Editorial: The Future of Work in the City

Unemployment has increased almost continuously in Germany since the 1970s. In particular, the base of long-term unemployment has consolidated and grown. Some regions are especially hard hit, above all in the new federal states. It is now no longer excluded that the five-million mark will be passed in the foreseeable future. All surveys, whether on local government problem areas (Bretschneider 2003) or on popular fears (R+V-Infocenter 2003), stress the outstanding importance of economic issues, which has further increased in recent years.

"The future of work" and "the future of the welfare state" - a not inconsiderable part of the welfare system is devoted to countering the risks of unemployment - have occupied many a commission since the 1990s and have spawned an abundant literature (the Future Commissions Bavaria and Saxony and Berlin, the Hartz Commission, the Rürup Commission). These bodies have not only carried out a profusion of studies and offered a multitude of explanations. They have also proposed reforms, which have to some extent been implemented.

Most proposals have envisaged reform of the general labour-market framework in Germany and of labour-market and employment policy. Although local authorities bear the brunt of labour market problems, the proposed reforms assign them only a secondary role. Since the 1970s, local authorities have taken on more and more functions in labour-market and employment policy, although this is not a primary province of local government. But the problems arise locally, and municipalities have been less and less able to withstand the pressure exerted by the local public. At the same time, social assistance has made municipalities into deficiency guarantors for less successful labour-market and employment policy. The burden of social assistance has grown continuously.

In 1999 the German Institute of Urban Affairs presented a comprehensive study on the local government perspectives of the topic "The Future of Work in the City" (Henckel/Eberling/Grabow 1999). It gave a broad overview of the major links between developments in cities and the labour market, and pointed to the lack of attention given local authority aspects. Since then, discussion on the urban aspects of labour-market and employment policy has hardly moved forward.

The future of work and reform of labour-market and employment policy is a veritable minefield. Discussion is highly charged ideologically, for different world views, societal models, and economic schools are at work. But the debate is also fierce because reform entails major cuts and shifts in competence and financial resources.

On closer consideration it is clear that:

• there are substantial differences between the academic and political camps in description and analysis, at least in construing and evaluating the facts;
• certain elements are considered out of context by directly imputing isolated aspects of labour-market performance in other countries to the German setting;
• there are strong differences on how problems in the labour market should be tackled.

Nevertheless the need for reform is now largely undisputed. But there are widely differing and often contrary ideas about the thrust of reform and the tools for implementing it, not least of all because they relate to quite different levels of scrutiny. The following aspects are among the most important:

• the general liberalisation and deregulation of labour markets, involving issues such as protection against dismissal, the gap between wages and social security, and wage negotiations (role of national wage agreements);
• the role of local authorities in labour-market and employment policy and its financial basis;
• the appropriateness of subsidies (e.g., low-wage sector) or cuts in subsidies (e.g., active labour market policy, job creation programmes).

Despite the wide-ranging discussion and the vast amount published on the subject, not least of all in the daily press, the debate on the future of work and the role of local authorities currently appears to be concentrated in various highly specialised circles and, in many regards, to lack breadth of view.

• Although local authorities have to shoulder the main burden of long-term, mass unemployment, and although they have overcome initial reluctance to accept responsibility in labour-market and employment policy (especially for integrating the difficult-to-place), their role in these policy areas is still considered inadequate.
  • Most studies and proposals on labour-market and employment policy address the macro-level, i.e., the national labour market, looking, for example, at the consequences of merging unemployment and social assistance in the context of the national economy (e.g., Sinn et al. 2002).
  • Local authorities themselves either take a strongly interest-driven perspective, or their analyses and recommendations are concerned with the details of local implementation. The distance needed for a consideration of structures is often lacking.
  • More comprehensive studies on the incentives and effects of different institutional arrangements are largely lacking.

The local authority perspective falls short in many debates on labour-market policy.

• The future of work and of the "paid-employment society" plays only a minor role in the present debate. Whether full employment - always restricted to very short periods in history - is attainable appears not to be an issue at the present time. (1) This means that redistribution strategy, which enjoyed high priority for a while - particularly in relation to the Volkswagen collective agreement for safeguarding jobs - is currently being neglected or treated only implicitly. This has been the case, for example, when a longer working life is proposed in the context of pension reform, or when certain politicians recommend extending individual working hours. However, such recommendations seldom link the overall labour supply with present and foreseeable labour demand. All entail substantial redistribution - between the employed and the unemployed, between old and young, between men and women, between regions. But until distribution effects are explicitly addressed by a comprehensive concept, short-term arbitrariness will prevail. A debate on a new social contract would be needed, dealing with the different aspects of distributive equity and focussing on changes in the working world (catchword: information and knowledge society).
• There is curious equivocality about the consequences of societal changes brought about by greater female employment and compatibility issues - more precisely, the frequent factual incompatibility (Hochschild 2002) of family and career, about the impact of changes in work forms due to economic structural change, different time structures in society, the polarisation of working hours and the overburdening of certain occupational groups, growth in different segments of the informal economy, and links between demographic developments and the growing proportion of foreigners in the resident population. Little attention is paid to the fact that local authorities often become deficiency guarantors for the event of societal disintegration.
• On the other hand, not inconsiderable hopes are placed in the local and regional contribution to handling the employment crisis, because greater proximity to the problem seems to promise better results (Evers/Schulze-Böing 1999). This is also the thrust of European Union employment guidelines. "In Germany, however, only the beginnings of a systematic development of local employment policy are apparent with the overall goal of actually integrating local government policy fields to any degree worth mentioning" (Evers/Schulze-Böing 1999: 943). The path-dependency of developments would have to be taken much more strongly into account (Henckel/Eberling/Grabow 1999: Chapter 4). There can be no blanket solution, only solutions with differing chances of success and different exigencies. A specific balance has to be established between risks and opportunities. Or, as the former mayor of Stuttgart put it: "In this age there are no patent recipes. There are only recipes that might be right and recipes that are certainly wrong" (Rommel 1998: 5).
• Changes in the regulatory framework, particularly as they effect local authorities - notably European integration and European legislation and regulations - have been neglected.
• The current reform debate and implementation seem to be determined by short-term action and short-term activation with no overall examination of the potential for future employment. Far-reaching reforms are announced and put into effect (Hartz Concept) without a clear picture of their repercussions and without clarifying the institutional prerequisites and conditions. (2) One example is the question of responsibility for the new unemployment benefit II, i.e., the merging of unemployment assistance and social assistance. Giving local authorities full responsibility for the unemployed and for social assistance recipients would thin out another regional equalization network and severely test the (local and state government) financial equalization system.

The articles in this issue cannot hope to treat the whole spectrum of labour-market questions. They therefore concentrate on a few of the many crucial problems facing local authorities in connection with labour markets.

• Since European regulatory arrangements have still to attract adequate attention despite their massive impact at the local level, an explicit examination of the role the EU plays in local government labour-market and employment policy seems appropriate. The European level is becoming more and more important. Local authorities have to adjust to this development and react accordingly (Reissert).
• If the potential role of local authorities is to be assessed, an overall view of urban labour-market potential, constraints, and needs is required, i.e., a picture must be obtained of the entire spectrum of local government activities in local labour markets Schulze-Böing).
• The merging of unemployment assistance and social assistance has been decided. Regardless of the details, this will bring considerable changes for local authorities. However, it is not clear what consequences this move will have for local government. In other words: What form of merger would be - or would have been - best for local authorities? This involves relatively detailed and difficult questions of competence allocation, resource distribution, and personnel allocation (Hötger/Freidinger).
• Finally, an examination of certain highly dynamic subsegments of urban labour markets is offered, whose importance for cities has tended to be neglected in the local government debate. For this reason local authority action in these fields has not been much in evidence. The segments in question are highly mobile labour, ethnic economies, and the grey economy (Floeting/Henckel).

A relatively broad but selective spectrum of questions relevant for local government are therefore addressed. The hope is that these articles will contribute to stimulating the debate on the local importance of labour-market and employment policy and to assigning it the status it deserves in the discussion on the future of work.

References

(1) An EU report concludes that the growth and employment threshold in Germany is attributable one third to conditions on the labour market and two thirds to the repercussions of unification (Tenbrock in "Die Zeit" 15 August 2002).

(2) According to a study by the German Institute for Economic Research (DIW), the merging of unemployment and social assistance will make an only modest contribution to employment (300,000), and, although it will bring savings, it will also expand the public employment sector and generate negative incentives for some groups to accept employment (Steiner 2003).

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