Employment threshold

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Employment threshold in the Federal Republic of Germany

The employment threshold is an economic term and is given as the relationship between increasing gross domestic product and increasing employment . In the past, around 1% –1.5% GDP growth was necessary in Germany to increase employment by 1%.

It has to be distinguished from the unemployment threshold, since in addition to employment and unemployment there is at least the hidden reserve , so the figures are not simply opposing considerations, but actually different.

In the case of the unemployment threshold, the relationship between increasing gross domestic product and the unemployment rate is considered. As productivity increases and demand increases, economic conditions change over time. Various studies have found a negative empirical relationship between the rise in unemployment and the rise in gross domestic product ( Verdoorn's Law , Okun's Law ). With these laws, an employment threshold is postulated, according to which a certain economic growth is necessary so that unemployment does not increase, or decreases when the employment threshold is exceeded.

criticism

It should also be noted that the relationships mentioned are not undisputed facts. This is how Holger Schäfer from the Cologne Institute for Economic Research reports :

“The concept of the employment threshold, derived from Verdoorn's law, postulates a causal relationship according to which employment growth depends on economic growth. On the one hand, the theoretical foundation can hardly support this causality. On the other hand, the observable correlation between the two quantities is empirically not stable. The height of the employment threshold depends not insignificantly on which support period is used for its calculation. Ultimately, an empirical test for different periods of time cannot provide any indications for Germany as to the reasons for the current employment problems. Okun's law, which describes a connection between economic growth and unemployment, is also unsuitable for explaining unemployment. At the same time, the findings indicate that the German labor market reacts only slightly to economic stimuli. "

- Schäfer, H. (2005): Employment and Unemployment Thresholds - Interpretation and International Comparison. , in: IW Trends, Volume 32, Issue 2/2005.

literature

  • Joachim Weeber: Introduction to Economics . 2006, p. 111.

Individual evidence

  1. IW Cologne: online as PDF ( memento of the original dated February 2, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . @1@ 2Template: Webachiv / IABot / www.iwkoeln.de