The German Welfare State and Labour Market Policy

Abstract

Following the new institutionalist approach, understanding of the development of labour market policy requires an understanding of the institutional framework in which labour market reforms are developed. First, the basic ideas and institutions of the German welfare state are briefly reviewed, before mapping the historical development of German labour market policy from its institutionalisation in 1927 to the last Kohl government, which left office in 1998. It will be shown that policy development had been characterised by remarkable continuity and change at the same time. The basic institutions remained intact, while the ideas governing labour market policy underwent some substantial transformation (Section 1). With the Job-AQTIV Law and the Hartz Legislation, the Schröder government (1998–2005) not only continued but accelerated the departure from the conservative–corporatist path of welfare in labour market policy, started by the centre-right government in the mid-1990s. The ideas of activation and new public management gained a virtually unchallenged predominance in labour market policy (Section 2).