Another Economic Miracle?The German Labor Market and the Great Recession

The mild response of the German labor market to the worst global recession in post-warhistory appears as an economic miracle. In response to the crisis, Germany has shown to bea strong case of internal flexibility. We argue that important factors that have contributed tothis development include the strong position of the German economy due to recent labormarket reforms, the nature of the crisis affecting mainly export-oriented companies inGermany, the extension of short-time work, the behavior of social partners, and automaticstabilizers. Among these factors, we emphasize the key role of the interaction between shorttimework and long-term shortages of skilled workers in sectors and regions that wereparticularly affected by the crisis. Although the German experience is in stark contrast to thatin the United States, we identify and discuss three challenges that will be at the center ofdebate on both sides of the Atlantic in the future....