The Management of Restructuring and Demographic Change – … · 2008. 8. 20. · Klima, Umwelt, Energie Institut Arbeit und Technik The Management of Restructuring and Demographic

Wissenschaftszentrum Nordrhein-Westfalen

Kulturwissenschaftliches Institut

Wuppertal Institut für Klima, Umwelt, Energie Institut Arbeit und Technik

The Management of Restructuring and Demographic Change – Challenges for German Labor Relations

Demographic Challenges for Human Resource Management and Labor Market

Policies-- A German-Japanese Comparison –

Tokyo, October 5-6, 2005

Matthias KnuthInstitute for Work and Technology,Gelsenkirchen




Outline

• structural change and labor market transitions

• early retirement – traditional mode of negotiated redundancy

• demographic challenge: opting out of early retirement

• negotiated outplacement: the new pathway• new demands on social actors




Sectoral Shift of Employment, Germany 1957 – 2003 (Thousands)

0

5000

10000

15000

20000

25000

30000

35000

40000

1957

1961

1965

1969

1973

1977

1981

1985

1989

1992

1996

2000

services

manufacturing ,construction & mining

agriculture

unification

Source: Federal Bureau of Statistics




Shift of Organizational Size:Distribution of Workforce*) over Establishment Size Categories, West Germany

22,3 22,6 24,5 24,2 25,927,5 27,3

22,1 22,1 21,9 22,323,9 24,8 24,8

24,6 24,6 24,0 24,224,6

25,1 25,3

31,0 30,6 29,7 29,325,5 22,7 22,6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1977 1980 1985 1990 1995 2000 2003

pe

rce

nta

ge

of t

ota

l e

mp

loym

en

t

>=500100-49920-99< 20

Source: Own calculations from employment register sample*) only wage and salary earners subject to social security contributions




Entry, Exit, and Labor Turnover Rates*), West Germany, 1976 – 2000

18

20

22

24

26

28

30

32

34

36

38

1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

Tu

rno

ver

Rat

es

90

95

100

105

110

115

120

125

130

135

140

Em

plo

ymen

t Ind

ex (

1980

=100

)

employment entry rate exit rate LTR

*) only wage and salary earners subject to social security contributions

Source: Own calculations from employment register sample




Job Separations by Type, West Germany 1985—2001

23,7 20,2 21,6 16,311,5

17,7 20,423,2

34,5 32,7 30,6 29,9 33,5 26,021,8 20,1

27,0

36,5 40,5 38,441,5 50,2

48,6 39,941,5

36,531,5 36,0

30,033,2

39,739,8 44,9

39,9

39,8 39,3 40,0 42,2 38,333,7

39,735,3

29,035,8 33,4

40,133,3 34,3

38,4 35,033,1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

per

cen

tag

e o

f se

par

atio

ns

dismissals quits other (e.g. end o f f ixed term)

Source: Own calculations from GSOEP




Traditional Pathway to Early Retirement(Earliest Possibility)

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

still employed

full pension

officially free from jobsearch obligation

unemployment benefit + compensation

short time allowance




Legal Employment Protection

• dismissal for ‘operational reasons’ socially justifiedif in selection for dismissal duly considered:

• tenure

• age

• obligations to support (children or other dependents)

• disability

⇒ three out of four criteria protect older workers� downsizing following the letter of the law

⇒ older workforce than before• dismissals of certain order of magnitude

negotiated with works council⇒ social compensation plan




(Dis-) Advantages of Voluntary Separations of Older Workers in Comparison to Dismissalsfor the worker:

• higher severance payment (if offered)

• avoiding psychological hardship

• earlier retirement

for the employer:

• freedom of selection

• no risk of legal recourse• shortening of notice period

• rejuvenation of workforce

for the remaining workforce and the works council:

• higher productivity, better competitiveness, more job security

for the general public:� more unemployment

benefits (1/3 of unemployed 50+)

� lower social security contributions

� earlier and longer pensions




“Window of Demographic Opportunity”

coho rt 1940 turned 60 in 2000

coho rt 1964 60 in 2024

coho rt 1945 turns 60 in 2005




Putting the Brakes on Early Retirement

• Pension reform: pensions before 65 with 3,6% deduction per year

• unemployment benefit reform: • maximum duration of contribution-based benefit for older

workers 18 months (instead of 32)• payments by former employer taken into account when

means-testing for open-ended and flat-rate follow-on benefit

• short-time allowance: maximum duration12 months (instead of 24)

• “gradual retirement” as an alternative to early retirement via unemployment




The Impact of the Pension Reform

0%

10%

20%

30%

40%

50%

1996 1997 1998 1999 2000 2001 2002 2003

50-59 Jahre

60 Jahre

61 Jahre

62 Jahre

63 Jahre

64 Jahre

65 Jahre




Population 50 – 65 by Status:1996

0%10%20%30%40%50%60%70%80%90%

100%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

age completed

cum

ula

ted

per

cen

tag

es

gainfully employed inactive, no pension or benefitreceiving social ass istance receiving pension

unemployed




Population 50 – 65 by Status:2003

0%10%20%30%40%50%60%70%80%90%

100%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

age completed

cum

ula

ted

per

cen

tag

es

gainfully employed inactive, no pension or benefit

receiving social ass istance receiving pensionunemployed




Impact of Pension Reform plus Approach of Female Cohorts with Higher Participation towards Ends of their Careers

• inactivity without social transfers decreasing• pensions decreasing 58 – 62• employment increasing 50 – 64� unemployment increasing 58 – 63 (relative

to numerically weak cohorts)




Provisions of the Public Employment Service for the Accompaniment of Redundancies

• subsidies for job transfer measures (2,500 Euros maximum per worker)• profiling• outplacment training• jobsearch coaching• job placement

• allowance for working ‘short time’ (0 hrs.) in a legally separate ‘transfer company’




Negotiated Redundancy:Trilateral Job Transfer Schemes

employer‘transfer company’

employee

⇑ voluntary annulment of open-endedlabour contract replaces imminentdismissal⇒ no legal recourse possible

⇓ prolongation of employment beyondnotice period

⇓ transfer services⇓ possibly: supplement to short-time

allowance⇓ possibly: severance payment

⇑ obligation to actively participatein transfer activities

⇓ fixed-term labour contracton short-time basis

⇓ transfer services

exchange of⇒ ressources and⇐ services

framed in collective agreement between employer and works c ouncil

subsidised by PES as ‘short time

working allowance’≈≈ unemployment

benefit not counting against eligibility

period




The New Outplacement Pathway forWorkers of all Ages

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

unemployment

notice period

month

profi ling, outplacement trainingjobsearch coaching, job p lacement

new job

no n ew job

fixed-term 'employment' for up to 12 months in 'transfer company',subsidized by short-time working compensation

vocational and outplacement training, jobsearch coaching, internships, job placementno n ew job

new job




Evaluation of Subisidies to ‘Transfer Measures’ 1998 – 2000

• enterprises




New Demands on Redundant Workers

• accept ‘real services’ as an equivalent (totally or in part) for severance payments

• accept the ending of an employment relationship many may have believed to be ‘for life’

• orient themselves towards new challenges and conditions

• often accept lower wages and poorer conditions




New Demands on Employers

• envisage and commission employment-oriented measures (possibly in times of corporate crisis)

• pay at least 50% of costs of ‘transfer measures’+ full wages for participation during working hours

• bear residual wage costs during short-time⇒ social insurance contributions, full wages for bank holidays and

annual leave⇒ 35% of regular wage costs

• plus possibly negotiated supplements on top of short-time allowances

• bear these reduced costs for periods longer than employees’ individual notice periods (up to the legal maximum of 12 months short-time)

• pay 100% of employment assistance costs during short-time (unless European Social Fund can be tapped)




New Demands on Works Councils

• defend existing jobs and simultaneously envisage transfer assistance to new jobs⇒ at which point in the negotiating process do you openly

switch strategy?

• give redundant workers confidence in opportunity for transfer• ‘real services’ of employment assistance more

sustainable than cash payments

• monitor quality and fairness of transfer services




New Demands on Trade Unions

• observe ‘critical’ corporate development in order to be prepared for pro-active responses� often: bring first information on the mechanisms of transfer

and of public provision to the employer

• strategic coaching of works councils• give employees confidence in transfer provisions� accept irony of transfer to new industries:

⇒ loss of members for TU representing old industry




New Demands on the Public Employment Service

• explain and implement complicated provisions in a straightforward manner

• provide information on available provisions and providers for employers and works councils

� win access to small enterprises in crisis where no workers’ representation exists

• win the confidence and commitment of employers and works councils who are ‘first time users’

• monitor the quality and outcome of third party provision




Demands on Outplacement Providers

• mediate between all the other actors• survive and maintain professional quality in

a highly cyclical business• find jobs in the market during recession or

stagnation• infuse optimism and can-do attitudes in

seemingly hopeless situations




Summary

• remarkable structural change effected without much increase in labor market mobility

• early retirement important buffer but not sustainable under demographic change

• reforms of the retirement system show effects• job transfer (assisted mobility) intended to replace

early retirement• difficult task in generally depressed labor marketB turn-around of employment patterns and

retirement orientations indispensable before baby-boomers arrive at the critical pre-retirement age in about 10 years

Documents

The Management of Restructuring and Demographic Change – … · 2008. 8. 20. · Klima, Umwelt, Energie Institut Arbeit und Technik The Management of Restructuring and Demographic