Institutional Analysis of the Effects of Social and Economic Reforms on Constructions of Legitimate and Informal Work in Germany
Since the Berlin Wall fell in 1989, Germany has undergone massive institutional reorganization, particularly in labor and employment. The rapid and wholesale replacement of East German institutions with Western counterparts has required socialization and social learning that could not be normalized in the one year reunification period—and has generated a hefty 900 billion euro price tag. The German-led EU Stability and Growth Pact (1997) has committed the country to liberal, free market approaches that contradict the cognitive core of its moral economy based on ordoliberal principles (which balance social order and security with a market economy). Entry into the Eurozone in 1999 has relinquished rigid control of monetary policy to the European Central Bank. At the turn of the millennium, high labor costs earned the country the moniker "Sick Man of Europe"—a title meant to describe a lack of competitiveness in the growth-focused global economy, but also captures high proportions of poverty, inequality, unemployment, and low-wage workers that continue to grow.
As part of a broader study that also examines organizational and individual levels, this paper examines how social constructions of work in institutional-level policies shape the distinctions between informal and formal work. This paper uses one setting, the skilled trades field in Germany, to ask, “How do Federal and European Union employment policies (in particular, the Hartz Reforms and European Employment Strategy) shape and reflect constructions of legitimate and informal work for EU and German policymakers?” It posits that global competition, economic shocks from the 2008-09 global recession, and EU integration and harmonization pressures have increased positive constructions of nonstandard work in the institutional policy process and introduced regulatory measures and normative guidelines that compete with deeply-rooted cognitive frameworks and cultural repertoires. It further posits that these conflicts provide the necessary, though insufficient, institutional environment to spark changes in social constructions associated with legitimate work and hence the economic morals of economic actors.
As the confusion about what is formal — or legitimate — work grows with freeing of markets, new employment arrangements, and instabilities of nation-states, understanding of societal factors that construct these distinctions will help us better understand drivers of informality and informalization, refine ways to predict the effects of informality on economies, and encourage the use of intersubjective methods to empirically examine the effects of policy change on economic actors and opportunity structures.
With the money supply no longer under their control, German policy-makers have redirected their attention to controlling unit wage costs—primarily through wage and benefits cuts. The 2003-2005 implementation of the Hartz reforms have achieved benefits cuts in part by codifying and incentivizing more variant forms of nonstandard employment, yet produced unforeseen negative consequences on work opportunity structures. Though unemployment declined significantly as a result of the reforms, many workers are underemployed and/or increasingly rely on (sometimes multiple) atypical and precarious employment like Mini-Jobs, part-time work, temporary work, and fixed-term contracts. Even apprentices in Germany's robust vocational education system lack opportunities as firms hire fewer interns and limit participation in norm-enforcing industry associations. Labor statistics from 2013 reveal nearly 1.3 million “working unemployed” while evaluations report that the Hartz reforms have left workers worse off and shifted social costs from firms to the government.
European conceptualizations of legitimate work conflict with those of Germany, affecting EU integration. The European Employment Strategy’s “flexicurity” principle (which aims to balance labor flexibility and security for both workers and employers) favors firms and investors through atypical employment that contradict national worker protection, egalitarian, and security principles. Flexicurity in the Hartz reforms derogates social status, a seminal part of the German work-life social structure, by introducing economic rights and duties that invalidate social norms and obligations. The locus of authority has gradually shifted from local and subnational governments to the EU, challenging deeply-rooted national principles of decentralization and wage autonomy. Policymakers find themselves caught between Germany’s cultural repertoires and an externally-influenced regulatory environment.
This study uses the Social Construction Framework (SCF) and Sociological Institutionalism (SI) to analyze EU and German employment policies. In both frameworks, actors and actions are culturally or cognitively constituted, and actors make decisions based on emotions and mental heuristics that emerge from societal influences. Practical reasoning in both is framed by the cognitive scripts, categories, and models provided by society through institutions, and each relies on logics of appropriateness to drive policy acceptance in a polity. SCF provides a way to analyze power asymmetries, which SI has traditionally not addressed. In addition, SCF shifts the unit of analysis from interest groups to groups of policy winners and losers regardless of how they are organized—important in the German context, where traditional organizations of interests through political parties and collective bargaining are declining. SCF falls short in theorizing the relationships between institutions and culture as well as in clearly conceptualizing “institution.” However, SCF provides five propositions that allows for in-depth analysis of 1) policy design and constitutive elements, 2) feedback and feed-forward processes and effects, 3) cognitive influences on problem definition and framing, 4) social and policy processes that affect changes in social constructions, and 5) policy changes and outcomes.
This study uses analysis of core employment legislation, case law, research reports, and political discourse to identify the benefits and burdens that these policies distribute to target groups of actors (i.e. firms, workers) and actions (i.e. work activities) in the skilled trades. It also uses semi-structured, in-depth interviews with EU and Germany policy makers to infer how policy-makers conceive and construct target groups of actors and activities in the policy process. The interview questions include prompts for direct and indirect measures of attitudes, perceptions, policy intent, and beliefs. During analysis, triangulation of these institutional-level moral indicators with discourse and policy analysis data will uncover work-related social constructions in Germany’s institutions and how they have changed since the 2002 Hartz reforms.