Labor Hoarding in Germany: The Influence of Retained Profits and Family Ownership

Jeremiah Nollenberger

The German labor market demonstrated resilience during the 2008 global financial crisis and the 2020 coronavirus crisis. While gross domestic product declined significantly in both crises, the anticipated waves of layoffs mostly did not materialize. This preservation of jobs is primarily explained by firms hoarding labor. Hoarding labor typically entails reducing employee working hours and accepting a decline in productivity. This firm behavior was encouraged by the state, for example through short-time working and credit programs. To deepen understanding of the German labor market resilience, this project adds two characteristic features of the German corporate landscape to the analysis: family ownership, also of large firms, and high levels of profit retention before the crises. Microeconometric analyses of firm-level data are used to determine the influence of these two features of the German model.