From deregulation to re-regulation : trend reversal in German labour market institutions and its possible implications

From the mid-1980s until 2005 the German labour market was characterised by continuous deregulation. In the period of an improving German labour market, the German governments have since imposed measures to re-regulate the labour market in order to strengthen employees' rights. At the same time one can observe a tendency towards atypical forms of employment and an increase in low-wage employment. Two closely interrelated questions arise: What role did deregulation play with respect to the overall improvement of the German labour market and shifts in the employment structure? How could re-regulation impact labour market performance and employment structure in the future? The paper presents evidence that institutional reforms were an important driver of the improvement of the German labour market as well as of changes in the employment structure but definitely not the only one. This result suggests that with regard to the potential effects of recent re-regulation neither concerns about severe job losses nor hopes for a much better quality of jobs should be overestimated.