Facilitating Labour Shedding or Enhancing Labour Supply?: An Analysis of German Employers' Organizations' Views on Work Incentive Effects of Social Programmes

Abstract

Public social benefits can, depending on their design, either weaken or strengthen work incentives. Benefits that provide an alternative to earned income weaken work incentives, benefits that require recipients to seek and accept work strengthen them. On the basis of historical case studies, this paper analyzes how the peak federations of German employers perceived the impact of public social programmes on work incentives and how these perceptions changed over time. The paper shows how employers’ assessments of the desirability and importance of work incentives changed over time, depending on two factors: Labour market conditions and firms’ own staffing policies. The paper distinguishes three scenarios: labour shortages (under-supply of labour), high unemployment, and over-staffing by firms. The paper finds that when faced with one of the first two scenarios employers oppose de-commodification, while when faced with the third scenario they welcome decommodification.