Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany

Performance of Active Labour Market Policy in Germany

Table 1

Cornerstones of the Hartz Reforms

(a) Increasing effectiveness and efficiency of labour market services and policy measures

- Re-organisation of local employment agencies

- Introduction of quasi markets

- Improved targeting

- Evaluation mandate

(b) Activating the unemployed

- Re-Organisation of the benefit system

- Sanctions

- New policy mix with priority to measures requiring proactive behaviour of the unemployed

- Make work pay

(c) Fostering employment demand by labour market deregulation

- Deregulation of the temporary work sector

- Exemptions from restrictions on fix-term contracts

- Exemptions from restrictions on dismissal protection

(Table 1). They aimed at, (a) improving labour market services and policy
measures in terms of effectiveness and efficiency, (b) activating the unem-
ployed by enforcing the so-called principle of „rights and duties” (Fordern und
Fordern), and, (c) fostering employment demand by deregulating the labour
market⁵.

To this end, the reform modified many of the already existing measures of
active labour market policy and introduced a set of new measures (cf. Fertig,
Kluve 2004 for an overview). It fundamentally changed the general
framework in which these measures operate and involved greater co-ordi-
nation of institutional arrangements, especially between active and passive
policy measures. Deregulating measures concentrated on the temporary work
sector, while the biggest changes entailed by the reform took place in the
realm of job placement services and the benefit system.

3. (a) Increasing Effectiveness and Efficiency of Services and Measures

The reform aimed to improve the performance of placement services and
policy programmes mainly by introducing market mechanisms to the realm of
placement services and by streamlining public employment services. Fur-
thermore, cost-effectiveness in the specific context of each regional labour
market is targeted to be the key criteria when choosing programme contents
and participants.

First, regarding their organisational structure, the public employment services
were modernised along the lines of New Public Management. The reform es-

⁵ The federal employment agency translates “Fordern und Fordern” as “Challenge and Promo-
tion”.

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