Progress towards greater labour flexibility in Germany

Abstract

Government and employers’ sources frequently emphasize that companies located in western Germany have traditionally been circumscribed in their pursuit of flexibility in staffing, working time arrangements and pay, due to the particular configuration of the German industrial relations system and labour market regulations. Examines to what extent recent deregulation and decentralization measures have actually enhanced the environment for greater labour flexibility. Then considers whether this has led to higher degrees of labour flexibility at the company level. The analysis of a number of key flexibility indicators reveals that, despite some significant broadening of the scope for greater labour flexibility since the late 1980s, companies seem, in general, not to have greatly altered their flexibility mix. In the light of the relatively high degree of functional flexibility in German firms, the pay‐offs from enhancing other forms of flexibility may be considered to be low.