Das Bündnis für Arbeit – Ein Weg aus der institutionellen Verflechtungsfalle?

Persistently high unemployment is still the most urgent problem confronting policymakers in many continental European countries. Policymakers were not idle but their activities often treated the symptoms rather than the real causes of the malaise in labor markets. A prerequisite for solving the unemployment problem is pushing for more competition in all markets, but in particular in the labor market. However, lack of competition allows insiders to capture rents, thus making them opposed to a rigorous competitive policy approach. It is often suggested that corporatism would be an alternative and possibly even superior solution, i.e., tripartist agreements involving unions, employer associations and the government. The paper argues that this is not the case. Rather, corporatism leads to even less competition and opens additional channels for externalizing the burden of adjustment to exogenous shocks on future generations and on taxpayers at large via the social security system. Globalization might in contrast help to overcome the problem because there are fewer rents to be captured by insiders, and more open goods and factor markets make labor demand more elastic, thus enforcing more moderate wage setting and more flexible wage structures.