2. Labour market institutions resulting from the Hartz Reform
Like in other European countries (e.g. United Kingdom, Finland, Denmark, Netherlands,
France), the local public employment services and the local social benefit administrations in
Germany were merged in the course of a labour market reform in order to ensure a single
contact point for long-term unemployed job seekers. The so-called Hartz reforms (Hartz I, II,
III, IV) implied a substantial change for the German welfare state in many respect. These
reforms were implemented step by step between 2003 and 2005 (see Jacobi and Kluve
(2007) for a more detailed description of all four Hartz reforms). While the Hartz IV reform
constitutes a comprehensive modification of the unemployment benefit and social assistance
schemes, the other Hartz reforms focused on relaxing regulations for temporary employment
and labour leasing, on modifying already existing active labour market policy instruments,
and on the reorganisation of the Federal Employment Service.
Before the Hartz IV reform the municipalities and the counties were responsible for
social assistance recipients and the local public employment services of the Federal
Employment Agency were responsible for unemployment assistance recipients. The
integration of the two systems under Hartz IV opened up the question of responsibility for
the long-term unemployed.
Municipalities and counties in charge of the local social benefit administration feared to
lose political influence if they gave up such an important task. Especially the German
County Association (“Deutscher Landkreistag”), supported by the majority of German
States, campaigned for giving municipalities and counties the sole responsibility for the
long-term unemployed, i.e. they campaigned for having the Approved Local Provider
institution implemented nationwide. The German County Association is the federal
Association of German Counties and its main tasks are to promote local government self-
administration (which is guaranteed by the German Constitution) and to foster common
interests between all local government bodies vis-à-vis the Federal State and the single
States. As a lobbying institution, it tries to influence Federal and State level legislation that
affects municipalities and counties.
However, the Federal Government, which predominantly finances the social security
system, favoured the Joint Local Agency model, where a local public employment service
and one or more counties (more precisely their local social benefit administrations) are
merged and carry out their responsibilities in mutual cooperation. Due to the federal system
in Germany, where the States have a veto right if the majority of the States oppose a law
passed by the Federal Parliament, the Federal Government was forced to agree to a policy
experiment, where 69 out of 442 regions were allowed to design the organisation and
activation process for the long-term unemployed in their job centres (Approved Local