Germany’s Reunification - The Political Geography of Inequality - page 157

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Germany
OECD

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FIGURE 6.4. The Evolution of Social Security Transfers in Germany. Source: OECD
Social Expenditure Statistics (2001).

economy exacerbated dependency on public transfers. Put shortly, a huge gap
emerged between the East and the West, with people entering the labor force
in the former region facing rather bleak prospects. As Mathias ( 2003 : 35-65)
depicts:

[ . . . ] the East-West divide could not be more obvious. By 1998,[...]allEastGerman
local government districts apart from the Eichfeld, a small strip of Thuringia along the
borders to Bavaria and Hesse, showed unemployment rates of at least 125 percent of
the federal average. By contrast, none of the West German local government districts
were in that category, and only about one-fifth showed rates around the federal average
[ . . . ] Between December 1991 and June 1998, unemployment in the eastern Lander
rose by 57 per cent as the number of industrial jobs declined by 65 per cent. The service
sector, despite going through a massive expansion, was clearly unable to absorb that
much labor. Indeed, between 1991 and 1996, employment in the service sector rose
only by two per cent [ . . . ]. (p. 55)

In light of these developments, it seems hardly surprising that the amount of
transfers to the East in the form of unemployment insurance was nearly double
that spent on pensions during the 1991-1998 period. The sheer magnitude
of this effort also implies that active labor market policies became hard to
fund and implement. As a result, passive income transfers became a dominant
feature of post unification labor market policies. Consistent with the political
incentives underpinning the social and political incorporation of the East, and
despite growing criticisms in the West, the federal government continued to
provide very generous unemployment benefits throughout Kohl's incumbency.
Indeed, the new social needs emerging from Reunification singled out the trend
of Germany's social policy efforts relative to other industrial democracies.
For instance, Figure 6.4 shows how Germany's social security transfers as a
percentage of GDP peaked during the period 1990-1994 at a much faster pace