Huge deficit at the Federal Agency: unemployment at a record high!

Huge deficit at the Federal Agency: unemployment at a record high!

The Federal Employment Agency is confronted with deep deficits that can be attributed to increased unemployment and short-time work. According to a recent report submitted to the Bundestag's budget committee on Friday, a deficit of over 2.3 billion euros is expected for 2023. This problem is exacerbated by the federal government's current autumn forecast, which predicts unemployment at 2.94 million in 2025, which is higher than the previous estimate of 2.76 million. For 2024, the Federal Agency plans to increase its spending by 2.46 billion euros above what was originally forecast, pointing to the ongoing challenges in the labor market.

The Federal Agency's income is developing "largely according to plan", but the costs for unemployment, short-time work and insolvency benefits have risen sharply. In particular, payments for insolvency money rose by 23.5 percent to 630 million euros, which clearly shows the increase in company bankruptcies. Increased spending is also necessary for active labor market policy: from 3.82 billion to 4.36 billion euros for 2024.

Active and passive labor market policy

In the context of these developments, labor market policy is becoming increasingly important. This includes all measures that influence supply and demand on the labor market. A distinction is made between active and passive labor market policy. Active labor market policy aims to bring the unemployed, especially the long-term unemployed and older workers, back into employment. Historically, it has been designed to combat unemployment, often through programs such as employment and skills training.

On the other hand, there is passive labor market policy, which alleviates the economic consequences of unemployment through wage replacement benefits such as unemployment benefits and short-time work benefits. In times of scarce public resources and declining jobs, the effectiveness of active labor market policy is increasingly being critically questioned. Their measures often only benefit specific groups, while the personal responsibility of the unemployed is emphasized, for example by reducing wage replacement benefits.

European influences on the labor market

In addition to the legislature, the bodies responsible for labor market policy are the Federal Employment Agency, employers' associations and trade unions. The European Union is also playing a growing role, particularly through regulations on the free movement of workers. Since May 2011, the German labor market has been open to citizens from Central and Eastern European countries, which has various effects on national labor market policy. This happens against the background of varying social policy standards and traditions in the member states.

The challenges facing the Federal Employment Agency are reflected not only in the financial forecasts, but also in the need to design a contemporary and effective labor market policy. As developments show, targeted support for disadvantaged groups and adaptation to European framework conditions are essential.

The federal government's upcoming liquidity aid amounting to 11.9 billion euros by 2029 could help alleviate the financial burden on the Federal Agency and ensure critical stabilization of the labor market. However, it remains to be seen how the situation will develop given the dynamic market conditions.

For more information on the effects and mechanisms of labor market policy in Germany, take a look at the comprehensive Lexicon of Economics and the detailed analysis Authorities mirror.