to the reduction of unemployment in Germany?
Both positive and negative aspects of the increased flexibility of non-standard
employment relationships will be discussed. The remainder of this report is organized
as follows: Section 2 gives an overview of the institutional setting in which the Hartz
reforms I-IV have been implemented in Germany. Section 3 discusses marginal
employment (mini-jobs and midi-jobs, Hartz II reform and subsequent reforms) in
detail. Section 4 contains a literature review, summarizing existing research and
conclusions from evaluations of the Hartz reforms, especially Hartz II with respect to
the reduction of unemployment. Section 5 concludes the report.
1
The Economist, “Germany on the Mend”, November 17, 2004, http://www.economist.com/node/3352024.
2
The Economist, “Wunderreform” Germany`s labour market, March 16, 2013, p. 26. http://www.economist.com/news/europe/21573583ten-years-how-does-germanys-agenda-2010-package-rate-wunderreform.
3
8
Technically speaking, marginal employment relates to mini-jobs only. This report also considers midi-jobs. Legally, however, midi-jobs
are not included in the definition of marginal employment. Nevertheless, they are often mentioned in one breath. Midi-jobs are regulated
in Article 20 German Social Code, Book IV.
4. Institutional overview of the Hartz
reforms in Germany
The Hartz reforms are considered the most far-reaching labour market reforms in postwar Germany. The primary aim was to make the labour market more flexible. While
the four parts of the Hartz reforms address different dimensions of labour market
policy, they were meant to jointly reduce unemployment sustainably using various
channels. The guiding principle of “assist and demand” (‘fördern und fordern’) entails
bringing more people into work by improved employment services and policy
measures as well as activating the unemployed to increase labour supply. At the same
time, deregulation of the labour market was meant to stimulate labour demand (Jacobi
and Kluve 20074).
Having suffered from increasing unemployment rates and low economic growth rates
at least since reunification, Germany was known as the “sick man of Europe” in the
early 2000s. The unemployment rate rose from 9.4% in 1995 to 11.7% in 2005. In
figures, the number of unemployed persons rose by over one million from 3.6 million
in 1995 to 4.9 million in 2005.5 The economic stagnation with low growth rates from
autumn 2000 to autumn 20036 was the longest stagnation period ever reported since
the foundation of the Federal Republic of Germany (Hüther and Scharnagel 2005). In
March 2003 Chancellor Gerhard Schröder gave a speech in the German Parliament
(‘Deutscher Bundestag’) and introduced his “Agenda 2010” to the public by declaring
inter alia: “We will be cutting state benefits, promoting individual responsibility, and
demanding that every individual make greater efforts.”7 At that point, the
implementation of the Hartz reforms had already begun. One main focus of the
Agenda 2010 strategy lay on modernizing the inflexible German labour market and
reforming the German welfare state.
In 2002, the federal government had established a commission under the leadership of
Peter Hartz, personnel director of the Volkswagen group, and advisor to Schröder,
mandating the commission to present proposals to modernize labour market
institutions and, thus, reduce influx into unemployment and ease the transitions out of
unemployment. The so-called Hartz commission – named after the chairman – devised
its final report in August 2002 consisting of 13 innovation modules to reduce
employment constraints (Hartz et al. 2002).8 Many of the proposals entered and
survived the legislative procedure that resulted in the Hartz reforms.
4
Jacobi and Kluve (2007) give a detailed description of the Hartz reforms.
5
Unemployment rate related to total civil-sector work force. Source: Federal Employment Agency, Nuremberg:
https://www.destatis.de/EN/FactsFigures/Indicators/LongTermSeries/LabourMarket/lrarb001.html
6
Growth rates of GDP in Germany were 1.7% in 2001, 0% in 2002, and -0.7% in 2003.
7
Government statement „Courage for peace and courage for change“ to the German Bundestag by Chancellor Gerhard Schröder (SPD) on
March 14, 2003. https://www.bundestag.de/dokumente/textarchiv/2013/43257637_kw11_kalenderblatt_agenda2010/211202.
8
Commission for Modern Services on the Labour Market. Summary of final report in English can be found here:
http://www.bmas.de/DE/Service/Publikationen/moderne-dienstleistungen-am-arbeitsmarkt.html.
9
The Hartz reforms (also called Hartz concept or Hartz initiative) consist of four Acts
for Modern Services on the Labour Market (‘Gesetze für moderne Dienstleistungen
am Arbeitsmarkt’), which, step-by-step, started coming into effect on January 1, 2003
(Hartz I and II), on January 1, 2004 (Hartz III) and on January 1, 2005 (Hartz IV). In
general Hartz reforms I – III were mainly concerned with active labour market policies
(ALMPs) and Hartz IV significantly reformed the benefit system. Hartz reforms I - III
were meant to, primarily, increase the flexibility of the labour market by relaxing
restrictions on temporary work, introducing a new grant scheme for unemployed
entrepreneurs, and by liberalizing the mini- and midi-jobs legislation, that is, marginal
employment, which is the focus of this report. Furthermore, organizational structures
were modified and the German Federal Employment Agency was fundamentally
restructured. Hartz IV is considered the most controversial part of the reforms due to
an incisive modification of the unemployment benefit and social assistance schemes.
The unemployment benefits for the long-term unemployed were cut significantly.
Labour supply, labour demand, matching efficiency
Bräuninger et al. (2013) gather the various measures of the Hartz reform into three
categories by their intended impact: labour supply, labour demand, and the efficiency
of the matching process. Following the authors, Table 1 summarizes these measures
and sorts them by the three categories. The measures of the Hartz reforms primarily
aim to increase labour supply by focusing on getting people into jobs and, thus,
increase the turnover from unemployment into employment. By the reduction of
reservation wages, job seekers were encouraged to increase their search effort and
widen their set of acceptable job opportunities. In turn, by reducing employers’ labour
costs the demand for labour was stimulated. Finally, the reform measures were meant
to increase the efficiency of the matching process, to reduce the influence frictions and
to allow labour supply and demand to get together more easily in the labour market.
Hartz I
The First Act for Modern Services on the Labour Market9 (Hartz I) contained
regulations and measures in all three reform dimensions: fostering labour demand,
activating labour supply and speeding up matching or placement processes between
unemployed and vacancies (see Table 1). The most comprehensive part of the Hartz I
reform was the deregulation of temporary work (‘Leiharbeit’, ‘Zeitarbeit’). Through
the enactment of Hartz I, the existing law on temporary work (Temporary Agency
Work Act – ‘Arbeitnehmerüberlassungsgesetz’) was revised completely.10 Several
parts of the Act were deregulated: the limitation on the maximum length of 2 years of
temporary placement, the so-called synchronization ban (staffing agencies
‘Leiharbeitsfirmen’ are not allowed to hire the employee only for the duration of the
placement at the user company), the restriction of temporary work to construction
9
First Act for modern services on the labour market, BGBl I Nr. 87 vom 30.12.2002, S. 4607.
10
Temporary work agencies had been existed since 1967 and 1972 respectively, but had been regulated rather restrictively.
10
industry, the re-hiring ban (within 3 months after dismissal) and the prohibition of
repetitive fixed-term contracts without material reasons were dropped entirely. On the
other hand, the new regulation on temporary work has introduced the equal pay
principle, which guarantees equal pay for permanent and temporary agency workers by
law (as long as there is no collective labour agreement setting the wage for temporary
workers in a different way). As a consequence, collective negotiations were conducted
and quickly led to a quasi-minimum wage in the temporary work sector (Spermann
2011).
Increasing the efficiency of the matching process was a key component of Hartz I.
Prominent examples are the so-called Personnel Service Agencies (PSAs).11 PSAs
were placement-oriented temporary employment agencies (‘Agenturen für
vermittlungsorientierte Arbeitnehmerüberlassung’) funded by local employment
agencies and managed privately.12
The local employment agency delegates
unemployed workers to the PSAs, which employ them. As soon as the workers are
hired by the PSA, they are subject to social insurance contribution. For each employee
the PSA gets a lump sum fee. The PSA then hires out their workers to firms
temporarily or, at best, permanently. For each successful placement lasting at least
three months the PSA gets an additional bonus. If the workers cannot be placed
successfully, the PSA has to offer them coaching to remove individual placement
obstacles. The basic concept relies on incentives to speed up the matching process and
to find a permanent job for the unemployed workers by hiring them out to employers
(“adhesive effect”). By hiring them only temporarily, employers can significantly
increase the flexibility of their work force and better deal with fluctuations in demand.
Additionally, they can test potential permanent hires for a longer period of time (“try
and hire”) without being subject to strict job protection legislation (Jahn and Ochel
2007).
Another measure of Hartz I aiming at increasing the efficiency of job matching was
the
introduction
of
a
voucher
system
for
placement
services
(‘Vermittlungsgutscheine’). Unemployed persons not placed successfully by the public
employment service after six weeks of unemployment can choose an alternative
private placement service, which is then paid for with a voucher. This possibility is
meant to introduce market elements to the provision of job search assistance since the
private agencies compete for the vouchers and has incentives to quickly get their
unemployed clients into work (“quasi market elements” Jacobi and Kluve 2007).
To activate the labour supply of the unemployed, Hartz I widened the definition of
suitable work, a measure that applied generally to all jobless people. Wage subsidies
were more of a target-group specific measure for older employees in particular
(‘Entgeltsicherung für ältere Arbeitnehmer’). They were meant to encourage older
people over 50 years of age to accept low paying jobs by compensating them for up to
11
See Jahn and Ochel (2007) for a detailed description of PSAs.
12
Legally PSAs could have been operated in the framework of Public-Private-Partnership or by the local employment office itself, but these
organizational forms have not been realized.
11
50% of the wage gap between the previous job and the new job for up to two years
(Bräuninger et al. 2013).
At the same time, Hartz I sought to increase labour demand by exempting employers
hiring an employee over 55 years of age from contributions to public unemployment
insurance from 2003 on. This incentive was granted only conditional on the fact that
the employee was hired for the first time to avoid strategic dismissal and re-hiring, socalled “revolving door” (‘Drehtür’) effects (ZEW, IAB, IAT 2005).
Table 1: Core elements of Hartz reforms I-IV*, structured into direction of impact**:
Core Elements of the Hartz reforms Hartz I: First Act for Modern Services on the Labour Market (Effective 1 January 2003) Direction of impact: labour demand (ld) labour supply (ls) matching process (mp) Deregulation of fixed-­‐term employment for older employees ld Introduction of bonus for hiring older employees ld Tightening the definition of suitable work ls Promotion of further education ls Introduction of wage subsidy for older employees ls Introduction of placement voucher system mp Setup of Personel Service Agencies (PSAs) mp Deregulation of temporary employment Hartz II: Second Act for Modern Services on the Labour Market Reform of Mini-­‐Jobs as of April 1 2003 (Effective 1 January 2003) 12
Introduction of Midi-­‐Jobs as of April 1 2003 ld/mp ld/ls ld/ls New start-­‐up subsidy for unemployed, so-­‐called Me-­‐Incs. ('ICH AGs') ld/ls Reorganisation of the Federal Employment Agency mp Hiring subsidy ld Hartz IV: Fourth Act for Modern Services on the Labour Market (January 1 January 2005) Merging of non-­‐means-­‐tested Unemployment Assistance ('Arbeitslosenhilfe') and means-­‐
tested Social Assistance ('Sozialhilfe') into Unemployment Benefits II ('Arbeitslosengeld II', ALG II -­‐ also called Hartz IV) ls Reduction of eligibility duration of Unemployment benefits I for elderly ls Introduction of One-­‐Euro-­‐Jobs for recipients of ALG II ls Hartz III: Third Act for Modern Services on the Labour Market (Effective 1 January 2004) * Main components, not complete.** Following Bräuninger (2013), see also Klinger and Rothe (2010), Jacobi and Kluve (2007). Hartz II
The Second Act for Modern Services on the Labour Market (Hartz II) contained
mainly relaxing regulations on both labour demand and supply and, in particular, new
legislation regarding marginal employment, the focus of this report and topic of
section 3. Additionally, Hartz II introduced a new subsidy for the unemployed, which
was meant to encourage start-ups (‘Existenzgründungszuschuss’). Those start-ups
were also called Me-Incs. (‘ICH-AGs’). The new subsidy was introduced in addition
to a pre-existing, but not widely used, subsidy called “bridging allowance”
(‘Überbrückungsgeld’), which was paid for 6 months and was dependent on potential
unemployment benefits (equal to the unemployment benefit that the recipient had
previously received or could have received plus a flat-rate social security
contribution). Me-Incs. were designed to be independent of prior social security
contributions and spanned up to 36 months of support. The unemployed could apply
for starting a business. The subsidy amounts to 600 Euro per month in the first, to 360
Euro per month in the second and to 240 Euro per month in the third year, as long as
the recipients’ income remains below 25,000 Euro per year. In 2006 the two
instruments were merged into one new subsidy, the “business formation allowance”
(‘Gründungszuschuss’), which is paid for a maximum of 15 months. In the first 6
months, it amounts to the individual unemployment benefit plus 300 Euro for social
security. A further extension of 9 months consisting of 300 Euro for social security
only is possible. Despite the reform in 2006, the term “ICH AGs” continued to be
applied in the public and the media. In 2011 the “Gründungszuschuss” was reformed
again and the eligibility criteria were tightened (Bräuninger et al. 2013).
13
Hartz III
The Third Act for Modern Services on the Labour Market (Hartz III) came into effect
on January 1, 2004, and provided the legal framework for a basic restructuring and
reorganization of the former Federal Employment Office (‘Bundesanstalt für Arbeit’)
in order to build a modern, efficient, and service-oriented provider of employment
services. In this spirit, the name of the public authority changed to the present Federal
Employment Agency (‘Bundesagentur für Arbeit’). The elements of the Hartz III
reforms aimed primarily at increasing the efficiency of the matching process.
Furthermore, Hartz III restructured hiring subsidies (‘Eingliederungszuschüsse’) in
order to motivate employers to hire hard-to-place workers, like older employees, but
also disabled persons. The main idea is to compensate the employer for the
presumably lower productivity of this type of worker. Hiring subsidies are granted for
a limited period of time. The duration depends on the target group and with a
maximum of up to 36 months (see e.g. ZEW, IAB, IAT 2005).
Hartz IV
The Fourth Act for Modern Services on the Labour Market (Hartz IV) became
operative on January 1, 2005 as the final step of the Hartz reform package. It
concentrated on the labour supply side. Being the fourth step of the Hartz reforms, it is
often simply referred to as “Hartz IV”. It was by far the most controversial part of all
Hartz reforms. Hence, it provoked mass protests and fierce resistance in broad parts of
society and media. The protests culminated in the secession of a group of left-wing
Social Democrats, who founded a new political party in opposition to Hartz IV and the
Agenda 2010 at large. To many, Hartz IV seemed to be the end of the German welfare
state. Indeed, Hartz IV reformed the benefit system completely.
Before the reform, unemployment benefits consisted of three pillars. A contributionbased unemployment benefit (‘Arbeitslosengeld’) was paid for up to 12 months after a
person lost their job. The duration was longer for elderly workers. Depending on the
former wage, it amounted to 60% (and 67% with children, respectively) of the former
net income. After this unemployment benefits ran out, a second, tax-funded benefit,
unemployment assistance (‘Arbeitslosenhilfe’), was paid to workers who were
unemployed for a prolonged period of time. Unemployment assistance was not meanstested and had no time limitation. It amounted to 53% (and 57% with children,
respectively) of the former net income. A third type of benefits was the tax-funded
social assistance (‘Sozialhilfe’) scheme paid as flat rate. It was open-ended and meanstested for all persons unable to support themselves. Thus, it was not restricted to
unemployed persons (Knuth 2007). Hartz IV merged the second and the third pillar,
unemployment assistance and social assistance into one new transfer called
unemployment benefit II (‘Arbeitslosengeld II’, ‘ALG II’), which is means-tested13
and a flat payment, thus not related to previous income. The payment was fixed at 345
13
For example individual financial assets or the partner`s income are credited.
14
Euro in West-Germany (2005) and 331 Euro in East-Germany plus means-tested
housing assistance.14 Unemployment benefit I (‘Arbeitslosengeld I’, ‘ALG I’)
remained largely unmodified (normally 12 months and 60% and 67% of the last net
income), but the eligibility for elderly workers was reduced from a maximum of 32 to
18 months15, effective on February 1, 2006. Later, it was raised again to 24 months.
Additionally, the law introduced stricter rules regarding the acceptance of job offers.
Unemployed workers were required to accept every reasonable offer of employment
presented by the job agency. Refusal could lead to benefit cuts.
At large, the Hartz IV reform package can be seen as paradigm change in the German
unemployment benefit system. While the outside option of workers with difficulties to
find employment, namely unemployment assistance (‘Arbeitslosenhilfe’), was rather
generous prior to Hartz IV, falling from unemployment benefit I to the newly created
unemployment benefit II from 2005 on was rather painful for most people. The
welfare state largely stopped safeguarding former standards of living by high
replacement ratios linked to previous wages. Rather, unemployment benefit II merely
covers basic living expenses (e.g. Arendt und Nagl 2013, Knuth 2007).
The Hartz IV reform also contributed to a growing sector of low-pay employment by
introducing the so-called One-Euro-Jobs.16 They were intended to activate benefit
recipients by taking up at least some employment because recipients of the
unemployment benefit II could increase their basic transfer (‘Regelsatz’) by one Euro
per working hour. Following legislation, One-Euro-Jobs have to be of public interest
and must not be substitutes of regular employment. In 2012, the One-Euro-Job
legislation was revised by introducing stricter entitlement conditions – only very hardto-place workers should be placed into One-Euro-Jobs. The basic idea of One-EuroJobs is to get long-term unemployed workers back to work, even by doing very basic
jobs, hoping to generate attachment to the labour market in order to take up regular
employment afterwards.
14
Current rate since Jan. 1, 2015: 399 Euro. The different rates for East- and West-Germany were harmonized on July 1, 2007.
15
The eligibility duration is dependent on age and on the length of the individual`s former employment. To get an unemployment benefit I
for at least 6 months one has had to work for at least 12 months during the last two years in employment subject to social insurance.
16
More precisely: „Work opportunities with expense allowance“ (‚Arbeitsgelegenheit mit Mehraufwandsentschädigung‘).
15
5. Marginal Employment: Mini- and MidiJobs (Hartz II) in Germany
Definition and reforms
Marginal employment (‘mini-jobs’) in Germany is defined by law in Article 8,
paragraph 1 in the German Social Code, Book IV,17 as employment
-
for which the wage is regularly not exceeding 450 Euro per month (marginal
employment with low pay, ‘geringfügig entlohnte Beschäftigung’, Art. 8, para.
1, no. 1 ) or
which is restricted to three months or 70 working days per year (short-term
employment, ‘kurzfristige Beschäftigung’, Art. 8, para. 1, no. 2).
The income level of 450 Euro was raised to the current level in January 2013. Between
2003 and 2012 the threshold was 400 Euro, what gave rise to the commonly used term
“400 Euro-Jobs”. As of January 1, 2015, the time limit for short-term employment was
raised to three months or 70 working days. Before, the respective thresholds were two
months or 50 working days. There has been one major reform of marginal employment
in 2003 and a smaller one in 2013 (see Table 2 for reforms of mini-jobs). Generally,
special rules apply to marginal employment relationships concerning taxation and
social security contributions. Other regulations are applied similarly to mini-jobs and
regular employment. For example, marginal employed workers do have the same
entitlement to paid vacancy or holiday allowance as regular employees.
Marginal employment in Germany was newly regulated and realigned in 2003 within
the framework of the Hartz reform. The Second Act on Modern Services in the Labour
Market18 (Hartz II) came into effect on January 1, 2003 and contained inter alia
regulations of marginal employment (mini-jobs) and midi-jobs, which came into effect
on April 1, 2003. Hartz II reformed the so-called mini-jobs, which had already existed
before, and introduced midi-jobs. Marginal Employment (mini-jobs) should become
“more attractive to give industry more flexibility in employing low-wage earners and
also to ensure that statutory pension contributions are paid to secure social security
coverage for such employees.” By revising marginal employment, the red-green
coalition pursued three objectives (Bundesregierung 2003):
-
Firstly, new employment opportunities should be created in the low wage
sector.
Secondly, mini-jobs were meant to serve as bridges for unemployed workers to
find regular employment fully subject to social insurance contribution.
17
Sozialgesetzbuch IV (SGB IV).
18
Second Act on Modern Services in the Labour Market, BGBl I Nr. 87 as of 31.12.2002, p. 4621.
16
-
Thirdly, by the new regulation informal employment relationships could be
established.
Table 2: Regulations on Marginal Employment (‘Mini-Jobs’)
Regulations on Mini-­‐Jobs Legal regulation defined in 1. Income threshold 2. Hours per week 3. Addition to: '-­‐ a further marginal employment with low pay '-­‐ short-­‐term employment '-­‐ main-­‐employment (subject to full social insurance contributions) unless no further marginal employment exists '-­‐ main-­‐employment (subject to full social insurance contributions) if a further marginal employment exists 4. Lump-­‐sum contributions paid by employers to: '-­‐ Statutory health insurance '-­‐ Statutory pension insurance Into effect as of 1st of April 2003 Article 8, Paragraph 1, Number 1, Social Code, Book IV Into effect as of 1st of Jan. 2013 Article 8, Paragraph 1, Number 1, Social Code, Book IV 325 Euro 400 Euro 450 Euro less than 15 hours no restriction no restriction Yes no yes yes yes no no yes yes no no yes Into effect until 31st March 2003 Article 8, Paragraph 1, Number 1, Social Code, Book IV 10 % 12 % In general:* In general:* In private households: In privatehouseholds: 11 % 5 % 13 %
5 % 12 % 5 % 15 % 5 % 17
5. Contributions to pension insurance paid by employees 6. Taxation Employees become subject to compuslory pension insurance as a rule. They are obliged to pay a contribution rate to fill the gap Employees can pay an extra between the lump-­‐sum Employees can pay an extra contribution voluntarily to employer`s contribution contribution voluntarily to fill the fill the gap between the and the full pension gap between the lump-­‐sum lump-­‐sum employer`s contribution rate (in employer`s contribution and the full contribution and the full 2013 and 2014 the gap pension contribution rate. pension contribution rate. was 3,9 %, in 2015 it is 3,7%). But opting-­‐out rule: Upon application the mini-­‐jobbers can be exempted from the obligation to pay pension insurance. Generally tax liability, Generally tax liability, no no exemption any Generally no tax liability if exemption any more. more. exemption certificate is awarded, Employee pays regular Employee pays regular otherwise employee pays regular income tax depending on income tax depending income tax depending on his gross his gross wage and his on his gross wage and wage and his indiviudal taxation indiviudal taxation his indiviudal taxation characteristics; or employer pays characteristics; or employer characteristics; or 20% lump-­‐sum tax. pays 2% lump-­‐sum tax. employer pays 2% lump-­‐sum tax. * As of July 1, 2006 the contribution rate to statutory health insurance was raised to 13%, to statutory pension insurance to 15%. Sources: Figure according to Rudolph (2003), and own extension based on inter alia Körner et al. (2013) and Bundesministerium für Arbeit und Soziales (2015). Main changes Hartz II
The main changes due to the Hartz II reform were the following: As of April 1, 2003
the maximum income level for mini-jobs was raised from 325 Euro to 400 Euro and
the working time restriction of 15 hours per week was abolished (row 1 and 2, Table
2).19 Additionally, a key element of mini-jobs was changed: Contrary to pre-existing
rules, marginal employment could now be taken up as a secondary job – i.e. in
addition to a regular main job – with the same social security and tax exemptions
(Table 2, row 3). Before the reform 2003, marginal employment as a secondary job
was fully subject to social insurance contribution and taxes, which made this
possibility very unattractive for both employees and employers. Even though minijobs as secondary jobs benefit from social security and tax exemptions in case the
primary job is a regular employment relationship, this does not apply to workers who
have more than one mini-job. In this case, both marginal employment relationships are
added up. In other words, tax and social security exemptions up to the defined limit
(400 Euro or, later, 450 Euro) can be used only once. If the threshold is exceeded,
earnings from all marginal employment relationships above the limit become gradually
19
The working time restriction of 15 hours per week had been introduced 1999.
18
subject to higher social security contributions in the wage band between mini- and
midi-jobs (400.01 Euro - 800 Euro or, later, 450.01 Euro - 850 Euro). Above the midijob threshold, employment is fully subject to social insurance contribution.
Social insurance contributions of mini-jobs
In the framework of Hartz II, mini-jobs continued to be exempt from social insurance
contributions paid by the employee. Gross and net earnings are equal for the
employee. Contributions to social security and income tax for mini-jobs are, generally,
paid by the employer alone as a lump-sum contribution.20 With the reform in 2003, the
flat-rate contribution to social security was slightly raised from 22% to 23% (Table 2,
row 4, in detail see Table 3):21 12% to statutory pension insurance and 11% to
statutory health insurance. Before, marginal employment was completely exempt from
social contributions, which might have incentivized firms to substitute regular jobs
with marginal employment (Rudolph 2003, Caliendo et al. 2012). In 2006, the lumpsum contribution for statutory health insurance was raised again to 13% and the one to
statutory pension insurance to 15% (see Tables 2 and 3).
Hartz II also introduced marginal employment relationships in the context of private
households22 (see Table 2, row 4; Table 3). The aim was to enable employees offering
services to private households informally, e.g. cleaning or childcare, to enter regular
employment relationships. This was encouraged by reduced contribution rates and a
simplified registration procedure for the households. The contribution rates to the
statutory health insurance and the statutory pension insurance to be paid by employers
were fixed at 5% each. Indeed, the increase of declared marginal employment in
private households from 30,000 to 60,000 within one year indicates success of this
measure (Griga 2006).
In 2013, an obligation to membership (“Versicherungspflicht”) in the statutory
pension insurance for employees (Table 2, row 5) was introduced, being the second
main modification of the 2013 reform in addition to the increase of the threshold for
mini-jobs to 450 Euro (and to 850 Euro for midi-jobs). Before, mini-jobbers could
make contributions to the public pension system voluntarily. As of January 1, 2013,
the opting-in rule was replaced by an opting-out rule. Hence, employees had to pay
pension contributions by default. However, they are obliged only to pay the small rate
necessary to fill the gap between the lump-sum employer`s contribution and the full
pension contribution rate (in 2013 and 2014 the gap was 3.9%, in 2015 it is 3.7%,
Table 3). Even though opting out is possible, the advantage of paying insurance
contributions is obviously the generation of an entitlement to pensions.
20
Usually in Germany social insurance contributions are jointly paid by the employers and employees. Currently, the contribution rates
(referring to the gross wage of the employees) amount to 18.7% for the statutory pension insurance, to 14.6% for statutory health
insurance, to 3% for unemployment insurance and to 2.35% for long-term care insurance (each shared 50:50 for employees and
employers, amounts to 19.325%).
21
Plus very low contributions to the insolvency fund, to statutory occupational accident insurance systems and levies due to childbearing.
22
New Article 8a, German Social Code, Book IV.
19
Taxation of mini-jobs
The last row of Table 2 (row 6) shows regulations on the taxation of mini-jobs. Before
2003, generally, no tax liability existed if an exemption certificate was awarded.
Otherwise the employee had to pay regular income tax depending on his gross wage
and his individual taxation characteristics or the employer paid 20% lump-sum tax.
With Hartz II, a general tax liability was introduced and the possibility of exemption
abolished. Since 2003 a mini-jobber pays regular income tax depending on his gross
wage and his individual taxation characteristics or the employer pays 2% lump-sum
tax (including income tax, church tax and solidarity surcharge) (see Table 3, column
5).
Table 3: Development of contributions to social insurance system and taxes for minijobs and total rates of contributions to pension insurance since 2003, in % of gross
wage
HI in
PI in
Effective
HI
PI
PI+
Taxes
PHH
PHH
01.04.2003 11.0
5.0
12.0
5.0
19.5
2.0
01.07.2006 13.0
5.0
15.0
5.0
19.5
2.0
01.01.2007 13.0
5.0
15.0
5.0
19.9
2.0
01.01.2012 13.0
5.0
15.0
5.0
19.6
2.0
01.01.2013 13.0
5.0
15.0
5.0
18.9
2.0
01.01.2015 13.0
5.0
15.0
5.0
18.7
2.0
Notes: HI = Flat-rate contributions to statutory health insurance, HI in PHH = Flat-rate contributions to statutory health insurance for minijobs in private households, PI = Flat-rate contributions to statutory pension insurance, PI in PHH = Flat-rate contributions to statutory
pension insurance for mini-jobs in private households, PI+ = Full contribution rate to statutory pension insurance, Taxes = Standard lumpsum tax (including income tax, church tax and solidarity surcharge). Source: Minijob-Zentrale.
Less bureaucracy and more flexibility
Summing up, the contributions to social insurance and income taxation result in a
burden of 30%23 for the employer. Given the fact that the regular contribution rate for
social insurance system amounts to (only) 19.325%24 (in 2015) mini-jobs are more
expensive than regular jobs, but offer many advantages. First, the bureaucratic process
in administrating mini-jobs is much less time consuming than for regular jobs. This
relates to another important element of Hartz II: The foundation of the so-called
“Minijob-Zentrale”. To organize all administrative tasks regarding marginal
employment efficiently, a new federal agency – the Bundesknappschaft/MinijobZentrale – was founded. This was a simplification for employers in particular, since
henceforth only one single authority is responsible for all marginal employment
relationships, including the collection of all taxes and social insurance contributions.
In statutory health insurance, for instance, employers had to deal with up to 300
existing health insurance companies and pay contributions before the reform.
23
See footnote 22.
24
See footnote 21.
20
Potentially, there could be one entity for every single marginal employee.
Additionally, taxes had to be paid to the correct tax office out of a pool of over 700
financial authorities in Germany. While this complicated bureaucratic process is
normal in Germany for regular employees, this simplification clearly made sense for
marginal employees, who are more likely to spend only a short amount of time
working for an employer. This advantage is even bigger for small firms without a
professional human resources department.
The second main argument for mini-jobs in comparison to regular jobs is their inherent
flexibility. Peaks in production can be easily smoothed by the flexible employment of
mini-jobbers on short-call. In the first six months of a new employment relationship
(marginal or regular) job protection is not strict. Furthermore, due to few working
hours mini-jobbers can be scheduled more flexibly outside of regular working hours:
e.g. in the evenings or on weekends. Lastly, gross hourly costs are often lower for
marginal employees than for regular employees because marginal employees are often
paid less even if the duties are comparable to those of regular employees
(Hohendanner and Stegmaier 2012). Eichhorst et al. (2012) point out that the residual
funds generated by exemption of taxes and social insurance contributions as compared
to regular employment might benefit mainly the employers. Employees tend to accept
this since they receive wages “gross for net”, that is, under the impression that social
security contributions and taxes do not affect them. In the low wage sector or in
occupations with high unemployment employers are probably more prone to absorb
the benefits of marginal employment due to their high bargaining power.
Short-term employment
Regarding short-term employment – as defined in Art. 8, para. 1, no. 2, German Social
Code, Book IV – the Hartz II reform in 2003 didn`t change the time limit of 50
working days or two months. However, the reference period was changed from
employment year to calendar year. As long as short-term employment is not performed
on a professional basis (‘berufsmäßig’), the income threshold of 400 Euro (450 Euro
from 2013 on) does not apply. Legally, a professional basis means that the
employment is of more than “secondary economic importance” for the employee.
From January 1, 2015 on the time limits were raised to 70 working days or three
months, respectively.
Midi-Jobs
Midi-jobs25 were introduced within the Hartz II reform. The motivation of midi-jobs in
the context of Hartz II in 2003 was to avoid the low wage trap mini-jobs entailed
before the reform (by then 325-Euro-trap). According to Rudolph (2003) a monthly
gross wage of approximately 410 Euro was necessary to earn a net wage of 325 Euro
after paying social security contributions. The sudden jump to full contributions to
25
By legal definition midi-jobs are not included in marginal employment relationships. Nevertheless they are often mentioned in the same
breath as mini-jobs, as we do here. Midi-jobs are regulated in Article 20 German Social Code, Book IV.
21
social insurance generated little incentives to increase labour supply, due to this
financial burden. Thus, many mini-jobbers remained trapped in marginal employment.
The goal of midi-jobs was to attenuate the sudden transition from marginal
employment to a regular employment relationship fully subject to social insurance
contribution. The introduction of midi-jobs in 2003 created the so-called wage band
(‘Gleitzone’) of a gross wage in between 400.01 and 800 Euro within which the
employee’s contributions to social insurance and taxes were rising only gradually,
whereas the contributions of employers were constant according to current social
insurance rates. If the regular monthly wage exceeded 400.01 Euro, the employee’s
contributions to social insurance increased gradually on a linear basis starting at 11%
up to the employee`s full share for incomes of 800 Euro and above. In contrast to
mini-jobs, contributions for midi-jobs have to be paid to all pillars of the social
insurance system, hence also to the unemployment insurance system and to long-term
care insurance. The earnings thresholds for employment in the progressive
contribution wage band were raised to 450 Euro and 850 Euro parallel to the increase
of the mini-job threshold in January 2013.
Facts and figures
In Figure 1 visualizes employment groups in Germany.
Figure 1: Regular and marginal employees in Germany, September 2014
22
Notes: *Regular employment relationships subject to social insurance contribution (including midi-jobs) beyond the marginal employment
threshold of 450€. ** Note that, overall approximately 2.5 million (8%) of regular workers in Germany have both a regular employment
relationship and a marginal secondary job. Source: Federal Employment Agency, Employment Statistics Register (2015a).
In September 2014, approximately 30.7 million people were employed in regular
employment relationships on the German labour market. Among these, about 2.5
million employees or 8% have a marginal employment relationship as a side job, that
is, additionally to their main job. 5 million or about 14% of the employment
relationships in Germany are occupied by exclusively marginal employees with low
pay. Overall, 7.8 million people were registered as marginally employed: 7.5 million
employees are marginally employed with low pay compared to only 0.3 million (4%)
using the short-term employment rule. Among the short-term employees 17% have the
job as side job and 83% are employed marginally only. In the group of marginally
employed workers with low pay, 5 million or about two-thirds of the employees have a
mini-job exclusively and 2.5 million or about one-third of the employees uses it to
engage in a secondary employment relationship, combined with another job fully
subject to social insurance contributions. The groups are visualized in Figure 1.
Development
Figure 2 shows the development of marginal employment relationships over time (blue
line). In total, marginal employment has increased substantively since 2003, the
second Hartz reform led to a boom in mini-jobs. In June 2003, 5.6 million marginal
employees were registered. Within a year the number of mini-jobs increased by 18%
to 6.6 million and to more than 7 million in June 2007. The latest statistic (September
2014) reports about 7.8 million marginally employed workers. Short-term employment
has been rather stable over the years whereas the share of marginally employed
workers with low pay (red line) has been rising steadily. However, the development of
low pay marginal employment was mainly driven by marginal employment as a side
job (orange line). Marginal employment relationships with low pay and no other
regular employment relationship (green line) increased during the first year after the
Hartz II reform and remained largely stable afterwards at around 5 million
employment relationships since December 2005. In total, the increase of marginal
employment mainly reflects the fact that Hartz II allowed employees to take up a
marginal employment relationship as a secondary job. This new rule is considered to
be the main factor for the increase of marginal employment in Germany since 2003.
23
Figure 2: Marginal Employment in Germany, 2000 - 2014
Notes: The figure shows marginal employment rates in total (blue line) in Germany from 2003 (2000) to (Sept.) 2014. Marginal employment
is defined as Marginal employment with low pay (red line) and short-term employment (light blue line). Marginal employment with low pay
can be carried out as sole employment one person has (green line) or as side job additional to a further employment (orange line). Source:
Federal Employment Agency, Employment Statistics Register (2015a).
Latest data of the Mini-Job Zentrale26 (May 2015) indicate a decline of employment in
the mini-job sector. The agency published figures on mini-jobs in the commercial
sector and in private households. As of March 31, 2015, the agency counted 6,614,145
marginally employed workers with low pay in the industrial sector and 283,793
marginally employed workers with low pay in private households for the first quarter
2015. In the industrial sector, the number of mini-jobbers declined by 3.5% since
December 2014. In comparison with the first quarter of 2014 to exclude seasonal
effects, this number fell by 2.8%, whereas the number of mini-jobbers in private
households increased by 6.1% from March 2014 to March 2015. Hence, the overall
decline is dominated by a reduction of marginal employment in industry. Moreover,
the Mini-Job Zentrale provides further information showing that the reduction of minijobs is much higher in Eastern Germany. The highest decrease compared to March
2014 occurred in Thuringia and Saxony-Anhalt with 6.6% and 7.7%, the lowest in
Bremen and Bavaria with 2.5% and 2.8%. Regarding industry sectors, the highest
decline (-5%) can be observed in “Wholesale and retail trade; repair of motor vehicles
and motorcycles”.
26
Note, firstly, that those figures do not contain numbers of short-term employees. Secondly, statistics of the Minijob-Zentrale and the
Employment Statistics Register of the Federal Employment Agency are not comparable. The first one counts mini-jobbers at a certain
cut-off date. The latter delivers official data only after six months, applies statistical methods, considers inflows and outflows into
employment, and counts employment relationships, which can be higher than the actual amount of employees.
24
Mini-jobs and minimum wage
There is some evidence attributing the decline of mini-jobs lately to the introduction of
the minimum wage of 8.50 Euro per hour on January 1, 2015. Generally, mini-jobs are
mainly located in the low-wage sector. Following data of the Federal Statistical
Office27 over four fifths (84.3%) of marginal employees earned below the low wage
limit in 2010. This limit is defined as a wage lower than two thirds of the median
wage. In 2010, the low wage limit in Germany amounted to 10.36 Euro per hour. It is
very likely that many mini-jobs are affected by the minimum wage of 8.50 Euro in
2015.
As mentioned before, the largest decline of mini-jobs occurs in Eastern Germany,
where wages are generally lower than in West Germany (by about one fifth).
Moreover, industries with the largest decline (-5% in “Wholesale and retail trade;
repair of motor vehicles and motorcycles”) are also sectors employing a large number
of mini-jobbers (see Table 4). The leading economic research institutes in Germany
warned in their 2014 report (‘Gemeinschaftsdiagnose’) that marginal employees are
especially at risk due to the introduction of the minimum wage because the share of
marginal employees with low hourly wages is high. In their latest report of spring
2015, first observations indicate that the total number of mini-jobs has decreased since
autumn 2014. This decrease has accelerated since January 2015. The report argues that
a share of lost marginal jobs could have been transformed into regular employment,
since those numbers increased lately, mostly in sectors like gastronomy and retail sale,
which have been sectors with high shares of mini-jobbers before. However, at this
early point in time no reliable conclusions about the effects of the minimum wage on
marginal employment can be drawn (Projektgruppe Gemeinschaftsdiagnose 2014 and
2015).
Who are the mini-jobbers?
The following statistics shed light on different socio-economic characteristics. Figure
3 shows the shares of marginal employment in Germany for September 2014
according to sex, age and education. In general, women (61%) are more likely to work
in mini-jobs than men (39%). Furthermore, data show that: While 53.8% of all
employees subject to social insurance contribution in Germany are male, the share of
men decreases to 39% for marginal employees. The share of women in marginal
employment is higher both in East and West Germany. 61% of mini-jobbers in West
Germany and 57% of mini-jobbers in East Germany are female (Federal Employment
Agency, 2015b). Regarding age, Figure 3 shows that approximately 20% of
marginally employed workers are younger than 25 years of age, 40% are between 25
and 50 years of age and 40% are older than 50. The education level of all mini-jobbers
appears rather comparable to regular employees. 18% of all marginally employed
27
Press release of September 10, 2012 – 308/12 “Anteil der Beschäftigten mit Niedriglohn ist gestiegen”,
https://www.destatis.de/DE/PresseService/Presse/Pressekonferenzen/2012/niedriglohn/pm_niedriglohn_PDF.pdf?__blob=publicationFile
.
25
workers do not have any professional education as compared to 12% among regular
workers. However, the educational attainment of 28% of workers in marginal
employment is unknown.
In short-term employment, the gender share turns out to be more equal. In fact, more
male workers (152,053) engage in short-term employment than female workers
(137,847). Primarily pupils and students make use of employment as short-term
workers (Körner et al. 2013). In September 2014, 155,475 of the registered 289,000
short-term employed workers were under the age of 25, about 54%. The data do not
reveal much about education, as educational attainment is unknown for almost 50% of
short-term workers. However, we can see that almost 30 % have no professional
education (yet).
Figure 3: Marginal Employment in Germany: sex, age and education, in %,
September 2014
AGE Sex 50< Women 39 61 39,0 42,0 25-­‐50 Men <25 18,0 0 10 20 30 40 50 EducaSon 28,0 5,0 18,0 47,0 no professional educalon professional educalon higher educalon unknown Source: Federal Employment Agency, Employment Statistics Register (2015a).
Four different socio-demographic groups
Körner et al. (2013) analyse marginally employed workers in detail. They use special
data from a register survey, which the Federal Statistical Office and the Federal
26
Employment Agency initiated jointly in 2010.28 The data contain more information
about the socio-demographic background of marginally employed workers. In
particular, employees with a marginal employment relationship only can be divided
into four subgroups:
-
Housewives /-men (35%)
Pupils and students (20%)
Retired persons (22%)
Unemployed persons (11%)29
These four groups are very heterogeneous with respect to their background and
motives to take up marginal employment. Obviously, the groups of pupils and
students, as well as retired persons normally do not work in regular full-time
employment relationships due to other time intensive obligations (studying) or other
sources of income (pensions). In these cases, marginal employment enables students to
become attached to the labour market early on and to gain experience or, for retired
workers, to continue working if they want an additional source of income. Both groups
use mini-jobs as an additional source of income (‘Zuverdienst’). For the majority, it
can be assumed that the combination of working hours, income, and flexibility make
mini-jobs attractive employment opportunities.
The two other groups, Housewives /-men as well as unemployed persons are more
likely to be interested in a transition to regular employment, mainly due to higher
wages and higher social security contributions resulting in higher pensions.
Housewives and /-men is the largest of the four groups by far. These prime-age
workers generally show a high attachment to the labour market and show high
participation rates. 94% of housewives and /-men are between 24 and 60 years of age.
Marginal employment relationships in this group commonly reach the upper earning
thresholds of mini- and midi-jobs. Almost 60% would like to increase their working
hours but are restricted by family obligations or an insufficient demand for their skills.
Only few mini-jobbers are unemployed
About every tenth marginally employed worker is registered as a job seeker. Having a
mini-job does not end registered unemployment. Entitlements to unemployment
benefits I and II according to the social code remain unaffected as long as weekly
hours worked do not exceed 15 hours and all other requirements for registered
unemployment are met (Job-seeking and availability). However, certain earnings
thresholds limit the amount of wages that can be earned in marginal employment by
workers who are registered as being unemployed. Some earnings can be added to
transfer payments without deduction. In case of unemployment benefit I, the threshold
is 165 Euro. Higher earnings reduce transfer payments. In case of unemployment
28
A methodological report on the survey is available in English, see Körner and Puch (2012).
29
Missing to 100%: Other.
27
benefit II the amount of exemption (‘Freibetrag’) is 100 Euro. Earnings above 100
Euro are offset against the unemployment benefit II payment. Thus, for every Euro
earned additionally above the threshold, unemployed mini-jobbers are allowed to keep
20 Cents. Think of a mini-jobber receiving unemployment benefit II and earning
additional money at the mini-job threshold, that is, 400 Euro per month. This worker is
allowed to keep 160 Euro as additional income (100 Euro are exempt and 60 Euro
equal 20% of the remaining 300 Euro). Hence, 240 Euro are lost due to receiving the
unemployment benefit II payment (Dingeldey et al. 2012). Therefore, it is not
surprising that the medium income of unemployed mini-jobbers amounts to 155 Euro
for men and 165 Euro for women, compared to 200 Euro for men and 300 Euro for
women working in mini-jobs without being registered unemployed (Dingeldey et al.
2012).
Where do they work?
Table 4 shows the number of employment relationships by economic activity in
Germany.30 In column 2, absolute numbers of employees working subject to social
insurance contributions, that is, both regular and marginal employees are reported. In
column 3 and 4, the respective percentage shares of regular and marginal employment
relationships are reported. Columns 5 and 6 separate marginal employees by exclusive
marginal employment and marginal employment as a side job.
The shares of marginal employees are the highest in the sectors “Accommodation and
food service activities” (49%), “Real Estate Activities” (53%), “Arts, entertainment
and recreation” (47%) and “Activities of Households” (85%). In these sectors, almost
the same amount of workers can be found in the two employment forms. Not
surprisingly, in domestic households even 85% of all workers are marginally
employed. This is the highest share across all economic sectors. In the sector
“Accommodation and Food service activities” marginal employment can be mainly
found in food and beverage service activities (54%, 778,212). In the sector
“Administrative and support service activities” the highest share of mini-jobbers is
working in services to buildings and landscape activities (46%, 579,098). Notably, on
the other hand, are very low shares in divisions with a high demand for specific skills,
like manufacturing (9%), electricity and water supply (7%), and financial and
insurance activities (7%). Also in the public sector, marginal employment is rarely
applied (7%).
In the “Wholesale and retail trade, repair of motor vehicles and motorcycles” sector
24% of the workers are marginally employed. Given the fact that altogether almost 6
million employees are working in this sector this figure represents 1,336,859
employees. Marginal employment is very common in this sector. By breaking down
the whole sector into divisions one can see that the retail trade division drives those
30
Official Classification of Economic Activities, Edition 2008, by Federal Statistical Office Germany. English version can be found here:
https://www.destatis.de/DE/Methoden/Klassifikationen/GueterWirtschaftklassifikationen/Content75/KlassifikationWZ08.html
28
numbers. 935,444 employees are marginally employed in retail trade, which amounts
to 12% of all mini-jobbers.
29
Table 4: Employees – Classification of Economic Activities, September 2014
German
Classification of
Economic
Activities,
Edition 2008
(WZ 2008)
Breakdown
Exclusively
Marginally
marginally
employed as sidejob
employed in %
in % of all marginal
of all marginal
employment
employment
relationships
relationships
(column 4)
(column 4)
Emplyoment
relationships*
Regular
employment
relationships*
*
Marginal
employment
relationships*
**
Agriculture,
forestry and
fishing, mining
and quarrying
489,256
67
33
72
28
Manufacturing
7,339,222
91
9
69
31
Electricity, gas,
steam, and air
conditioning
supply, water
supply;
swerage, waste
management
and remediation
activities
502,399
93
7
60
40
2,050,127
85
15
64
36
5,595,722
76
24
74
26
756,387
84
16
68
32
1,630,148
83
17
69
31
3,209,187
71
29
76
24
Transportation
and storage
2,077,931
76
24
67
33
Accomodation
and food service
activities
1,877,832
51
49
66
34
Construction
Wholesale and
retail trade;
repair of motor
vehicles and
motorcykles
- Wholesale and
retail trade and
repair of motor
vehicles and
motorcycles
- Wholesale
trade, except of
motor vehicles
and motorcycles
- Retail trade,
except of motor
vehicles and
motorcycles
30
- Accomodation
438,225
66
34
68
32
- Food and
beverage
activites
1,439,607
46
54
65
35
Information and
communication
1,120,420
83
17
69
31
Financial and
insurance
activities
1,090,305
93
7
63
37
497,072
47
53
57
43
2,436,183
80
20
66
34
3,069,828
69
31
61
39
115,800
65
35
59
41
922,494
90
10
65
35
101,432
78
22
68
32
216,138
67
33
54
46
1,257,630
54
46
60
40
456,334
70
30
67
33
1,836,114
93
7
72
28
Real estate
activities
Professional,
scientific and
technical
activities
Administrative
and support
service activities
- Rental and
leasing activities
- Employment
activities (of
employment
placement /temp.
employment
agencies)
- Travel agency,
tour operator and
other reservation
service and
related activities
- Security and
investigation
activities
- Services to
buildings and
landscape
activities
- Office
administrative,
office support
and other
business support
activities
Public
administration
and defence;
compulsory
social security
31
Education
1,389,728
84
16
77
23
Human health
and social work
activities
5,082,407
85
15
65
35
- Human health
activities
2,727,140
84
16
64
36
- Residential care
activities
1,059,558
89
11
71
29
- Social work
activities without
accomodation
1,295,709
85
15
64
36
Arts,
entertainment
and recreation
489,465
53
47
59
41
Other service
activities
1,178,250
69
31
71
29
305,614
15
85
72
28
303,796
15
85
72
28
1,818
34
66
53
47
20,568
100
0
85
15
15,513
47
53
67
33
38,463,956
80
20
67
33
Activites of
households as
employers;
undifferentiated
goods- and
servicesproducing
activities of
households for
own use
- Activities of
households as
employers of
domestic
personnel
Undifferentiated
goods- and
servicesproducing act: of
private
households for
own use
Activities of
extraterritorial
organisations
and bodies
No classification
possible
In total
Notes: *Total number of dependent employment relationships by sector (without civil servants, judges and soldiers). **Regular employment
relationships subject to social insurance contribution (including midi-jobs) beyond the marginal employment threshold of 450€. ***Both
exclusive marginal employment and side jobs, break down in columns 5 and 6. Note that, overall, approximately 2.5 million workers in
32
Germany have both a regular employment relationship and a marginal secondary job. Source: Federal Employment Agency, Employment
Statistics Register (2015c).
The last two columns show the shares of marginal employees divided into workers
who are exclusively marginal employed and workers who hold a mini-job as second
job. In every sector the share of the latter one is lower than in the first one. This is in
line with the overall distribution of the two forms of employment (see Figure 1). In
some sectors, however, just as many mini-jobbers are marginally employed
exclusively as compared to marginal employees who are doing side jobs. This can be
observed in real estate activities, rental and leasing activities, security and
investigation activities and services to buildings and landscape activities, as well as in
arts, entertainment and recreation.
What kind of jobs do people do as mini-jobs?
Table 5 depicts the distribution of employees across different occupational areas (110) in Germany, using the structure of the Classification of Occupations developed by
the Federal Employment Agency.31 In occupational areas with a high occurrence of
marginal employment, further breakdowns are shown.32 The four requirement levels of
the Classification of Occupations for marginal employed workers are shown in
percentages and the last column contains the ratio of marginally employed workers
and regular employees.
In absolute numbers, most mini-jobbers are occupied in the occupational area of
“Traffic, logistics, safety and security” (2,460,133), followed by the area “Occupations
in commercial services, trading, sales, the hotel business and tourism” (1,708,464) and
“Occupations in business organization, accounting, law and administration”
(1,086,118). This is about two thirds of all marginal employed workers. In occupation
area 5 (traffic), almost half of all mini-jobbers are occupied in cleaning services, that
is, 1,156,491 employees. Furthermore, it`s worth to take a closer look into area 7. 85%
of the marginal employed workers are occupied in the business management and
organization and not in other groups like for example in financial services, accounting
and tax consultancy (only 92,102). Mini-jobs in business, management and
organization are mostly held by office clerks and secretaries (88%), whereas only very
few managing directors are working in mini-jobs.
Table 5: Employees – Classification of Occupations, September 2014
German Classification
Regular
Occupations, Editions 2010 ('KldB employment
2010')
relationships*
Marginal
employme Requirement Level
nt
in % of all marginal employment
relationshi relationships
Ratio
Marginal
employment
/ regular
31
The Classification of Occupations 2010 is structured as a hierarchical classification with five breakdown levels: 10 Occupational Areas, 37
Occupational Main-Groups, 144 Occupational Groups, 700 Occupational Sub-Groups, 1,286 Occupational Types). For a detailed description
see Paulus and Matthes (2013).
32
Note that breakdowns are not shown for all occupational areas, hence they do not necessarily add up.
33
ps**
employment
Unskill
ed or
Specialis
semit
skilled
activities
activiti
es
1 Occupations in agriculture,
forestry and horticulture
2 Occupations in production of
raw materials and goods, and
manufacturing
- among occupations in foodproduction and -processing
'- among occupations in beverage
production
'- among occupations in the
production of foodstuffs,
confectionery and tobacco products
'- among cooking occupations
3 Occupations in construction,
architecture, surveying and
technical building services
- among occupations in building
services engineering and technical
building services
'- among occupations in building
services engineering
4 Occupations in natural sciences,
geography and informatics
5 Occupations in traffic, logistics,
safety and security
- among occupations in traffic and
logistics (without vehicle driving)
'- among occupations in
warehousing, logistics, postal &
delivery services, cargo
- among drivers and operators of
vehicles and transport equipment
'- among drivers of vehicles in road
traffic
- among occupations in safety and
health protection, security and
surveillance
'- among occupations in physical
security, personal-, fire-protection &
workplace safety
- among occupations in cleaning
services
6 Occupations in commercial
services, trading, sales, the hotel
business and tourism
- among building services
engineering
'- among sales occupations in retail
trade (without product
specialisation)
- among occupations in tourism,
hotels and restaurants
'- among gastronomy occupations
7 Occupations in business
organisation, accounting, law and
34
Compl
ex
special
ist
activiti
es
Highly
complex
activities
491.589
235.571
72,6
23,6
2,9
0,9
0,48
6.991742
684.230
56,8
36,9
4,6
1,7
0,10
793.476
259.468
75,6
23,5
0,7
0,2
0,33
14.594
1.559
-
90,5
9,1
0,4
0,11
315.308
42.963
51,5
45,0
3,4
0,1
0,14
463.574
214.946
81,0
18,8
0,1
0,2
0,46
1.849.762
434.290
20,7
75,4
2,2
1,8
0,23
678.427
307.789
4,6
94,1
1,2
0,1
0,45
277.000
275.163
-
99,6
0,3
0,0
0,99
1.104.218
46.207
14,4
31,0
36,0
18,6
0,04
3.948.520
2.460.133
72,1
27,1
0,6
0,2
0,62
1.828.806
807.281
91,6
7,6
0,4
0,4
0,44
1.482.256
789.463
93,6
6,3
0,0
0,0
0,53
1.036.281
360.353
0,3
99,4
0,2
0,0
0,35
843.981
347.329
-
100,0
-
-
0,41
307.836
136.008
17,4
74,3
7,3
1,0
0,44
289.698
133.269
17,7
74,7
6,6
1,0
0,46
775.597
1.156.491
87,2
12,7
0,1
-
1,49
3.664.921
1.708.464
35,4
62,2
2,0
0,4
0,47
2.036.880
895.349
37,4
62,0
0,5
0,1
0,44
1.190.182
627.767
48,4
50,8
0,7
0,1
0,53
707.238
764.598
35,2
63,3
0,9
0,5
1,08
432.681
657.850
31,6
67,7
0,3
0,4
1,52
6.385.089
1.086.118
34,8
53,3
6,8
5,1
0,17
administration
- among occupations in business
management and organisation
'- among managing directors and
executive board members
'- among legislators and senior
officials of special interest
organisations
'- among occupations in business
organisation and strategy
'- among office clerks and
secretaries
'- among occupations in human
resources management and
personnel service
- among occupations in financial
services, accounting and tax
consultancy
8 Occupations in health care, the
social sector, teaching and
education
9 Occupations in philology,
literature, humanities, social
sciences, economics,
media, art, culture, and design
10 Armed forces personnel
NO CLASSIFICATION POSSIBLE
IN TOTAL
3.991.266
928.969
39,8
54,0
1,9
4,3
0,23
182.548
21.109
-
-
-
100,0
0,12
22.927
7.492
-
-
-
100,0
0,33
1.500.322
73.803
-
83,2
6,4
10,4
0,05
2.089.283
820.260
45,1
53,4
1,3
0,2
0,39
196.186
6.305
-
44,7
31,0
24,3
0,03
1.402.450
92.102
-
36,1
55,3
8,7
0,07
5.230.659 781.339
21,2
46,1
15,8
16,9
0,15
776.622 110.478
3,0
37,7
33,3
26,0
0,14
2.220
1.121
-
9,8
16,2
74,0
0,50
217.160
253.503
-
-
-
-
1,17
30.662.502
7.801.454
45,9
43,1
4,5
3,3
0,25
Notes: *Regular employment relationships subject to social insurance contribution (including midi-jobs) beyond the marginal employment
threshold of 450€. **Marginal employment, both exclusive marginal employment and marginal employment as a side job, to Occupational
Areas, and partly in Occupational Main-Groups and Groups. Requirement levels divide marginally employed workers. Source: Federal
Employment Agency, Employment Statistics Register (2015d).
In columns 4-7 the occupations practiced by marginal employed workers are
subdivided into the requirement levels. Requirement levels are distinguished to show
the degree of complexity of an occupation. Unskilled and semiskilled activities
typically comprise simple activities of low complexity, which usually do not require
any specific specialized knowledge beyond basic general school education. For the
second level of specialist activities, special knowledge, skills and abilities are
necessary and usually acquired within the framework for vocational training (Paulus
and Matthes 2013). One quick look on Table 5 is enough to see that the overwhelming
majority of mini-jobs use the first two requirements levels. Only 8% of occupations for
which a master craftsmen, technician or university degree is required are occupied by
mini-jobbers.
In the last column, the ratio of marginal employment and employment subject to social
insurance contribution is shown. The ratio is higher than 1 in occupations such as
cleaning services (1.49), and in occupations in tourism, hotels and restaurants (1.08; in
gastronomy occupations even 1.52). This implies that more mini-jobbers than regular
workers are employed in these occupations. Sales occupations in retail trade,
occupations in warehousing, logistics, postal & delivery services, and cargo, as well as
occupations in building services engineering show a ratio higher than 0.5. On the other
35
side, in occupations such as human resources management and personnel service
marginal employment plays no noteworthy role.
36
6. Literature review on Hartz reforms and
reducing unemployment
Even after ten years, there is still a lively debate about the impact of the Hartz reforms.
They are being criticised for economic hardship in the low-pay sector, but there is also
a broad recognition of the apparent alleviation of tensions both in the labour market
and the social security system. In academia, many researchers studied and evaluated
the Hartz reforms. In the following section, we summarize some of the existing
evaluations of the Hartz reforms in the literature with respect to the reduction of
unemployment, focusing on Hartz II along the lines of the leading question of this
report: To what extent did the Hartz-reforms and particularly the reform of the socalled mini- and midi-jobs (Hartz II) contribute to the reduction of unemployment in
Germany in the last ten years? Section 4.1 reviews several evaluations of the full Hartz
reform package. Many studies examining specific elements of the Hartz reforms other
than marginal employment, e.g. training vouchers or Me-Incs, cannot be considered.
Section 4.2 focuses on several papers that specifically study the contribution of
marginal employment to reducing unemployment. Another strand of the literature
arguing that the decline of unemployment in the last 10 years was not primarily driven
by the Hartz reforms but by other developments in Germany is mentioned only briefly:
Dustmann et al. (2014) see wage moderation and the decline in unionization rates in
Germany prior to the Hartz reforms as a main factor for Germany’s increasing
competitiveness declining unemployment throughout the last decade. Beissinger et al.
(2015) even claim that the decrease in unemployment would have occurred without the
Hartz reforms, only later and less intensively. Wage moderation and the increase in
competitiveness started long before the Hartz reforms.
Did the Hartz reforms reduce unemployment?
In general, the evidence on the effects of the Hartz reforms and the decline of German
unemployment is rather mixed (see Table 6). Findings from theoretical approaches to
understand the employment effects of the Hartz reforms using calibrated macro
models are generally inconclusive. Krebs and Scheffel (2013) as well as Krause and
Uhlig (2012) find that the Hartz IV reform reduced unemployment, whereas Launov
and Wälde (2013a) conclude that Hartz IV had no impact. In a follow-up study,
however, Launov and Wälde (2013b) find unemployment-reducing effects of Hartz IIII. Other studies use reduced-form models of labour market transitions to study the
impact of the structural changes on the labour market, see Fahr and Sunde (2009),
Klinger and Rothe (2012), or Hertweck and Sigrist (2013). They examine the overall
effectiveness of the Hartz reforms and also find positive effects on job creation and
reducing unemployment, mainly due to Hartz reforms I-III.
37
Table 6: Literature review: Did the Hartz reforms reduce unemployment?
Authors Title Effect on Unemployment Krebs and Scheffel (2013) Macroeconomic Evaluation of Labor Market Reform in Germany Yes, Hartz IV reduced the unemployment rate. Launov and Wälde (2013a) Estimating incentive and welfare effects of non-­‐stationary unemployment benefits No, Hartz IV did not affect the unemployment rate. Launov and Wälde (2013b) Thumbscrews for Agencies or for Individuals? How to Reduce Unemployment Yes, Hartz I-­‐III reduced the unemployment rate. Krause and Uhlig (2012) Transitions in the Germand labour market: Structure and crisis Yes, Hartz IV reduced the unemployment rate. Fahr and Sunde (2009) Did the Hartz Reforms Speed-­‐Up the Matching Process? A Macro-­‐
Evaluation Using Empirical Matching Functions Yes, Hartz I-­‐III reduced the unemployment rate. Klinger and Rothe (2012) The impact of Labour market reforms and economic performance on the matching of the short-­‐term and long-­‐
term unemployed Yes, Hartz I-­‐III increased matching efficiency. No, Hartz IV had no effect (slightly negative). Hertweck and Sigrist (2013) The Aggregate Effects of the Hartz Reforms in Germany Yes, Hartz I-­‐IV increased matching efficiency. Krebs and Scheffel (2013) try to answer the question, how much of the observed
decline in unemployment during the period 2005-2012 has been permanent and can be
attributed to the Hartz reforms. They find significant effects of the lower replacement
rates in the unemployment benefit system. This element of the Hartz IV reform
reduced unemployment because the reform significantly lowered unemployment
benefits for the long-term unemployed. In their macroeconomic study, the authors
apply a calibrated search model combining incomplete markets and human capital. In
their baseline calibration, they find that the reform reduced the long-run (noncyclical)
unemployment rate in Germany by 1.4 percentage points. Hence, they conclude that
the Hartz reforms contributed to the resilience of the German labour market
throughout the Great Recession.
38
In contrast, Launov and Wälde (2013a) argue that the contribution of the Hartz IV
reform to reducing unemployment in Germany has been low. According to them, less
than 0.1 percentage points of the post-Hartz decline in unemployment can be attributed
to Hartz IV. They analyze the effectiveness of the reform by looking at the reform’s
specific changes of replacement rates for various income groups caused by reforming
unemployment payments I and II. The dramatic cuts of unemployment payments after
12 months did not really concern medium- and high-wage earners. They usually find a
new job within one year after becoming unemployed. For the low-skilled workers,
who are often unemployed for longer periods of time, the changes due to Hartz IV did
not translate into substantial differences in benefit payments. The difference between
the benefits of unemployment assistance (‘Arbeitslosenhilfe’) before the reform and
unemployment benefit II (‘Arbeitslosengeld II’) after the reform is often too small to
make a difference.
In a follow-up study, Launov and Wälde (2013b) provide evidence on the
effectiveness of Hartz I-III on reducing unemployment. Especially the reorganization
of the former Federal Employment Office (‘Bundesanstalt für Arbeit’) into the Federal
Employment Agency (‘Bundesagentur für Arbeit’) to become a modern, efficient, and
service-oriented provider of employment services can be seen as success story. The
creation of job centers, the introduction of a single contact person for every
unemployed worker, the lowering of the number of unemployed per case worker and
various further measures led to more effectiveness in placing the unemployed into
work. This reduced the post Hartz unemployment rate by 1.3 to 2 percentage points.
All in all, following Launov and Wälde (2013a and 2013b) the Hartz I, II and III
reforms seem to have been more helpful reducing unemployment than Hartz IV.
In contrast, Krause and Uhlig (2012) find unemployment-reducing effects of the Hartz
reforms. They apply a structural model of the labour market with search
unemployment, which is extended by heterogeneous worker productivity (high-skilled
and low-skilled workers). They control for the German unemployment insurance
system in a stylized fashion. The model is calibrated to target a long-term
unemployment rate of 10.8% before the reform, which then falls to 8% in the new
equilibrium. Krause and Uhlig (2012) attribute the 2.8 percentage point’s decrease
entirely to the reduced duration of earnings-dependent benefits (Hartz IV). Before the
reform, unemployment assistance (‘Arbeitslosenhilfe’), which depended on previous
income, prevented the long-term unemployed to accept low pay jobs despite those
workers’ low productivity. The Hartz IV reform merged unemployment assistance and
social assistance into unemployment benefits II, which shortened the duration of
income dependent unemployment benefits and thus increased the incentives to accept
low-pay jobs. Interestingly, the average wage of most workers did not decrease. In the
model, the workers’ bargaining power is increased due to the higher probability of
finding a job. Assuming that the Hartz III reform (reorganization of the Federal
Employment Agency) improved matching efficiency too, which is not included in the
model, they simply use a result of Fahr and Sunde (2009, see below) to justify the
increase of matching efficiency. Summing up the results, the supposed effect of the
39
Hartz reforms in reducing the unemployment rate lies at 3.45 percentage points: 2.8
according to Krause and Uhlig (2012) and 0.65 from Fahr and Sunde (2009).
Fahr and Sunde (2009) provide results indicating that the matching process between
unemployed and vacant jobs has been speeding up due to the implementation of the
Hartz reforms. They consider the first two waves of the reforms, so Hartz I/II and
Hartz III. They estimate an empirical matching function using monthly panel data for
40 occupational groups from the Federal Employment Agency covering the time
period from March 2000 to December 2003 examining Hartz I/II and from March
2000 to December 2004 examining Hartz III. Months before the implementation are
the control period, and the months after implementation of the particular reform serve
as treatment period. The data contain series on the stocks of unemployed by
occupational group, the stocks of vacant positions by occupational group and the
respective flows by occupational group. Dependent variables are the respective
outflows out of unemployment into employment by occupational group. The results
indicate that the reforms had a significant impact in making the labour market more
dynamic and accelerating the matching process. The Hartz I and II reforms had a
significant positive effect on the speed of the matching process, and Hartz III turned
out to have an even stronger effect on the speed of the matching. The Hartz I and II
reforms accelerated the outflows from unemployment to employment by 5–10%; the
average duration of unemployment spells decreases by about the same magnitude.
Occupations in manufacturing seem to benefit the most, crafts has benefited
moderately less, whereas high- and low-skilled occupations have not benefited. The
reorganization and restructuring of the Federal Employment Agency within Hartz III
has accelerated the outflows from unemployment to employment in manufacturing
occupations by more than 10%. Overall, the reforms have had a stronger impact in
East Germany.
Klinger und Rothe (2012) investigate how the four Hartz reforms during 2003-2005
and the economic performance 2005-2008 affected the matching process. They try to
find out whether the positive development of the German labour market since 2005
can be traced back to the Hartz reforms or to pure business cycle effects, that is, the
economic expansion. Furthermore, they differentiate between the impact of labour
market reforms and economic performance on the matching process both for the shortterm and the long-term unemployed. To estimate the empirical matching function, they
use monthly data from the Federal Employment Agency covering the time span from
April 1998 to March 2008 and providing information on stocks as well as inflows and
outflows from unemployment and vacancies on the regional level of German federal
states. Following them, the Hartz reforms in total, but especially Hartz reforms I-III
increased matching efficiency by about 10 to 20%. Their main results point out that
the matching efficiency for both groups has improved, but the effect was larger for the
long-term unemployed. The Hartz IV reform had a slight negative effect on the
matching of short-term employees. They explain this surprising result by the fact that
many hard-to-place people previously getting social assistance (‘Sozialhilfe’) now
showed up in unemployment statistics. Even though the efficiency of the matching
40
process is usually considered to be pro-cyclical, following them, there is no evidence
that the interaction of economic expansion and Hartz reforms contributed to explaining
the sharp decline of unemployment.
Hertweck and Sigrist (2013) examine the overall effectiveness of the four Hartz
reforms and quantify the macroeconomic effectiveness using time series data on
aggregate labour market transition rates. They use data from the German SocioEconomic Panel (SOEP) containing gross worker flow from 1983-2009 for West
Germany. They focus on matching-efficiency before and after the reforms and find
that since the implementation of the Hartz reforms, matching efficiency has increased
by 20%. To examine matching efficiency and the fluctuations of the German
unemployment rate more closely they analyse inflow rates (job separation) and
outflow rates (job finding) separately. It turns out that the changes of the
unemployment rates since the Hartz reforms are not primary driven by changes of the
job destruction rate, as it was the case before the reforms but rather by changes in the
job finding rate. They conclude, “the rising importance of the outflow rate in
conjunction with the falling cyclical volatility of the inflow rate indicates a substantial
increase in matching efficiency” (p. 20).
The contribution of Mini-jobs (Hartz II)
Given these insights from the literature, the direct impact of marginal employment on
reducing unemployment throughout the last decade has probably been small. This is
simply due to the fact that people who are taking up marginal employment are
typically not registered as unemployed. Rather, they are students, housewives/-men or
pensioners, looking for flexible, secondary employment besides their main occupation.
Recall that only 11% of the mini-job-holders have an unemployment status (Körner et
al. 2013). However, it can be insightful to evaluate marginal employment from a
broader perspective. New, flexible employment opportunities and the regulation of
formerly informal employment relationships increased output, social security
contributions and the tax base, which could positively affected growth and thus
reduced unemployment indirectly. Apart from that, the specific way of raising social
security contributions for marginally employed workers ensured that incentives are not
too distorted while marginally employed workers accumulate, for instance, at least
some entitlements towards the pension system. As long as marginal employment does
not replace regular employment, this is a win-win situation.
Regarding the transition of marginally employed workers into regular employment,
two effects are conceivable from the theoretical perspective. First, stepping-stone
effects can appear in case marginal employment serves as a bridge into regular
employment. This is due to the fact that marginal employment limits human capital
deterioration and generates positive network effects. Employers could use fixed-term
marginal employment at the beginning and transform the job into regular employment
later. Further, the earnings from a mini-job can stabilize the household income and
reduce the pressure to accept unsuitable jobs. Instead, the unemployed can search more
41
intensively for better and more stable jobs. From a long-term perspective this could
decrease the risk of re-entering unemployment.
Table 7: Literature review: The contribution of mini-jobs (Hartz II)
Authors Title Marginal Employment: Stepping Stone or Dead End? Caliendo et al. (2012) Marginal Employment, Unemployment Duration and Job Match Quality Post-­‐employment jobs are more stable. Job-­‐finding probability increases after one year. No effect within first 12 months. Freier and Steiner (2008) 'Marginal Employment': Stepping Stone or Dead End? Evaluating the German Experience No increase in time spent in regular employment within the next three years. But reduction of future unemployment. Dingeldey et al. (2012) Governance des Einkommensmix: Geringfügige Beschäftigung im ALG-­‐II-­‐Bezug Marginal employment has no bridge function. No effect on unemployment. Fertig and Kluve (2006) Alternative Beschäftigungsformen in Deutschland: Effekte der Neuregelung von Zeitarbeit, Minijobs and Midijobs Hartz II reform increased the number of mini-­‐
jobs. But no bridge function. Authors Title Marginal Employment: Substitution Effects? Hohendanner and Stegmaier (2012) Geringfügig Beschäftigte in deutschen Betrieben: Umstrittene Minijobs Yes, in small firms. In larger firms regular and marginal employment normally coincide. Jacobi and Schaffner (2008) Freier and Steiner (2010) Does Marginal Employment Stubstitute Regular Employment? -­‐ A Heterogeneous Yes, mainly for unskilled workers. Dynamic Labour Demand Approach for Germany 'Marginal Employment'and the demand for heterogeneous labour -­‐ elasticity estimates from Yes, mainly for part-­‐time employed women. a multi-­‐factor labour demand model for Germany On the other hand, dead end effects are possible: Mini-jobs might lead to higher
reservation wages and therefore lead to a prolongation of unemployment. Caliendo et
al. (2012), Freier and Steiner (2008), Fertig and Kluve (2006) and Dingeldey et al.
(2012) investigate whether marginal employment is a stepping-stone or a dead end
(see Table 7). A common empirical strategy to evaluate this question is to compare the
development of mini-job employment with the employment development of workers
without mini-jobs. All in all, mini-jobs are not seen as a success story regarding the
42
bridge function. On the contrary, substitution effects in the sense of replacing regular
jobs by mini-jobs could emerge (Hohendanner and Stegmaier 2012, Jacobi and
Schaffner 2008, Freier and Steiner 2010), (see Table 7).
Stepping stone or dead end?
Caliendo et al. (2012) evaluate the impact of marginal employment on unemployment
duration and subsequent job quality. The latter is measured by monthly wages and the
probability of re-entering unemployment. In their empirical analysis they use data
from the IZA Evaluation Dataset (IZA = Institute for the Study of Labour) based on
the Integrated Employment Biographies (IEB) of the Institute for Employment
Research (IAB). They restrict their sample to male individuals in West Germany who
entered unemployment in 2001. They track 10,000 unemployed individuals for 36
months because the Hartz IV reform in 2005 changed the unemployment benefit
system crucially. The authors compare biographies of initially unemployed individuals
who took up a mini-job in the following three years to those who did not take up a
mini-job. Hence, entering into marginal employment is considered the treatment. The
analysis controls for both observed and unobserved heterogeneity. The main result is
that marginal employment leads to more stable post-unemployment jobs, especially for
the long-term unemployed, but not at the beginning of the unemployment spell. The
job-finding probability clearly increases, but only after one year.
Within the first twelve months there is no effect. Hence, the finding of Caliendo et al.
(2012) does not support the hypothesis that mini-jobs serve as prolonged probation
period and lead to regular employment. Rather, after being unemployed for some time,
marginal employment gains importance as a device to stop the deterioration of human
capital. Additionally, the worker might benefit from network effects with potential
employers and colleagues at the mini-job. However, these points may not be as
important at the beginning of an unemployment spell when the worker is still highly
attached to the labour force. Furthermore, marginal employment increases the jobfinding probability if the job is related to previous experience of the unemployed
worker. There is a significant positive impact on the transition probability to regular
employment if the mini-job is in the same sector as the previous job. Considering
wages, marginal employment has no impact. If anything it seems to vary with the skill
level. More skilled individuals and individuals who are not working in the construction
sector start with a lower wage in their jobs after leaving unemployment if they had a
mini-job. A possible explanation is that on a higher-skill level mini-jobs might be seen
as a rather negative signal whereas this is not the case on a lower skill-level.
Considering local labour markets it appears that better economic situations lead to
higher wage effects. In other words a higher local unemployment rate seems to
correlate with lower wages for the treatment group.
In another empirical study, Freier and Steiner (2008) also assess the question whether
marginal employment is a stepping-stone or a dead-end. The database is the
Employment Panel of the Federal Employment Agency for the years 1999-2005.
43
Using an empirical matching approach, the authors examine to what extent marginal
employment influences future unemployment and regular employment as well as
wages over a period of 3 years. The study considers both average and cumulative
effects that potentially make an impact over the whole sample period as well as
dynamic effects that have an effect at a specific point in time. As in Caliendo et al.
(2012), the sample is restricted to men because part-time jobs are much more
widespread among women and it is difficult to distinguish between preferences for
part-time jobs and mini-jobs in the data. Furthermore, to examine the labour supply of
married women, one would have to control for household characteristics and earnings
of the spouse. The sample contains of four quarterly inflow cohorts of men who
became unemployed for at least three months between April 1, 2001 and March 31,
2002 and had regular employment or marginal employment contracts before. The
unemployed who take up marginal employment within 9 months (so before the Hartz
II reform, which came into effect on January 1, 2003) are assigned to the treatment
group. Individuals who do not take up a marginal employment so remain unemployed
or change into a regular employment represent the control group. The employment
biographies of both groups are observed and compared in the following three years.
Using propensity score matching, they estimate the average effect of starting marginal
employment as compared to remaining unemployed and continued search for a regular
job.
Freier and Steiner (2008) find that marginal employment does not significantly
increase the time spent in regular employment within the period of three years, but it
leads to a reduction of future unemployment and a slight increase in cumulative
earnings on average. The reduction of unemployment is substantial in both Western
and Eastern Germany. Treated workers experience on average 9 months less
unemployment in the observations period relative to the control group, older treated
workers even approximately 15 months. However, the reduction of unemployment
seems only to be transitory. Concerning earnings, the positive average effect on
cumulative yearly income is turned around for older workers (50+) in West Germany,
who experience a negative effect and, hence, income losses. For older workers in East
Germany, this effect is slightly positive. In total, marginal employment does not seem
to serve as a direct bridge into employment, nor does it seem to have an influence on
the sticking effects in unemployment. The authors also point out that for an overall
picture of the effects of marginal employment on reducing unemployment and other
labour market outcomes, women need to be considered as well.
Dingeldey et al. (2012) specifically examine the group of mini-jobbers obtaining
unemployment benefit II (‘ALG II’). They use data from the Panel Study “Labour
Market and Social Security” (PASS) from 2007-2009 (three waves), which is
conducted by the Institute for Employment Research (IAB). The dataset focuses on the
lower end of the income distribution and households receiving unemployment benefit
II. The study concentrates on two major outcomes – on wages of ALG II recipients
holding a mini-job and on the stepping-stone idea of mini-jobs. Regarding wages they
find that the median working hours of mini-jobbers receiving ALG II are slightly
44
higher than for normal mini-jobbers, although they earn less on average. This clearly
hints to wage discrimination of mini-jobbers with unemployed status. The analysis on
the stepping stone idea shows the following: The status of being a recipient of ALG II
is quite stable over time. 68% of ALG II recipients in the first wave in 2007 get ALG
II in the following two years as well. One quarter of them holds a mini-job in every
year, whereas one third is not marginally employed in each wave. Among the 29%
who managed to leave ALG II in the surveyed years, more than 50% had never
worked in a mini-job while getting ALG II. In the last survey year before leaving
ALG-II-recipient status, only 15.5% reported having a mini-job. Among them, only
5% had worked as mini-jobber since the beginning of the survey. The authors
conclude from their study that exiting unemployment and taking up regular work is
more likely if the unemployed worker did not work in a mini-job. The data suggest
that the workers, who have the slimmest chances of leaving the benefit system, are
particularly often working in mini-jobs. Hence, they discard the hypothesis that minijobs serve as a bridge into regular jobs. The likelihood of leaving the benefit system is
not increased by taking up a mini-job.
Fertig and Kluve (2006) examine the macro effects of the new regulations of
temporary work and mini- and midi-jobs within the Hartz reforms and focus on the
numbers and structure of these types of employment. In their empirical analysis, they
use data from the Employment Panel of the Federal Employment Agency to estimate
the reform’s effects on the three forms of employment (mini- and midi-jobs as well as
temporary work). Their main interest lies in the question, how the counterfactual
development of the three employment forms would have evolved in case the Hartz
reforms had not been implemented. For the evaluation of mini-jobs, they use a fixed
effects panel model and predict the development of mini-jobs before the reform from
the second quarter 1999 to the first quarter 2003 (in-sample prediction) and in the four
quarters after the reform (April 2003 - June 2004), which is interpreted as the counterfactual. It turns out that, without the reform, the number of mini-jobbers would not
have changed much with a high probability. Hence, the increase of mini-jobs reported
by the Mini-Job Zentrale between April 2003 and June 2004 can be attributed to the
reform (almost) entirely. Midi-jobs and temporary jobs have increased in numbers due
to the reform too, but modestly in comparison to mini-jobs. Thus, the political aim of
this specific reform element was largely reached.
In the second part of their paper, Fertig and Kluve (2006) summarize the results of
implementation analysis and surveys (face-to-face interviews, written and oral surveys
of important labour market participants (e.g. firms, job seekers) conducted within an
evaluation module (RWI 2006) for the Federal Ministry of Labour and Social Affairs.
Regarding mini-jobs, the results show both that employers and employees know the
instrument of mini-jobs and the new regulations very well, indicating that the
implementation and administrative simplification was successful. For the employers,
mini-jobs are popular because they are flexible and cost-efficient instruments for
personnel management. Firms appreciate mini-jobs because they give them the
possibility to cover production peaks efficiently and, especially, for allowing them to
45
retain competitiveness in sectors with a lot of cost pressure like retail trade. The
employees, on the other hand, see mini-jobs as ways to (re-) enter the labour market.
However, transitions from mini-jobs to midi-jobs or regular employment seem to be
the exception. The survey data does not support the idea that mini-jobs can function as
a stepping-stone to successfully find a long-term regular employment. When asked
what their status was before taking up a mini-job, only 11.5% of respondents report
having been unemployed (see also Körner et al., 2013). Additionally, when asked for
their motives to take up a mini-job only a small number of workers reports hoping for
a regular job. Almost 80% of the respondents report to use mini-jobs as an additional
source of income (‘Zuverdienst’) in the face of time restrictions due to family
obligations. However, one quarter plans to look for a regular job within the following
year. Therefore, following Fertig and Kluve (2006), a bridging function from
unemployment to employment by means of mini-jobs appears to work only to a
limited extent. They assume that this can be explained at least partly by the too
restrictive offsetting rules with respect to state transfers, which leave only small
incentives for the unemployed to take up marginal employment. Further analysis of the
data with a focus on socio-demographic characteristics reveals that mini-jobbers
searching for regular work are primary higher-skilled workers, recipients of state
transfers, non-Germans, non-married people and marginal employed workers in
Eastern Germany. Women, however, usually do not plan to leave their mini-job.
Substitution effects
Although not directly linked to the effects of marginal employment on reducing
unemployment, the question whether employers substitute full-time jobs subject to
social insurance contribution by mini-jobs is of great importance from the economic
policy perspective. Descriptive statistics seem to confirm an alleged substitution effect
straight after the mini-job reform. From 2003 to 2005 the share of marginal
employment contracts increased strongly (see Figure 2), whereas regular employment
decreased by one million from December 2002 to December 2005 (Federal
Employment Agency 2015a). The literature does not offer clear causal evidence on
this matter, but delivers some evidence supporting substitution effects (Hohendanner
and Stegmaier 2012, Jacobi and Schaffner 2008, Freier and Steiner 2010).
Hohendanner and Stegmaier (2012) document some negative outcomes of mini-jobs.
Their study exploits the longitudinal data set from the IAB Establishment Panel, which
contains 16,000 establishments from all branches of the economy and of all sizes
surveyed annually and nationwide since 1993. Firms in the data employ at least one
employee subject to social insurance contributions. Private households and firms
employing only marginal employees are not in the data set. They run regressions with
fixed-effects using the IAB Establishment Panel. The dependent variable is the number
of employees subject to social insurance contribution – in full- and part-time including
midi-jobs. The main explanatory variable is the number of marginal employees in an
establishment. Since mini-jobs have been reported as a separate group in the social
security records since 2006, the authors use data for 2006 to 2011. Using many
46
additional control variables including characteristics of the establishments like size and
sector, the study examines to what extent changes in the number of mini-jobs can
explain changes in the number of regular employees (in full-, part-time- and midi-jobs)
in the same establishment. Regression results show an insignificant and small negative
correlation between regular and marginal employment. However, this effect varies
greatly depending on the size and the sector of the establishment. Especially for small
firms with less than 10 employees, Hohendanner and Stegmaier (2012) find a
significant negative correlation, indicating the prevalence of a substitution effect. In
larger firms with more than 100 employees, mini-jobs normally coincide with more
regular jobs, indicating a more complementary relation between the two types of
employment. Regarding sectoral differences, a negative correlation is found especially
in retail sale, gastronomy and the health care and social sector. In the information and
communication sector or in parts of manufacturing, in turn, more mini-jobs coincide
with more regular jobs. Combining the results regarding size and sector, the negative
correlation in small firms prevails in almost every sector. Therefore, evidence for the
displacement of regular jobs by means of mini-jobs is prevalent particularly in smaller
firms.
Jacobi and Schaffner (2008) also analyse whether regular employment and marginal
part-time employment are substitutes or complements. They conduct an empirical
analysis based on an own build up dataset from the Employment Panel of the Federal
Employment Agency and the German Microcensus and investigate heterogeneous
labour demand elasticity’s in Germany before and after the mini-job reform in 2003
(1999-2005) based on a dynamic framework. For their empirical model, they
distinguish five groups of workers – marginal employment, regular part-time
employment, unskilled full-time employment, skilled full-time employment and highskilled full-time employment. First of all, they state that it is much easier to replace
regular jobs by mini-jobs than vice versa. The comparison of substitution elasticity’s
before and after the reform yields that the substitutability of the two employment
forms increased significantly due to the reform, as expected for unskilled labour, but,
surprisingly, for high-skilled labour too. Simultaneously, own-wage elasticity’s are the
highest for marginal employees compared to other worker groups. This suggests that
mini-jobs are very popular among firms due to their cost advantages. The authors
conclude, “any changes in wage policies regarding marginal labour will have
substantial effects on its employment” (p. 25). A reduction of exemptions from social
security contributions would hence lead to a decrease of marginal employment and
increasing wages for regular employment would indicate a further increase of marginal
employment.
Freier and Steiner (2010) compute own-wage and cross-wage elasticity’s for
heterogeneous labour in a similar fashion. They distinguish labour demand into eight
categories, skilled full-time, unskilled full-time, part-time and marginal employment,
each examined separately by gender. Using a structural multi-factor labour demand
model, they estimate heterogeneous labour demand elasticity’s with respect to the
number of workers and total working hours. Their dataset is compiled from the
47
Employment Panel of the Federal Employment Agency, the German Microcensus and
the German National Accounts. The estimated own-wage elasticity’s are of substantial
size for most labour categories. In contrast, cross-wage elasticity’s are rather small,
except for skilled workers in full-time employment and West-German women in
marginal employment. In those categories, labour displacement effects due to a
substitution of regular employment by subsidized marginal employment can be
observed. This effect arises primarily for part-time employed women who are
substituted by marginal employed women.
48
7. Conclusion
This report gave an overview of the Hartz reforms in Germany, which have been
implemented in four stages from 2003 to 2005. The main focus of the report lay on
Hartz II, which affected mainly marginal employment. The underlying and leading
question was whether and to what extent the Hartz reforms and especially the so-called
mini- and midi-jobs (Hartz II) contributed to the reduction of unemployment in
Germany throughout the last decade. Did the reforms contribute to the development of
the sick man of Europe into the economic powerhouse Germany is today? To answer
this question, the report closely examined the Hartz reforms and particularly the
institutional setting of marginal employment in Germany, describing its design and
development since 2003. Summarizing relevant studies on this topic leads to the
following conclusions: In general, the evidence on the link between the Hartz reforms
and the decline of German unemployment is rather inconclusive and mixed. Some
studies attribute unemployment-reducing effects to the Hartz IV reform (Krebs and
Scheffel 2013, Krause and Uhlig 2012) whereas others regard the Hartz reforms I-III
as having been more important for the reduction of unemployment (Launov and Wälde
2013a and 2013b). Studies that examine the joint effectiveness of the Hartz reforms
find similar results, that is, positive effects on job creation and reducing
unemployment. However, it was mainly the Hartz reforms I - III that had a significant
impact, by making the matching process more efficient (Fahr and Sunde 2009, Klinger
and Rothe 2012, also Hertweck and Sigrist 2013 for all four reforms). An alternative
strand of literature, which has not been in the focus of this report, attributes the
reduction of unemployment mainly to wage moderation (Dustmann et al. 2014,
Beissinger et al. 2015).
The literature leads to the conclusion that the direct impact of marginal employment
on reducing unemployment throughout the last decade has probably been small.
Moreover, only 11% of the mini-jobbers are registered unemployed at the same time
(Körner et al. 2013). Evidence from the literature focusing on marginal employment is
mixed. The findings of the effects of marginal employment on reducing
unemployment neither fully support the stepping stone idea, nor the dead end
hypothesis. Mini-jobs were meant to serve as bridges for unemployed workers to find
regular employment. This political goal has probably not been met (Fertig and Kluve
2006, Dingeldey 2012). One can assume that the missing stepping stone for the
unemployed can be explained at least partly by too restrictive offsetting rules with
respect to state transfers, leaving only small incentives for the unemployed to take up
marginal employment (Fertig and Kluve 2006). However, there is some evidence for
slightly positive effects of marginal employment for long-term unemployed related to
the fact that marginal employment can limit human capital deterioration and lead to
network effects. Furthermore, marginal employment increases the job-finding
probability if the mini-job is in the same sector as the previous job (Caliendo et al.
2012). Even though marginal employment does not significantly increase the time
spent in regular employment, it can lead to a reduction of future unemployment and a
49
slight increase in cumulative earnings (Freier and Steiner 2008). But even if mini-jobs
do not serve as a bridge into the first labour market directly, they do not seem to entail
negative dead end effects (Freier and Steiner 2008). Another goal of the mini-job
reform was clearly met; it created many new employment opportunities in the low
wage sector. The number of marginally employed workers has risen by 2.2 million
since 2003. Of big concern and of great economic importance is the question whether
these new many mini-jobs replaced regular jobs. The literature does not offer clear
causal evidence on this matter, but some insights pointing towards the prevalence of
substitution effects, especially in smaller firms and sectors where the share of minijobs is high like in gastronomy, retail sale and health care and social sector. In larger
firms, however, mini-jobs normally coincide with more regular jobs; the two forms of
employment seem to be largely complementary (Hohendanner and Stegmaier 2012).
Further evidence point to a higher substitutability between marginal and regular
employment forms after the Hartz II reform, both for unskilled labour, but,
surprisingly, for high-skilled labour too (Jacobi and Schaffner 2008). This affects
especially part-time employed women, who are substituted by marginally employed
women (Freier and Steiner 2008).
In the end, the conclusion of this report is largely similar to what the Federal Ministry
of Labour and Social Affairs (2006) already learned from the political concluding
report on the Effectiveness of Modern Services on the Labour Market (Hartz reforms),
which summarizes the most important results of the scientific evaluation regarding
“the improvement of framework conditions for employment policy” (temporary work,
mini- and midi-jobs): “Flexibilisation of the labour market was continued and new
employment potentials were opened up in certain segments. However the new
provisions have contributed to a very limited extent only to overcoming
unemployment” (p. 23). Although there seems to be no direct link between the labour
market instrument of marginal employment and the reduction of unemployment in
Germany, one cannot conclude, however, that there has been no effect of the reform.
Marginal employment contributed to the increased flexibility of the crusty German
labour market. New and more flexible employment opportunities came into existence,
which probably would not have happened without the reform. This increased output
and the tax base. Additionally, stress on the social security system has been relieved.
All of this may very well have indirectly contributed to economic growth and the
reduction of unemployment in Germany.
50
8. References
Arent, Stefan and Wolfgang Nagl (2013), Unemployment Compensation and Wages:
Evidence from the German Hartz Reforms, Journal of Economics and Statistics
(Jahrbuecher fuer Nationaloekonomie und Statistik), Vol. 233(4), p. 450-466.
Beissinger, Thomas, Chusseau, Nathalie and Joël Hellier (2015), Offshoring and Labour
Market Reforms: Modelling the German Experience, IZA Discussion Paper No. 8920,
March 2015.
Berthold, Norbert and Mustafa Coban (2013), Mini- und Midijobs in Deutschland:
Lohnsubventionierung ohne Beschäftigungseffekte?, Wirtschaftswissenschaftliche
Beiträge 119, Julius-Maximilians-Universität Würzburg.
Bräuninger, Michael, Michaelis, Jochen and Madlen Sode (2013), 10 Jahre Hartz-Reformen,
HWWI Policy Papers 73, Hamburg Institute of International Economics (HWWI).
Bundesministerium für Arbeit und Soziales (BMAS 2015), Geringfügige Beschäftigung und
Beschäftigung in der Gleitzone, Bonn.
http://www.bmas.de/SharedDocs/Downloads/DE/PDF-Publikationen/a630geringfuegige-beschaeftigung.pdf?__blob=publicationFile.
Bundesregierung (2003), Bericht der Bundesregierung zu den Auswirkungen des Gesetzes zur
Neuregelung der geringfügigen Beschäftigungsverhältnisse auf dem Arbeitsmarkt, die
Sozialversicherung und die öffentlichen Finanzen, Deutscher Bundestag, Drucksache
15/758.
Bundesministerium für Arbeit und Soziales (2006), Die Wirksamkeit moderner
Dienstleistungen am Arbeitsmarkt,
http://www.bmas.de/SharedDocs/Downloads/DE/PDF-Publikationen/f356-hartz-berichtlangfassung.pdf;jsessionid=A56D67772D128339A2D43586C3A8E70C?__blob=public
ationFile.
Caliendo, Marco, Künn, Steffen and Arne Uhlendorff (2012), Marginal Employment,
Unemployment Duration and Job Match Quality, Discussion Paper No. 6499, IZA
Bonn.
Dingeldey, Irene, Sopp, Peter und Alexander Wagner, Governance des Einkommensmix:
Geringfügige Beschäftigung im ALG-II-Bezug, WSI-Mitteilungen 1/2012, p. 32-40.
Dustmann, Christian, Bernd Fitzenberger, Uta Schönberg, and Alexandra Spitz-Oener (2014),
From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy,
Journal of Economic Perspectives, 28(1): 167-88.
Eichhorst, Werner, Hinz, Tina, Marx, Paul, Peichl, Andreas, Pestel, Nico, Siegloch,
Sebastian, Thode, Eric and Verena Tobsch (2012), Geringfügige Beschäftigung:
51
Situation und Gestaltungsoptionen," IZA Research Report No. 47, Institute for the Study
of Labour (IZA).
Fahr, René and Uwe Sunde (2009), Did the Hartz Reforms Speed-Up the Matching Process?
A Macro-Evaluation Using Empirical Matching Functions, German Economic Review,
Vol. 10 (3), pp. 284-316.
Federal Employment Agency, Employment Statistics Register
-
(2015a) Zeitreihe über sozialversicherungspflichtig Beschäftigte Insgesamt und
Auszubildende sowie geringfügig Beschäftigte nach ausgewählten Merkmalen,
Nürnberg, Datenstand März 2015.
(2015b) Sozialversicherungspflichtig und geringfügig Beschäftigte nach
Staatsangehörigkeiten und Geschlecht - Zeitreihe, Nürnberg, Datenstand Januar 2015.
(2015c) Arbeitsmarkt in Zahlen, Sozialversicherungspflichtig und geringfügig
Beschäftigte nach Wirtschaftszweigen der WZ 2008 und ausgewählten Merkmalen,
Nürnberg, April 2015.
(2015d) Arbeitsmarkt in Zahlen, Sozialversicherungspflichtig und geringfügig
Beschäftigte nach der ausgeübten Tätigkeit der Klassifikation der Berufe (KldB 2010)
und ausgewählten Merkmalen, Nürnberg, April 2015.
Federal Ministry of Labour and Social Affairs (2006), The Effectiveness of Modern Services
on the Labour Market (Hartz reforms), Summary of the results,
http://www.bmas.de/SharedDocs/Downloads/EN/the-effectiveness-of-modern-serviceson-the-labourmarket.pdf;jsessionid=A56D67772D128339A2D43586C3A8E70C?__blob=publication
File.
Fertig, Michael and Jochen Kluve (2006), Alternative Beschäftigungsformen in Deutschland:
Effekte der Neuregelung von Zeitarbeit, Minijobs und Midijobs, Vierteljahreshefte zur
Wirtschaftsforschung 75 (3): 97-117.
Freier, Ronny and Viktor Steiner (2008), ‘Marginal Employment’: Stepping Stone or Dead
End? Evaluating the German Experience, Zeitschrift für Arbeitsmarktforschung, 2 and
3/2008, p. 223-243.
Freier, Ronny and Viktor Steiner (2010), ‘Marginal Employment’ and the demand for
heterogeneous labour – elasticity estimates from a multi-factor labour demand model for
Germany, Applied Economics Letters 17(12), 1177-1182.
Griga, Dorit, Leschke, Janine and Günther Schmid (2006), On the marriage of flexibility and
security: Lessons from the Hartz-reforms in Germany, Berlin, 2006, WZB Discussion
Paper. SP I 2006-108.
Hartz, Peter et al. (2002), Bericht der Kommission für Moderne Dienstleistungen am
Arbeitsmarkt (Hartz-Kommission),
http://www.bmas.de/DE/Service/Publikationen/moderne-dienstleistungen-amarbeitsmarkt.html.
52
Hertweck, Matthias S. and Oliver Sigrist (2013): The Aggregate Effects of the Hartz Reforms
in Germany. SOEPpapers 532. Berlin DIW Berlin.
Hohendanner, Christian and Jens Stegmaier (2012): Geringfügig Beschäftigte in deutschen
Betrieben: Umstrittene Minijobs. IAB-Kurzbericht, 24/2012.
Hüther, Michael and Benjamin Scharnagel (2005), Die Agenda 2010: Eine
wirtschaftspolitische Bilanz, in: Aus Politik und Zeitgeschichte, Bundestagswahl 2005,
32-33/2005, p. 23-30.
Jacobi, Lena and Jochen Kluve (2007), Before and After the Hartz Reforms, Zeitschrift für
Arbeitsmarktforschung, 1, p. 45-64.
Jacobi, Lena and Sandra Schaffner (2008), Does Marginal Employment Substitute Regular
Employment? – A Heterogeneous Dynamic Labour Demand Approach for Germany,
Ruhr Economic Papers #56, Rheinisch-Westfälisches Institut für Wirtschaftsforschung,
Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
Jahn, Elke J. and Wolfgang Ochel (2007), Contracting-out employment services: temporary
agency work in Germany, Journal of European Social Policy, May 2007 17, p. 125-138.
Klinger, Sabine and Thomas Rothe (2012), The impact of labour market reforms and
economic performance on the matching of the short-term and the long-term
unemployed. In: Scottish Journal of Political Economy, Vol. 59, No. 1, p. 90-114.
Knuth, Matthias (2007), Implementing the new basic allowance for job seekers in Germany,
discussion paper, Brüssel, European Commission, DG-EMPL.
Körner, Thomas and Katharina Puch (2012), Measuring marginal employment in surveys and
registers, Federal Statistical Office, Statistics and Science, Vol. 20/2012.
Körner, Thomas, Meinken, Holger and Katharina Puch (2013), Wer sind die ausschließlich
geringfügig Beschäftigten? Eine Analyse nach sozialer Lebenslage, In: Wirtschaft und
Statistik, H. 1, p. 42-61.
Krause, Michael U. and Harald Uhlig (2012), Transitions in the German labour market:
Structure and crisis, Journal of Monetary Economics 59.1, p. 64-79.
Krebs, Tom and Martin Scheffel (2013), Macroeconomic Evaluation of Labor Market Reform
in Germany, IMF Economic Review, Palgrave Macmillan, vol. 61(4), p. 664-701.
Launov, Andrey and Klaus Wälde (2013a), Estimating incentive and welfare effects of nonstationary unemployment benefits, International Economic Review, 2013, 54(4),
p.1159-1198.
Launov, Andrey and Klaus Wälde (2013b), Thumbscrews for Agencies or for Individuals?
How to Reduce Unemployment, IZA Discussion Papers 7659, Institute for the Study of
Labour (IZA).
53
Mini-Job Zentrale (2015), Deutsche Rentenversicherung Knappschaft-Bahn-See / MinijobZentrale, Aktuelle Entwicklungen im Bereich der geringfügigen Beschäftigung, I.
Quartal 2015, Essen.
Paulus, Wiebke and Britta Matthes (2013), The German classification of occupations 2010 *
structure, coding and conversion table. FDZ-Methodenreport, 08/2013 (en), Nürnberg.
Projektgruppe Gemeinschaftsdiagnose (2014), Deutsche Wirtschaft stagniert – Jetzt
Wachstumskräfte stärken, ifo Schnelldienst 67 (20), p. 03-61.
Projektgruppe Gemeinschaftsdiagnose (2015), Kräftiger Aufschwung dank günstigem Öl und
schwachem Euro, ifo Schnelldienst 68 (08), p. 03-73.
Rudolph, Helmut (2003), Mini- und Midi-Jobs: Geringfügige Beschäftigung im neuen Outfit,
IAB Kurzbericht Nr. 6/2003, 1-6.
RWI Essen, ISG Köln, GISA Magdeburg, IWH Halle and Michael C. Burda, Evaluation der
Maßnahmen zur Umsetzung der Vorschläge der Hartz-Kommission – Modul 1f,
Verbesserung der beschäftigungspolitischen Rahmenbedingungen und Makrowirkungen
der aktiven Arbeitsmarktpolitik, Forschungsbericht des BMAS.
Spermann, Alexander (2012), The New Role of Temporary Agency Work in Germany,
published in: Bouncken, Ricarda B. u. Lutz Bellmann u. Manfred Bornewasser (ed.),
Die neue Rolle der Zeitarbeit in Deutschland, Beiträge zur Flexibilisierung, Band 3,
München und Mering, 2012, p. 203-224.
ZEW, IAB, IAT (2005). Evaluation der Maßnahmen zur Umsetzung der Vorschläge der
Hartz-Kommission, Arbeitspaket 1: Wirksamkeit der Instrumente, Modul 1d:
Eingliederungszuschüsse und Entgeltsicherung. Nürnberg.
54
55
After being called the sick man of Europe in the early 2000s,
Germany became Europe’s economic powerhouse. The
Hartz reforms, implemented in 2003–2005, played a crucial
role in the liberalization of the inflexible German labour
market. By stimulating labour, supply and demand as well as
the efficiency of the matching process, the reforms contributed to a sustained reduction of unemployment in Germany
throughout the last decade. But were the Hartz reforms
really a “Wunderreform”?
This report summarizes and discusses the effects of the
Hartz reforms in detail with a special focus on Hartz II, which
affected mainly marginal employment. To what extent did
the Hartz-reforms and particularly the reform of the
so-called mini- and midi-jobs contribute to the reduction of
unemployment in Germany?
This policy paper is published as a part of Fores’ project about
the labour market of the future.
is a political scientist working as expert for
Labour markets, Family policy and Demographic change at
the Ifo Center for Labour Market Research and Family Economics at the Ifo Institute in Munich.
Anita Fichtl
FORES Policy Paper 2015:3
www.fores.se