German Study Examines Employment Effects of Statutory Protection Against Dismissal

By Heiner Dribbusch

The Infratest/WSI-survey does not lend support to the view that the current statutory protection against dismissal prohibits labour market flexibility.

The number of terminations of employment remains consistently high. Furthermore, there is no indication that increasing the workforce-size threshold above which statutory protection against dismissal is granted, and thus releasing employers in small enterprises from the obligations involved, might stimulate their willingness to extend employment. From an employee's point of view; given the small number of cases where any compensation is granted and the modest amounts involved in those cases on average, one could argue in favour of a reform of the current statutory protection against dismissal to strengthen the rights of employees in the event of dismissal, thus helping more employees to keep their job.

Institute for Economic and Social Research or WSI