By Regina T. Riphahn, Dennis J. Snower, Klaus F. Zimmermann

The publication summarises the main classes from the East German exertions marketplace in transition and places them into context with the 1st studies within the different transition international locations. After an advent to the topic and an summary of work marketplace advancements in East Germany, half 1 of this quantity turns to precise problems with adjustment: salary developments, company start-ups, and early retirement. half 2 studies the coverage recommendations on hand within the transformation technique and their hard work marketplace implications: salary subsidies, revenue sharing, invested pay, additional schooling, and numerous different types of lively exertions industry coverage. the ultimate bankruptcy attracts parallels with the event of alternative transition economies.

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Extra info for Employment Policy in Transition: The Lessons of German Integration for the Labor Market

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The aggressive bargaining position taken by West German unions in wage negotiations certainly bears primary responsibility for the wage explosion. Just before monetary union (June 1990) nominal wages after 1:1 conversion were roughly a third of West German levels ; within one year, average wages had reached roughly 50 percent. A number of contracts committed to parity of contractual wages by mid-decade. 1 While workers enjoyed a doubling of real wages measured in consumer goods , labor costs to firms in terms of output prices rose to 450 percent of 1990 levels.

24 Bolger Bonin - Klaus F. Zimmermann Figure 4 also highlights some considerable gender disparities. While labor force participation of eastern males consistently has been similar to that of western males, the propensity of females to seek employment is still substantially higher in the East than in the West. The communist eastern leaders had tried to overcome traditional gender roles promoting women to work. As a consequence, female labor force participation in the former GDR ranked among the highest in the world.

The immediate consequence of the wage increase is a decline in employment and an increase in the unemployment rate as firms move back along their given labor demand schedules. At the same time, the shadow value of human capital jumps, inducing retraining investment and an increase in H. As H accumulates, the demand for labor increases and unemployment declines. The steady state value of employment is ambiguous, however, the elasticity condition is insufficient to guarantee that employment increases in the steady state.

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