Labour market developments, non-standard employment and low wages in Germany

In terms of basic labour market developments and outcomes Germany is faring comparatively well. Indeed, against the European trend, Germany saw employment rates increasing and unemployment decreasing during the economic crisis. But since the deregulatory Hartz reforms of the early and mid-2000s, the last decade saw non-standard forms of employment increasing substantially and the low wage sector surging. One of the aims of the Hartz reforms was to increase employment opportunities, among other in the low wage sector, especially in services. Non-standard workers and among them fixed-term, temporary agency workers, regular part-time workers and mini-jobbers are disproportionally affected by low wages.

This chapter sets out to demystify the recent German labour market success.It starts with a brief account on labour market developments over the last decade with a specific focus on the economic crisis.It will then address the erosion of the German industrial relations system and the increasing use of forms of non-standard employment.This will be discussed with a focus on mini-jobs as well as the low wage sector which have gained further importance after the implementation of the Hartz reforms in the mid-2000s.In a last section this paper will briefly discuss non-standard and low wage work in Germany in an international perspective with a specific focus on the services sector. 1.

Recent labour market outcomes in Germany and rise in non-standard employment
In terms of basic labour market developments and outcomes Germany is faring comparatively well.
Indeed against the European trend Germany saw employment rates increasing and unemployment decreasing during the economic crisis.

Erosion of German industrial
relations system and growth in nonstandard employment 3 At low trade union density, collective bargaining coverage is substantially higher in both Spain and France with 73% (2010) and 92% ( 2008), respectively (ICTWSS data base).

Mini-jobs -a German phenomenon
The At the same time marginal employment ("mini-jobs") was further deregulated.The maximum monthly earnings threshold was raised from 325 to 400 Euro and the maximum hour's limit which was previously set at 15 hours was abolished.On top the possibility to carry out a contribution and tax-free mini-job in addition to a regular job was reintroduced.
The main features of mini-jobs are as follows: • 4 Mini-jobbers had the possibility in the past to pay own contributions to retirement insurance to increase their future  pensions -this possibility was seldom used.Since 2013, in most cases, retirement insurance contributions are obligatory but with possibilities to ask for deferments.Due to the strong equivalence between wages and retirement benefits, pensions deriving from mini-jobs are minimal. 5This applies when workers and their families remain under the social minimum and claim partial unemployment benefits on top of their wages (so-called "Aufstocker").
Today there are 7.4 million mini-jobs, counting both exclusive and second jobs.
Women make up two thirds of mini-jobbers and are particularly over-represented in the pool of people holding a mini-job as their only job.This configuration is in line with the male-breadwinner model that the German social insurance and tax system was -and to some degree still is -built on.The most important characteristics of this model are derived social benefits (e.g.health insurance for non-working partners and widower pensions) as well as the tax splitting system which is most favourable for married couples where one partner, usually the wife, is not or only marginal employed and least favourable for couples where both partners have similar earnings.
Every second male but only every fourth female minijobber is under 25 or over 65 years old.The fact that old people take up mini-jobs to boost their pensions is not surprising in view of the comparatively low pension levels of many German pensioners and particularly women (Riedmüller and Willert 2008).
The bulk of mini-jobs are exercised in the retail,  In 2010, almost one in four employees (24%) in Germany had a low wage (defined as two-thirds of the national median of gross hourly wages) (Rhein 2013 based on EU-SILC data).This is one of the highest rates in Europe; and indeed higher than the UK one.Nonstandard workers are disproportionally affected.The low wage share among full-time workers stands at 18%, whereas the share among part-time workers is 40%, the one for fixed-term workers 51% (Rhein 2013) and the one for mini-jobbers (main job) is as high as 88% (Voss & Weinkopf 2012).Also, the share of non- Notwithstanding the general finding that women are in all countries more likely to be non-standard employed and to have low wages or combinations of both and that the problem is considerably more pronounced in occupations that require fewer education, there are important and significant differences across countries.
And this is true both in terms of prevalence and depth of non-standard employment in services occupations.
The UK, Ireland, Germany and the Netherlands are doing very poorly whereas in particular the Nordic and to some degree also the Central Eastern European countries have been shown to perform better (see figure 7 on country groups).
As regards the latter two country groups it is important to point out that female employment shares are considerably higher in the former than in the latter countries.The Nordic countries thus seemingly manage to combine both services employment of comparatively high quality as well as high female employment rates.This is linked not least to institutions such as encompassing access to child-care for the very young and better functioning industrial relations including high trade union and collective bargaining coverage and the public delivery of services.
Those institutions can cushion the evident trade-off between high female employment in the services sector and job quality.This trade-off also adds an outcomes in Germany and rise in non-standard employment 2. Erosion of German industrial relations system and growth in non-standard employment 2.1.Mini-jobs -a German phenomenon 2.2.Non-standard employment and growth of the low wage sector 3. Excursion: non-standard employment in the services sector -Germany in (2014): "Labour market developments, non-standard employment and low wages in Germany".Anuario IET de Trabajo y Relaciones Laborales, Vol. 2, 67-78.Introduction Using basic labour market indicators such as unemployment and employment rates Germany has fared comparatively well during the recent economic crisis and is increasingly being upheld as a good example.The recent German labour market success and indeed the turning of the "sick man" into the "Wunderkind" of Europe is often linked back to the socalled Agenda 2020 and the corresponding Hartz reforms of the early 2000.The downsides of this "job wonder" and among them the rise in non-standard employment and particularly mini-jobs and temporary agency work as well as the surging low wage sector and the implications of these developments for social insurance benefits and particularly pensions are less frequently pointed too.

Figure 5 Figure 3 :
Figure 5 shows trends in labour market participation in Germany over the last two decades.It illustrates that female labour force expansion (in large parts taking encompassing German labour market reforms, coined Hartz reforms, started in 2002 and comprised a wide range of measures implemented by amending the Social Code through Laws 1 to 4 on modern services in the labour market and phased in over several years.The conversion of the Federal Employment Office into a modern service provider, the improvement of job placement activities and, importantly, the merging of unemployment assistance (formerly paid as a share of the previous wages) and social assistance into a new flat rate means-tested basic allowance (ALGII) at the level of social assistance are the most prominent features.The latter reform increased the pressure on long-term unemployed to take up poorly paid jobs.At the same time a number of deregulatory reforms were carried out that contributed to the growth in non-standard employment.Time-limits with regard to the assignment of temporary agency workers were for example removed which made it possible to replace regular staff with lower paid temporary agency workers and the number of temporary agency workers indeed tripled between 2003 and 2008.Also, incentives for unemployment to start up a business were increased which led to a growth in the share of solo self-employment; solo self-employed are excluded from many social insurance benefits in Germany (Schulze Buschoff & Protsch 2008).

Figure 5 :
Figure 5: Labour market participation and destandardisation in Germany over the last 2 decades

Figure 6
Figure 6 illustrates the development in mini-jobs since the late 1990s.There was a steady increase over the 2000s and up to 2008.During the crisis the number of people working exclusively on a mini-job was falling whereas the share of people carrying out a mini-job as a side-job was increasing further.
hospitality and cleaning sector.45% of regular female part-time workers and two thirds of mini-jobbers would prefer to work more hours per week: four additional hours for regular part-time workers and 9 additional hours for mini-jobbers on average (Wanger 2011).

Figure 6 :
Figure 6: Development in mini-jobs (% total employment subject to social security), 1999-2012 standard workers (regular part-time workers, minijobbers, temporary agency workers and workers on fixed-term contracts) in the low wage sector has increased from 49% in 1995 to 66% in 2006.(Kalina&   Weinkopf 2008 based on SOEP data).Women are everywhere in Europe more likely than men to have a low wage; the gender difference is particularly large in Germany.Also non-nationals are disproportionally affected.As in most other countries, workers in hotels, restaurants and personal services have higher risks of being on low pay(Bosch 2009).The principal factors behind the strong increase in the low wage sector since the mid-1990s -between 1995 and 2006 low wage employment grew from 15% to 22.2% -are the withdrawal from collective agreements, the rise in outsourcing and posting of workers and -following the Hartz reforms -the dramatic expansion of temporary agency work and mini-jobs (Bosch & Weinkopf 2009).Collective bargaining coverage has been declining since the mid-1990s especially in East Germany.Particularly, many small and medium enterprises have chosen to withdraw from national collective agreements.Another decisive factor is that there is no statutory minimum wage and among the countries without a statutory minimum wage Germany has the lowest coverage rate of collective agreements (European Commission 2009: 82).Starting with the construction sector, a sector characterised by labour migrants often working on very low wages, since the mid-1990s minimum wages have successively been introduced in a number of industries by way of extension of collective agreements (e.g.construction, postal services, specialist cleaning, nursing services, security, waste management and temporary agency work (Bosch & Kalina 2010).The level differs from industry to industry leading to an intransparent situation not least for workers.After almost a decade of debates on a statutory minimum wage 6 , the new grand coalition has in its coalition agreement from December 2013 finally decided to phase in a statutory minimum wage of 8.50 Euro from 2015 with possible exceptions until 2017 (CDU, CSU, SPD 2013).Currently, 15.5% of dependent employees earn less than 8.50 gross.8.50 Euro is relatively low in a Western European perspective -Ireland, the Netherlands, Belgium, France and Luxembourg all pay hourly minimum wages of more than 9 Euro; the UK minimum wage was 7.63 Euro in 2013 (Schulten 2013).A number of questions with regard to the inclusiveness of the new statutory minimum wage are still open and both politicians and employer organisations have among others been calling for various exceptions including retired persons, students, seasonal workers, long-term unemployment, mini-jobbers and persons working in firms with less than 10 employees (for a critical account see Amlinger et al. 2014).Low wages (those below the social minimum) can be supplemented by means-tested income support.In practice this means that in 2008, for example, 1.3 million employees received supplements from the basic allowance (ALG II) (Dietz et al. 2009).For the most part, these are part-time workers and mini-jobbers; temporary agency workers are also disproportionally receiving this supplement.However, every fifth person receiving this supplement holds in fact a full-time job (Bosch et al. 2009; DGB 2011).In the absence of a 6 There have been vivid debates on a statutory minimum wage since the beginning of the 2000s.Until 2006 there was no consensus between the trade unions on a minimum wage, however since then the German Trade Union Confederation (DGB) has supported a statutory minimum wage of €7.50 (since May 2010 €8.50) gross per hour.statutoryminimum wage, firms that pay very low wages are thus subsidised by the state.perspective and with a focus on the services sector, Germany performs particularly poorly with regard to the extent and depth 7 of non-standard employment as well as the gender gap (Leschke 2014, forthcoming) 8 .It is shown that the rise in services employment over the last two decades opened up employment opportunities for women but on the other hand entailed trade-offs with regard to job quality.Female services employment has been shown to be undervalued when it comes to wages and parts of the sector, cleaning being an example in case, are comparatively difficult to organise for trade unions as work places are often small, outsourcing is common and working times are short or irregular.This is manifested in wages that are in many cases substantially lower than in industrial occupations; indeed -as shown above for Germany -in some countries services expansion has been going hand in hand with a thriving low wage sector.In the light of unequal gender distribution of household and care work, a lack in encompassing work-life balance policies and tax splitting policies, women are often obliged to or incited to work part-time hours.Marginal employment is especially problematic as -if exercised exclusively -it will not allow generating an independent income which also has repercussions on social benefits and particularly pensions.Marginal employment is of relatively high importance for women in Germany (mini-jobs), the UK and the Netherlands, and especially in elementary sales and cleaning services.Particularly the lower strands of services occupations (e.g.personal and protective services and elementary sales and cleaning) are to a high degree characterised by forms of non-standard employment and low wages with women disproportionately affected.Here the degree of public sector employment plays a decisive role as public sector employment usually entails better working conditions among others due to the higher presence and activity of trade unions and higher collective bargaining coverage.The prevalence of nonstandard employment and particularly (low hours) part-time work among lower educated women in the services sector of some countries is also impacted by traditional tax policies such as tax splitting, which tends to be more beneficial at lower earnings, and the marginal cost of child care.
on recent German labour market developments highlights that the currently widely praised success of the German model -and particularly its resilience during the crisis -comes at a cost.Triggered not least by the deregulatory Hartz reforms of the early and mid-2000s, the last decade saw nonstandard forms of employment increasing substantially and the low wage sector surging.Non-standard workers and among them fixed-term, temporary agency workers, regular part-time workers and minijobbers are disproportionally affected by low wages.The share of women but also non-nationals and persons with low education levels in both nonstandard employment and the low wage sector is disproportional.In fact, as the above analysis showed, the expansion in female labour force participation, particularly in the services sector, went hand in hand with a destandardisation of employment forms.This can be explained among others by a lack in work-life balance institutions and particularly encompassing child-care coverage, negative work incentives generated by the traditional tax-splitting system, the lack of a statutory minimum wage as well as the erosion of the industrial relations system and the fact that many of the newly created female jobs are placed in sectors that are traditionally less organised -and indeed more difficult to organise -than the industrial sector.The impacts of the recent initiatives on organising (non-standard) workers in the services sector (Pernicka 2005; Vandaele & Leschke 2010) as well as the recent grand coalition decision to phase in a statutory minimum wage remain to be seen.

Figure
Figure 7: Country groups* with high levels of and high gender gaps in non-standard employment for three occupation groups 7: Country groups* with high levels of and high gender gaps in non-standard employment for three occupation groups The country groups are as follows: Nordic (Social Democratic) regime (DK, SE, NO, FI), Continental (Corporatist) regime (DE, FR, NL, BE, AT), Anglo-Saxon regime (UK, IE); Southern (Mediterranean) regime (ES, GR, IT, PT); and Central Eastern regime (CZ, HU, PL, SK, SI).Luxembourg, Malta and Cyprus, the Baltic countries as well as Romania and Bulgaria were not included in the analysis. *