June 21, 2017
Guest blog post by Adrian Sonder, policy advisor within the German Parliament.
The German labour market has experienced a job boom over the past decade. The number of employees who are subject to social insurance contributions reached a new record level of 32.3 million (Institute for Employment Research). The total number of employees is estimated around 44.2 million (Institute for Employment Research). Despite this positive development, there is one outlier group that stands out within the labour market, namely the long-term unemployed (more than 12 months without any gainful employment). Their number decreased quite noticeably between 2005 and 2011, moving from an estimated 1.8 million down to one million (Federal Employment Agency). However, in recent years these numbers have stagnated. This can be explained by the fact that long-term unemployment has become a structural problem in Germany.
Characteristics of long-term unemployment
The structural dimension of long-term unemployment can be demonstrated by examining main characteristics of this specific group:
- Education: More than half of long-term unemployed people have not undertaken some form of vocational training.
- Age: The risk of being long-term unemployed strongly increases by age. While the unemployed aged under 25 have a risk of 11% being long-term unemployed, this number increases to 49% among more senior citizens (over 55 years).
- Health: According to a survey conducted by the Institute for Employment Research, one third of long-term unemployed people have indicated that they have experiences mental health issues. Furthermore, health issues contribute to occupational disabilities.
Regional differences matter
The levels of long-term unemployment vary across Germany. It is much more pronounced in Northern and Eastern Germany than in Southern Germany. In states such as Bavaria only 26% of unemployed people are identified as being long-term unemployed (Federal Employment Agency). This number is significantly higher in North Rhine-Westphalia and Bremen, with approximately 44% (Federal Employment Agency).
These findings are supported by data taken from rural districts showing different levels of long-term unemployment. Six out of ten districts with the highest level of long-term unemployment are located in North Rhine-Westphalia (Federal Employment Agency). This stands in direct contrast to the very low levels of long-term unemployment that can be found in rural districts in Bavaria, such as Eichstätt with 0.1 % (Federal Employment Agency).
What can be done?
There have been several initiatives to address long-term unemployment in Germany. These have mainly consisted of targeted programmes for specific groups of long-term unemployed people. Last year, the Federal Parliament passed the Ninth Law to Amend the Second Book of the German Social Code. This law was aimed at reducing bureaucracy within the Hartz IV system. Unfortunately, only minor steps have been taken in order to achieve this goal.
In this context, it must be emphasized that the level of long-term unemployment cannot be reduced with the current conditions and structures. For this purpose, the following measures must be taken:
- Improved individual support for the long-term unemployed: Evidence suggests that individual attention and support is an effective means of integrating the long-term unemployed into the labour market. Consequently, efforts to strengthen individual support for the long-term unemployed must be instituted. More specifically, the caseload of the caseworkers must be reduced by increasing their number.
- Implementing genuine legal reform: The complex legal infrastructure has over time contributed to the creation of an obscure system. Approximately 20,000 employees of job centres are primarily concerned with calculating benefits for Hartz IV recipients. From this perspective, the Hartz IV system needs to radically simplify its legislation on the basis of a lump sum calculation.
- Vocational training first: One characteristic of long-term unemployment is a lack of vocational training opportunities. Therefore, a “Vocational Training First” policy should be implemented for all long-term unemployed.
- Better health services: A higher proportion of long-term unemployed people experience health issues. As a consequence, these people should receive a higher degree of support. In this context, it will be essential for agencies to cooperate with health insurance companies.