Chapter 2: Germany.

This chapter examines the labor market policy in Germany. As in many other European countries German labor market policy is confronted with the problem of mass unemployment which has developed since the late 1960s in a cyclical and cumulative pattern. As the unemployment rate increased, so did the share of long-term unemployment. The labor market policies of the Federal Labor Office are in the first place based on a compulsory state insurance system to which contributions are made equally by employers and employees and which has to be subsidized in case of a deficit by the Federal Government. Conventional labor market policies in Germany have relied on two main instruments. First, macro-economic instruments have been used: Keynesian demand management strategies in the 1970s, and monetaristic fiscal policies in the 1980s and 1990s. Second, the Labor Promotion Act continues to provide the basis for vocational training, job creating measures, early retirement schemes, and short-time work designed to overcome problems on the labor market. In the 1990s, demand to increase flexibility of working time has strengthened considerably, focusing on the distribution of working hours and the duration of working time.