The sustained rise in German unemployment since 1973 poses a problem of critical importance for the world economy. Fewer than two decades ago, Germany boasted an average unemployment rate of under 1% and imported labor to relieve chronic labor shortages. By the mid-1980s, unemployment had risen...

The sustained rise in German unemployment since 1973 poses a problem of critical importance for the world economy. Fewer than two decades ago, Germany boasted an average unemployment rate of under 1% and imported labor to relieve chronic labor shortages. By the mid-1980s, unemployment had risen...

This paper reviews the dramatic and widely noted developments in the German labor market in the past decade and surveys the most plausible reasons for these changes. Alternative hypotheses are compared and contrasted. I argue that the labor market reforms associated with the Agenda 2010 – the...