The dovish turnaround: Germany's social benefit reform and job findings

Abstract

On the labor markets, recent decades were characterized by structural supply‐side reforms in many countries. Following its hawkish reforms from the 2000s, Germany has recently made a dovish turnaround. Conditions in basic income support for unemployed became more generous, combined with a focus on qualification and development. Before, a temporary moratorium on sanctions had been imposed, providing a unique policy shift. We analyze the consequences for job findings, building on large administrative data and a novel control group approach. The moratorium dampened job findings by 4% and the subsequent benefit reform by almost 6%—offsetting half of the positive effect of the 2000s reform. Considering reform objectives, so far, we find no improvement in skill level, job stability, or transitions to training.