The Labor Market : Germany

The German labor market has had to cope with profound changes in the course of the past decades. In the early postwar years, the Federal Republic was preoccupied with finding jobs for millions of expellees from Germany’s former eastern territories and for refugees from the GDR. But they in particular made a large contribution to the country’s economic upswing. From the end of the 1950s to the beginning of the 1970s, hardly anyone was out of work, but as a result of the crises during the 1970s and the early 1980s unemployment became an increasingly serious problem. When Germany regained its unity in 1990, there suddenly arose the problem of a divided labor market.

In the old federal states, the extraordinary burst of economic activity sparked by unification had a salutary effect on the labor market situation. After this boom subsided, the west slipped into a severe recession which had repercussions on the labor market until 1994. In the new federal states, many jobs were initially lost in the transition from socialist central planning to a social market economy, and unemployment soared. Then there began to be indications that recovery was under way. This was due among other things to increasing economic integration in the eastern and western parts of the Federal Republic and to the massive transfer payments from the old states to the new states. In 1995 and 1996, however, the labor market situation deteriorated again in both east and west as a consequence of economic and structural problems.