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.