NOT WORKING? THE WEST GERMAN LABOR MARKET 1964-2001

Aggregate Data from the German Labor Market paints a worrisome picture of falling wage growth and rising non-employment. Real wage growth (Figure 1 and Table 1) has been declining in every decade since the nineteen-sixities. Between 1995-2001 growth was slower than during any 5 year period in the sample with the exception of the recession at the beginning of the nineteen-eighties. Figure 2 shows how overall unemployment and non-employment rates among males aged 25-65 have followed an upward trend over the 1964-2001 time-period. Substantial attention has been brought to the fact that each increase in these series seems to permanently lift Germany to a new level of unor non-employment. During no cycle since 1964 have employment rates been able to regain more than a small fraction of a preceding decrease during the subsequent recovery. This feature of the data adds to the alarm with which recent unemployment rates have been greeted in Germany.