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

Effects¹ of the Hartz Reforms

Measure

Evidence

Reform effect

before

after

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

Placement Services

General

(+)

(+)

(+) Introduction of one-stop-
centres seems positive, but
significance of effects unclear

Placement voucher²

n/a

0

0 No significant effect on
re-employment probability

Assignment to private
placement providers²

n/a

0

0 No significant effect on
re-employment probability

Placement via temporary work
(PSA)

n/a

-

- PSA reduce the employment
probability of participants

Training

0 older
studies /
(+) more

recent
studies

+

+ Exit rate to employment
increased, locking-in effects
reduced

Public job creation

-

(-)

- Measure remains detrimental
after the reform

(+) Magnitude of negative effect
decreases

Impact on “employability” unclear

(b) Activating the unemployed

Wage subsidies to employers
(Integration subsidies)²

(+)

+

+ 20-50 percentage points higher
probability of regular employment
post-treatment. Extent of windfall
gains unclear.

Start-up subsidies (Bridging
allowance and “Me, Inc.”)

(+)³

+

+ Subsidy significantly reduces risk
of unemployment (decreasing over
time). Some windfall beneficiaries
exist.

Make work pay

Wage protection for elderly

n/a

0

0 No significant effect.

Minijobs

n/a

+

+ Reform caused large increase in
employees in Minijobs (+1.8 Mill.).
(-) Inflow from unemployment
low. Incidence of intra-enterprise
displacement cannot be ruled out

Midijobs

n/a

(+)

(+) Modest effect on creation of
Midijobs (+125,000). Incidence of
intra-enterprise displacement
cannot be ruled out