The labor market in eastern and western Germany 30 years after reunification

How is the East German labor market doing compared to the West German market 30 years after reunification? This question is addressed in a new Focus Paper published by the Bertelsmann Stiftung, which examines various factors relating to the labor market and contrasts them with the situation in West German states. The paper shows that there are hardly any differences in some labor market indicators: This applies, for example, to the employment rate, where the West, at 77.3%, is only 0.6 percentage points ahead of the East, at 76.7%.

The situation is similar for women's employment, although here the West still lags behind the East. There is also only a half-hour difference in the standard weekly working hours. The differences in household market income are similarly small, although East Germans are still more at risk of poverty than West Germans.

Despite this convergence, there are still significant differences between the east and west. For example, the unemployment rate in the east, at 7.2%, is two percentage points higher than the west German equivalent, and the number of job vacancies in the east is lower, while the number of people employed in the low-wage sector is higher. The differences in productivity are also striking: In the manufacturing sector, for example, gross value added per hour worked in eastern Germany was only 76.3% of the western level – with consequences for economic growth and labor market development. In addition, the subjective perception of the labor market situation in the east is also significantly more negative, probably as a consequence of years of poor labor market development and differing prospects for advancement and decline.

However, some of these differences also work in favor of the east, for example in the employment situation of women. Not only is this higher in the east than in the west, but women here also perform demanding jobs at specialist and expert level significantly more often. In addition, the gender pay gap is smaller and the range of childcare options is greater.

To improve the situation on the East German labor market, the Bertelsmann Foundation proposes various measures at the end of the paper. These include, for example, increasing the attractiveness of the region for companies and promoting networking and digitization among smaller businesses. Overall, however, the structural challenges in the east should be tackled jointly by business and politics in order to “boldly tackle the transformation.”

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