Older Unemployed Workers Following the Recent Economic Recession

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However, in the wake of the severe economic recession in , the performance of the German labor market improved significantly with increasing employment and decreasing unemployment rates. As shown by Fig. Employment, unemployment, and retirement in Germany, — Data are weighted using SOEP weighting factors. Source : SOEP —, own calculations.

Another important feature of labor market developments in Germany is the evolution of real hourly wages which have, on average, changed little since Fig. Except for the oldest age group, average real wages declined for several years before the recession in and increased slightly since then. For employees in the oldest age group real wages increased between and but declined in recent years. Real hourly wages in Germany, — Notes: Real hourly wages are derived using SOEP generated information on individual annual earnings and actual working hours.

Real hourly wages smaller than 1. The self-employed are excluded. Source: SOEP —, own calculations. The factors which might have contributed to the described labor market development remain controversial. As in other EU member states see, e. The reform of the unemployment compensation system was mainly intended to increase work incentives in general, and not especially targeted at older workers, but may still have had relatively strong effects on them.

Other labor market reforms were targeted at increasing employment opportunities of older people with little earnings potential.


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Footnote 2 Taken together, these studies seem to suggest that recent labor market and pension reforms may have contributed to the increase in employment and the reduction in unemployment of older workers. Although there seems to be no quantitative assessment on the overall economic effects of these reforms on older workers, their overall direct contribution to the substantial employment increase of older workers is likely to have been relatively small.

Employment policies and data

Footnote 3. This paper aims at establishing important stylized facts about the development of the labor market for older workers in Germany in recent years. The focus of this descriptive analysis is on identifying age effects in changes of various labor market outcome variables between and These include various employment and unemployment indicators as well as the real hourly wage, all measured at the individual level using data from the Socioeconomic Panel SOEP for the period — To account for the importance of gender and the still existing large differences in most of these indicators between east and west Germany, the estimations are differentiated by gender and region.

Based on this empirical analysis, some implications for labor market policies are discussed in the concluding Chap. Footnote 4. Probably the most controversial reform introduced to achieve this aim concerns the unemployment compensation system. Both of these regulations were changed by the recent reform, and the new rules became effective in and , respectively.

Labor market programs specifically targeted at older workers include in-work benefits Entgeltsicherung and temporary wage subsidies Eingliederungszuschuss. The program was introduced in and prolonged twice until Temporary wage subsidies Eingliederungszuschuss are paid to firms employing people with severe placement difficulties, of which old age is considered to be one see Ruppe and Stephan They have existed in Germany already before the recent reform but have been slightly adjusted for older workers.

As reported by Dietz and Walwei these instruments have not been widely used, however.

Among several other important changes, this reform introduced deduction factors for early retirement 0. Public subsidies for partial retirement schemes ended in During the transition period, early retirement was still possible, but the pension was cut by 0.

The broad reach of long-term unemployment

Footnote 6 The disadvantage of the SOEP is its limited sample size, which renders estimation of population statistics for small groups somewhat imprecise. Footnote 7. The estimates are conditional on other potential determinants of labor market outcomes at the individual level. Part-time employment has also gained increasing importance among women in east Germany and for men in partial retirement in both regions.

Self-employed people are included in the following analysis without further explicit differentiation between full-time and part-time employment. AME give the average percentage change of the employment probability of the respective variable relative to the base category. Standard errors are based on clustering observations by individual to account for the panel structure of the SOEP estimation sample.

Estimation results for full-time employment are summarized in the upper part of the table, those for part-time employment in the lower part. The interaction terms identify the marginal effects of changes of the age effects on the employment probabilities within the observation period. While the increase in part-time employment among older men in west Germany and older women in both regions may be related to restrictions on early retirement and the labor market reforms in the observation period, as described in Sect.

To some extent, this may be related to the stronger increase in male full-time employment in east compared to west Germany. Another factor may be related to the increase in unemployment among older east German men, as described below. This unemployment measure resembles more the one derived from national statistics on registered unemployment than the internationally comparable concept based on self-assessed job searching activities. In fact, the unemployment rate calculated from SOEP date is very similar to the one calculated from the national statistics see Fig.

Except for other household income, the logit models include the same control variables as for the employment model above. Note that the unemployment probability has also declined substantially for younger people in east Germany, while no significant time trend for this age group could be detected in the west.

In west Germany, the initial unemployment differential between the older and younger age groups was also significantly reduced for both men and women by the end of the observation period. Given the relatively low unemployment rate of older women in East Germany at the beginning of the observation period, these estimates imply that age differentials in female unemployment have been reduced in recent years, but remain substantial.

The broad reach of long-term unemployment

Long-term unemployment is usually defined by the share of people with interrupted unemployment durations in their current spells of more than one year. This definition misses the potential importance of brief but frequent unemployment spells which may accumulate to long-term unemployment over the lifecycle. This variable is generated from retrospective SOEP data on time spent in various labor market states over the individual lifecycle.

This measure also avoids the arbitrary choice of reference period and the left-censoring of unemployment durations. Although it is unclear to what extent long-term unemployment has increased above average among older workers, they have not fared better in this respect than younger people. As described in Sect.

Unemployment - Wikipedia

Except for the dummy variables for the presence of children in the household and the exclusion of pension income from other household income, the same control variables are included as in the unemployment logit models. The self-employed are excluded from the analysis here because the difficulty to properly measure labor income on an hourly basis for them. Nominal hourly wages are deflated by the consumer price index for all Germany. These wage effects are conditional on employment status and account for selection effects.

For older men, real wages declined substantially in west Germany, and in the oldest age group also in east Germany, where these changes mainly took place since —8. Detailed estimation results do not support simple generalizations regarding age effects on changes in labor market outcomes.

The broad reach of long-term unemployment

Either the labor market was not as tight as it appeared or some other force such as monopsony power in the labor market was keeping wages down. In either case, there was evidently substantial room remaining for further demand growth without risking a wage-price spiral and runaway inflation. This judgment has been borne out by the experience of the last four years: Employment has grown and the unemployment rate has continued to fall with little sign of wage pressure. While wages have grown modestly, there is still substantial lost ground to recover.


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Since , there have been signs of resurgence. After growing at a less than 2 percent rate in , wages have been growing at a 3 to 3. This is a sign that the market is finally tightening, and that employers are beginning to offer higher wages in order to attract and retain workers. But much more labor market tightening is necessary to make up for the low growth averages over the last ten years.

Job growth in California has outpaced the national average in nearly every sector. California experienced 18 percent overall job growth since the start of the recovery compared to 13 percent nationwide. However, California lost a greater share of its jobs 1. As in the U. The U. On the surface this looks like good news for California, but job growth varies widely by industry and metropolitan area.

The health services industry, leisure and hospitality, and professional and business services in California have had the strongest job gains in the private sector, while natural resources and mining, construction, and manufacturing have experienced deep job losses. Unemployment rates in California were higher than the national average during the recession, and stayed in the double digits for 43 consecutive months.

Age-bias leaves older workers out of the recovery

In 23 California counties, particularly those in the Central Valley, unemployment reached between percent in While the worst rate of unemployment for whites and Asians was roughly 10 percent in , Latinos experienced Underemployment, which is a measure of discouraged and marginally attached workers, part-time workers looking for full-time work, and those who gave up the job search, has been consistently higher in California than the U.

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