Labor Market Entry in Germany before and after the Financial Crisis: An Analysis of Duration of Labor Market Entry, Quality of First Job, and Fixed- Term Employment

Abstract

Abstract This chapter examines the impact of the financial crisis in 2008 on the duration of labor market entry of men and women in East and West Germany. Furthermore, the effect of this crisis on the status at first job and fixed-term employment for East or West German men and women is analyzed. The empirical findings show that young Germans did need much more time to establish themselves in the labor market after the crisis. However, there were no significant differences between East and West Germans, men and women, or between skilled and unskilled workers with respect to the impact of the financial crisis on the duration of labor market entry. Furthermore, the financial crisis had a positive effect on the status of the first job. This was mainly the case because during the crisis unskilled jobs were quickly vanishing. There are no effects of the financial crisis on the quality of first jobs for East and West Germans as well as for men and women. Finally, the analyses demonstrate that fixed-term employment increased for men after the financial crisis. Again, there are no differences in the impact of the financial crisis on fixed-term employment at labor market entry for East and West Germans as well as between the skilled and the unskilled. Introduction In 2008, the sudden shock of the subprime mortgage crisis and the devaluation of housing-related securities in the United States triggered worldwide uncertainty about the viability of the global financial system. In the face of this credit crisis, the growth rates of real economies abruptly slowed down and unemployment rates in the USA and Europe increased rapidly (Verick 2009). In this chapter, I investigate the impact of this economic crisis by comparing young people who entered the German employment system shortly before and after 2008. In the research literature, the German labor market has been characterized as an insider–outsider market where the established workers, the so-called “insiders,” are highly protected and the “outsiders” such as young people looking for a first job or women seeking employment after family related interruptions, such as child birth, having difficulty finding jobs, particularly in times of an economic crisis (Blossfeld et al. 2006; Muller and Gangl 2003; van de Velden and Wolbers 2003; see also Ashton, this volume).