Like most Western European countries, Germany stringently regulates dismissals and layoffs. Critics contend that this regulation raises the costs of employment adjustment and hence impedes employers' ability to respond to fluctuations in demand. Other German labor policies, however, most especially the availability of unemployment insurance benefits for those on short time, facilitate the adjustment of average hours per worker in lieu of layoffs. Building on earlier work, we compare the adjustment of employment, hours and inventories to demand shocks in the German and U.S.
Labor Adjustment Under Different Institutional StructuresKatharine G. Abraham and Susan N. Houseman ,
Institutional Frameworks and Labor Market Performance, ed. by Friedrich Buttler, Wolfgang Franz, Ronald Schettkat, and David Soskice, Routeledge