German labor market thrives post-reform, reducing unemployment and boosting welfare.
The German government made big changes to its labor market in the early 2000s, known as the Hartz reforms. One key change was cutting unemployment benefits for long-term unemployed people. A study looked at how these reforms affected the German job market. It found that the Hartz IV reform lowered the noncyclical unemployment rate by 1.4%. Employed workers benefited, but unemployed workers did not. Earlier Hartz reforms also helped reduce unemployment by 1.5%. Overall, the Hartz reforms helped Germany's job market during the Great Recession.