The years since the early 1970s are unprecedented in terms of the volatility in the prices of commodities, currencies, real estate and stocks, and the frequency and severity of financial crises (Kindleberger and Aliber).
Many authors have already studied about reasons of the origin of financial crises and their impact on the economy concerned, since financial crises, in particular global ones and especially the current one affect all economic factors significantly. The economic growth slows down or even turns into a recession due to decreasing investments, affected by a significantly lower liquidity of companies and investors. All these factors also affect the GDP and the labour market of the economy concerned, in this case Germany, which economy has turned into a recession in February 2009.
The subject of this paper has been chosen due to the present global relevance of the impact of a financial crisis on the labour market. The topic in particular has been chosen due to the fact that it is of worldwide relevance since the outbreak of the crisis analysed occurred on an unexpected scale, more precisely the worst of its kind since the Great Depression in the 1930s.
The focus of this paper lies on the analysis of the current crisis in terms of the impact on the German labour market.
Table of Contents
1 Introduction
1.1 Problem Definition and Objectives
2 Theoretical Foundations
2.1 Unemployment
2.2 Efficient Market Hypothesis and Behavioural Finance
3 Theoretical Discussion
3.1 The German labour market
3.2 Origins and anatomy of financial crises
4 Practical Examination on the Impact of the current Financial Crisis on the German Labour Market
4.1 Quantitative Examination
4.1.1 Impact on the real economy
4.1.2 Unemployment and Short-Time Work Development
4.2 Qualitative Examination
4.2.1 General Forecasts in the Media
4.2.2 Interpretation of Results of Interviews
5 Conclusion
Research Objectives and Core Themes
This independent study aims to analyze the specific impacts of the global financial crisis of 2008/2009 on the German labour market, investigating both quantitative employment data and qualitative insights from industry experts to understand how structural and policy factors mitigate or exacerbate the economic downturn.
- Analysis of the German labour market's structural rigidity and unemployment trends.
- Examination of the theoretical clash between the Efficient Market Hypothesis and Behavioural Finance.
- Evaluation of government stimulus packages and the unique "Kurzarbeit" (short-time work) instrument.
- Qualitative assessment of corporate strategies and expert forecasts regarding long-term recovery.
Excerpt from the Book
3.1 The German labour market
The German labour market is characterized by a high level of underemployment, which is steadily and gradually increasing since the 1970’s (Sachverständigenrat, 2005, p.132). One of the main reasons for this persistent unemployment is the high rate of low-skilled unemployed, which has been rising significantly in Germany since 1991 (Sachverständigenrat, 2005, pp.133-134). Germany’s structural change led to more capital intensive production, which further strengthened the position of skilled labour force despite a widening wage gap (Hollandars & ter Weel, 2002, p.580). In comparison to the former EU-15 states, Germany has the third highest unemployment rate of low skilled people (Sachverständigenrat, 2007, p.149) due to the inflexibility of the German labour market. Compared to more flexible labour markets, which faster adjust real and relative wages, the reaction to macroeconomic shocks is significantly different. The German labour market is more rigid, characterized by greater institutional control over wage setting and greater labour costs associated with employment protection regulations (DiPrete et al., 2006, p.313).
Another issue is high long-term unemployment. Bjornstad (2006, pp.469-470) empirically proofs that many workers tend to give up themselves after a duration of nine months of being unemployed.
Because of the oil crisis and the fall of Bretton-Woods in 1973, the demand for labour considerably declined. Due to the fact that two employee-focussed parties governed in the 1970’s, namely the social democratic party of Germany (SPD) and the liberal party (FDP), many labour laws were introduced. The power of trade unions increased during this time as well, which lead to better working conditions and higher wages (Stein, 2001). One of the main reasons of the German labour market being such rigid is the rigidity of wages, since companies in Germany cannot adjust wages to economic conditions as companies can do in more flexible economies like the UK or the USA (Nickell, 1997).
Summary of Chapters
1 Introduction: Defines the scope of the study regarding the financial crisis's impact on Germany and establishes the primary research objectives.
2 Theoretical Foundations: Provides definitions for unemployment and discusses the contrasting financial theories of the Efficient Market Hypothesis versus Behavioural Finance.
3 Theoretical Discussion: Analyzes the structural characteristics of the German labour market and investigates historical models regarding the origin and anatomy of financial crises.
4 Practical Examination on the Impact of the current Financial Crisis on the German Labour Market: Combines quantitative data on unemployment and short-time work with qualitative interview results from various industry sectors.
5 Conclusion: Synthesizes findings on the crisis impact, evaluates government intervention measures, and outlines future regulatory needs.
Keywords
Financial Crisis, German Labour Market, Unemployment, Short-Time Work, Kurzarbeit, Behavioural Finance, Efficient Market Hypothesis, Economic Recession, Stimulus Package, Banking Regulation, Structural Rigidity, Keynesian Unemployment, Economic Indicators, Corporate Strategy, Financial Supervision
Frequently Asked Questions
What is the primary focus of this paper?
The paper focuses on the impacts of the 2008/2009 global financial crisis specifically on the German labour market, analyzing how economic downturns translate into unemployment and corporate restructuring.
What are the central thematic fields covered?
The work covers labour market theory, financial market theory (EMH vs. Behavioural Finance), the mechanisms of financial crises, and the effectiveness of government policy interventions like stimulus packages.
What is the primary research goal?
The objective is to understand how the current financial crisis impacts employment in Germany and to assess the success of mitigating strategies such as the state-subsidized short-time work scheme.
Which scientific methods were employed?
The paper utilizes a mixed-methods approach: quantitative analysis of government labour market data and a qualitative study based on expert interviews with representatives from various industries.
What topics are discussed in the main part?
The main part examines real-economy indicators, the development of short-time work, expert forecasts regarding recovery times, and the potential need for stricter financial market regulations.
Which keywords best characterize the work?
Key terms include Financial Crisis, German Labour Market, Unemployment, Short-Time Work, Behavioural Finance, and Government Stimulus.
How does the "short-time work" instrument function in the German context?
It acts as a buffer by allowing companies to temporarily reduce employee hours instead of laying them off, with the government compensating a portion of the lost wages to prevent mass unemployment.
What role did the Lehman Brothers collapse play in the expert consensus?
Interviewees identified the decision to let Lehman Brothers fail as a major turning point that significantly worsened the recession and caused a severe credit crunch.
- Quote paper
- Benjamin Schmitt (Author), 2009, The impact of the current financial crisis on the German labour market, Munich, GRIN Verlag, https://www.grin.com/document/300325
