The Management of Restructuring and Demographic Change – Challenges for German Labor Relations
Demographic Challenges for Human Resource Management and Labor Market
Policies
-- A German-Japanese Comparison – Tokyo, October 5-6, 2005
Institute for Work and Technology,
Gelsenkirchen
Outline
• structural change and labor market transitions
• early retirement – traditional mode of negotiated redundancy
• demographic challenge: opting out of early retirement
• negotiated outplacement: the new pathway
• new demands on social actors
Sectoral Shift of Employment, Germany 1957 – 2003 (Thousands)
0 5000 10000 15000 20000 25000 30000 35000 40000
195 7
196 1
196 5
196 9
197 3
197 7
198 1
198 5
198 9
199 2
199 6
200 0
services
manufacturing,
construction & mining agriculture
unification
Source: Federal Bureau of Statistics
Distribution of Workforce*) over Establishment Size Categories, West Germany
22,3 22,6 24,5 24,2 25,9 27,5 27,3
22,1 22,1 21,9 22,3 23,9 24,8 24,8
24,6 24,6 24,0 24,2 24,6 25,1 25,3
31,0 30,6 29,7 29,3 25,5 22,7 22,6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1977 1980 1985 1990 1995 2000 2003
percentage of total employment
>=500 100-499 20-99
< 20
Source: Own calculations from employment register sample
*) only wage and salary earners subject to social security contributions
Entry, Exit, and Labor Turnover Rates*), West Germany, 1976 – 2000
18 20 22 24 26 28 30 32 34 36 38
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Turnover Rates
90 95 100 105 110 115 120 125 130 135 140
Employment Index (1980=100)
employment entry rate exit rate LTR
*) only wage and salary earners subject to social security contributions
Source: Own calculations from employment register sample
Job Separations by Type, West Germany 1985—2001
23,7 20,2 21,6
16,3 11,5 17,7 20,4 23,2
34,5 32,7 30,6 29,9 33,5
26,0 21,8 20,1 27,0 36,5 40,5 38,4
41,5 50,2
48,6 39,9 41,5
36,5
31,5 36,0 30,0
33,2 39,7
39,8 44,9 39,9 39,8 39,3 40,0 42,2 38,3 33,7
39,7 35,3 29,0
35,8 33,4
40,1 33,3 34,3
38,4 35,0 33,1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
198 5
198 6
198 7
198 8
198 9
199 0
199 1
199 2
199 3
199 4
199 5
199 6
199 7
199 8
199 9
200 0
200 1
p e rce n ta g e o f se p a ra ti o n s
dismissals quits other (e.g. end of fixed term)
Source: Own calculations from GSOEP
Traditional Pathway to Early Retirement (Earliest Possibility)
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
still employed
full pension officially
free from jobsearch obligation unemployment benefit
+ compensation short time
allowance
Legal Employment Protection
• dismissal for ‘operational reasons’ socially justified if in selection for dismissal duly considered:
• tenure
• age
• obligations to support (children or other dependents)
• disability
⇒ three out of four criteria protect older workers downsizing following the letter of the law
⇒ older workforce than before
• dismissals of certain order of magnitude negotiated with works council
⇒ social compensation plan
(Dis-) Advantages of Voluntary Separations of Older Workers in Comparison to Dismissals
for the worker:
• higher severance payment (if offered)
• avoiding psychological hardship
• earlier retirement
for the employer:
• freedom of selection
• no risk of legal recourse
• shortening of notice period
• rejuvenation of workforce
for the remaining workforce and the works council:
• higher productivity, better competitiveness, more job security
for the general public:
more unemployment
benefits (1/3 of unemployed 50+)
lower social security contributions
earlier and longer pensions
“Window of Demographic Opportunity”
cohort 1940 turned 60 in 2000
cohort 1964 60 in 2024
cohort 1945 turns 60 in 2005
Putting the Brakes on Early Retirement
• Pension reform: pensions before 65 with 3,6%
deduction per year
• unemployment benefit reform:
• maximum duration of contribution-based benefit for older workers 18 months (instead of 32)
• payments by former employer taken into account when means-testing for open-ended and flat-rate follow-on benefit
• short-time allowance: maximum duration 12 months (instead of 24)
• “gradual retirement” as an alternative to early
retirement via unemployment
The Impact of the Pension Reform
0%
10%
20%
30%
40%
50%
1996 1997 1998 1999 2000 2001 2002 2003
50-59 Jahre
60 Jahre
61 Jahre
62 Jahre
63 Jahre
64 Jahre
65 Jahre
Population 50 – 65 by Status:
1996
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 age completed
c u m u la te d p e rce n ta g e s
gainfully employed inactive, no pension or benefit receiving social assistance receiving pension
unemployed
Population 50 – 65 by Status:
2003
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 age completed
c u m u la te d p e rce n ta g e s
gainfully employed inactive, no pension or benefit receiving social assistance receiving pension
unemployed
Impact of Pension Reform plus Approach of Female Cohorts with Higher Participation towards Ends of their Careers
• inactivity without social transfers decreasing
• pensions decreasing 58 – 62
• employment increasing 50 – 64
unemployment increasing 58 – 63 (relative
to numerically weak cohorts)
Provisions of the Public Employment Service for the Accompaniment of Redundancies
• subsidies for job transfer measures (2,500 Euros maximum per worker)
• profiling
• outplacment training
• jobsearch coaching
• job placement
• allowance for working ‘short time’ (0 hrs.) in
a legally separate ‘transfer company’
Trilateral Job Transfer Schemes
employer ‘transfer
company’
employee
⇑ voluntary annulment of open-ended labour contract replaces imminent dismissal
⇒ no legal recourse possible
⇓ prolongation of employment beyond notice period
⇓ transfer services
⇓ possibly: supplement to short-time allowance
⇓ possibly: severance payment
⇑ obligation to actively participate in transfer activities
⇓ fixed-term labour contract on short-time basis
⇓ transfer services
exchange of
⇒ ressources and
⇐ services
framed in collective agreement between employer and works council
subsidised by PES as ‘short time working allowance’
≈≈ unemployment benefit not counting
against eligibility
period
The New Outplacement Pathway for Workers of all Ages
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
unemployment
notice period
month
profiling, outplacement training jobsearch coaching, job placement
new job no new job
fixed-term 'employment' for up to 12 months in 'transfer company', subsidized by short-time working compensation
vocational and outplacement training, jobsearch coaching, internships, job placement
no new job new job
