After the Fall of the Wall: Life Courses in the Transformation of East Germany 9780804779456

Citation preview

a f t e r t h e fa l l of t h e wa l l

STUDIES IN SOCIAL

INEQUALITY

editors David B. Grusky, stanford university Paula England, stanford university

editorial board Hans-Peter Blossfeld Mary C. Brinton Thomas DiPrete Michael Hout Andrew Walder Mary Waters

a f t e r t h e f a l l o f t h e wa l l Life Courses in the Transformation of East Germany

Edited by Martin Diewald, Anne Goedicke, and Karl Ulrich Mayer

s ta n f o rd u n i ve r s i t y p r e s s s ta n f o rd , c a l i f o r n i a 2006

Stanford University Press Stanford, California © 2006 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press. Printed in the United States of America on acid-free, archival-quality paper Library of Congress Cataloging-in-Publication Data After the fall of the wall : life courses in the transformation of East Germany / edited by Martin Diewald, Anne Goedicke, and Karl Ulrich Mayer. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-8047-5208-4 (cloth : alk. paper) 1. Germany (East)—Social conditions. 2. Germany (East)—Economic conditions. 3. Germany— History—Unification, 1990. I. Diewald, Martin. II. Goedicke, Anne. III. Mayer, Karl Ulrich. HN460.5.A8A348 2006 306.0943109049 — dc22

2006009399

Typeset by G&S Typesetters in 10/14 Sabon

contents

Contributors xi List of Tables and Figures Preface xvii

xiii

chapter one

After the Fall of the Wall: Living Through the Post-Socialist Transformation in East Germany 1 Karl Ulrich Mayer chapter two

Society of Departure: The German Democratic Republic Karl Ulrich Mayer

29

chapter three

A “Ready-Made State’’: The Mode of Institutional Transition in East Germany After 1989 44 Anne Goedicke chapter four

Old Assets, New Liabilities? How Did Individual Characteristics Contribute to Labor Market Success or Failure After 1989? 65 Martin Diewald, Heike Solga, Anne Goedicke chapter five

Firms and Fortune: The Consequences of Privatization and Reorganization 89 Anne Goedicke vii

viii

Contents

chapter six

Lost in Transformation? Disparities of Gender and Age Heike Trappe

116

chapter seven

The Rise of Meritocracy? Class Mobility in East Germany Before and After 1989 140 Heike Solga chapter eight

Family Formation in Times of Abrupt Social and Economic Change 170 Johannes Huinink, Michaela Kreyenfeld chapter nine

Community Lost or Freedom Gained? Changes of Social Networks After 1989 191 Martin Diewald, Jörg Lüdicke chapter ten

Spirals of Success and Failure? The Interplay of Control Beliefs and Working Lives in the Transition from Planned to Market Economy 214 Martin Diewald chapter eleven

Comparing Paths of Transition: Employment Opportunities and Earnings in East Germany and Poland During the First Ten Years of the Transformation Process 237 Martin Diewald, Bogdan W. Mach chapter twelve

The Quest for a Double Transformation: Trends of Flexibilization in the Labor Markets of East and West Germany 269 Martin Diewald

Contents c h a p t e r t h i rt e e n

Unusual Turbulences—Unexpected Continuities: Transformation Life Courses in Retrospective 293 Martin Diewald, Anne Goedicke, Karl Ulrich Mayer Appendix 319 Notes 325 References 339 Glossary 373 Index 377

ix

contributors

Martin Diewald Anne Goedicke Johannes Huinink Michaela Kreyenfeld Jörg Lüdicke Bogdan Mach Karl Ulrich Mayer Heike Solga Heike Trappe

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ta b l e s a n d f i g u r e s

Tables 4.1 4.2 5.1

5.2

5.3

6.1 6.2 6.3 6.4 6.5 7.1 7.2 7.3 7.4

Discrete-time logit models on career mobility in the first period 80 Discrete-time logit models on career mobility in the second period 82 Cox regressions on the effects of firm characteristics on direct firm shifts and exits into nonemployment from the firm of December 1989 (the former GDR firm) 107 Discrete-time logit models on the effects of historical period, firm size, and sector on direct firm shifts and exits from firms into nonemployment 110 Cox regressions on the effects of gender and job level in different sectors on direct firm shifts and exits into nonemployment from the firm of December 1989 112 Predictions for employment opportunities after unification 125 Unemployment between 1990 and 1996 129 Transitions from employment to unemployment and vice versa 130 Interaction between gender and cohort for transitions from employment to unemployment and vice versa 132 Percentage of women and men in positions of authority at the end of 1989 and in 1996 135 Class distribution in December 1989, EGP- and GDR-specific class scheme 143 Adopted Wright class scheme for the GDR and class distribution in December 1989 145 Mobility into the state-socialist upper service classes 148 Class structure by overt system loyalty 150 xiii

xiv

Tables and Figures

7.5

Class positions and distribution in December 1989 and at time of interview 154 Class mobility without job mobility 157 Reproduction and circulation in upper service class positions in the transformation process 161 Social characteristics of upper service classes in 1996/1997 164 “Elite” reproduction and circulation in comparative perspective 166 Rate regression of transition to first birth: relative risks 183 Rate regression of transition to first birth: relative risks, cohort 1971 185 Different kinds of social support before 1989 (GDR) 195 Changes in different types of relationships between the “Time Before 1989” and 1993 202 Relations to child(ren)—binary logistic regressions— odds ratios 205 Relations to siblings and other kin—multinomial logistic regressions— odds ratios 207 Relations to friends and acquaintances—multinomial logistic regressions— odds ratios 208 Relations to coworkers—binary and multinomial logistic regressions, odds ratios 211 Determinants of internal and external control beliefs in 1991/92 224 Causality beliefs in the domain of gainful employment in 1993 225 Agency beliefs in the domain of gainful employment in 1993 226 Impact of career mobility between 1993 and 1996 on causality and agency beliefs in the domain of gainful employment in 1996 230 Impact of perceived control on labor market mobility 234 Stability of occupational position between 1990/1995 and 1995/2000 in East Germany, and between 1988/1993 and 1993/1998 in Poland 248 Determinants of gross hourly earnings (Ln) in main job in the first, fifth, and tenth year of the transformation 252 Overtime rank order correlations of gross hourly earnings (Ln)

7.6 7.7 7.8 7.9 8.1 8.2 9.1 9.2 9.3 9.4 9.5 9.6 10.1 10.2a 10.2b 10.3

10.4 11.1

11.2 11.3

Tables and Figures

11.4a 11.4b 12.1 12.2 12.3 12.4 12.5 12.6

xv

in East Germany (1990 –1995/1995 –2000) and Poland (1988 – 1993/1993 –1998) 259 Determinants of individual change in gross hourly earnings (main job) in East Germany and Poland 262 Determinants of individual change in gross hourly earnings (main job) in East Germany and Poland 264 Characteristics of jobs in East and West Germany 277 Different types of job mobility in East and West Germany 280 Dynamics of unemployment and re-employment in East and West Germany 282 Move into unemployment, moves into self-employment, downward moves, and upward firm and within-firm shifts 286 Risk of unemployment, moves into self-employment, downward moves, and upward firm and within-firm shifts 288 Move into unemployment, downward moves, and upward firm shifts 290

Figures 3.1 3.2 3.3 4.1 4.2 4.3 5.1 5.2 6.1 8.1 8.2

Unemployment rates in East and West Germany by gender 55 Number of workers across sectors in East Germany 1989 – 2003 56 Employment trend in East Germany after 1989 57 Average monthly rate of mobility occurring in the first and second period 72 Comparison of mobility after unemployment and direct shifts 73 Mobility competencies and network resources accumulated before 1990 75 Survival rates in the firm of December 1989 by sectors, December 1989 –March 1996 105 Survival rates in the firm of December 1989 by size, December 1989 –March 1996 106 Transition to first stable employment corresponding to level of training 137 Transition to first birth, cohorts 1959 – 61 and 1971, KaplanMeier survival curve 178 Transitions to the second child, Kaplan-Meier survival curve 179

xvi

Tables and Figures

8.3

Transition to first marriage and interrelation between first birth and marriage, Kaplan-Meier survival curves 180 Reasons for not having any children yet, childless respondents of the cohort 1971 187 (a) Advisors of respondents in personally difficult situations; pretransitional FRG (West Germany) compared to GDR; (b) Advisors of respondents in personally difficult situations; pre-transitional FRG (West Germany) compared to GDR 197 (a) Change of earnings (gross hourly wage) after first five years of transformation; (b) Change of earnings (gross hourly wage) fifth to tenth year of transformation 257

8.4 9.1

11.1

p r e fa c e

Why a book on the transformation of East Germany seventeen years after the Berlin Wall crumbled in 1989 and sixteen years after German reunification? There are scientific, historical, and biographical reasons why we publish this book now. When the communist regimes of Central and Eastern Europe imploded, the social sciences were—with very few exceptions—taken by complete surprise. In contrast, the following transition processes were under very close scientific scrutiny from the beginning. Often empirical studies were, however, confined to the first years of transformation with a danger of getting short of breath too early. They also concentrated overwhelmingly on the former communist countries of Central and Eastern Europe without looking at East Germany. In the post-communist countries, expectations about the pace and the outcomes of the reforms differed widely, ranging from swift market liberalization and rapid economic growth to resistant mentalities and the holdover of communist power elites. For East Germany, the situation seemed much clearer and the future much brighter: instant inclusion into a well-functioning West German democracy and an affluent and socially regulated market economy as well as a thoroughly pluralized society. As students of social structure and the life course, we were already very skeptical about such expectations in the early 1990s. Although institutions can be implemented quickly as legal rules, persons need time to adjust. They must be reallocated in a reshaped social structure and realign their past lives to a new institutional order. Meanwhile, it became indeed apparent that the process of transformation and reunification would take at least a generation and not simply a few years, that the course of transformation was less smooth and less predictable, and its outcomes were more ambivalent than xvii

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Preface

many hoped. The transfer of formal institutions from West to East Germany turned out to be only a part of the story. Thus, the East German case got more interesting for comparisons with other cases of post-socialist transformation. However, although much research on the East German transformation has been carried out, with few exceptions the results are published in German only. For this reason, the East German case was excluded from the attention of many relevant scholars, especially from those doing empirical analyses. This book sets out to fill this gap for the English-speaking audience. At least in Germany, the attention for analyzing and discussing the transformation and reunification is now in a third phase. During the first years, interest was high in science as well as in politics and the general public. When it became apparent that the process was more protracted and difficult than assumed, the activities calmed down to a considerable extent in all of these spheres. It was only a few years after the millennium that attention increased again. More and more people seemed to notice that observations in East Germany are of wider interest than for the region itself and that the transformation process is not just a bit too slow. The awareness was growing that the difficulties of reform in East Germany might tell us a lot about German institutions and their ability to meet the demands of a changing world. Similarly, the study of East German life courses adds to our general understanding of how individuals, institutions, and policies contribute to coping with fast social change. Most of our knowledge stems from life course studies in rather stable societies. The pace of social change may have, however, speeded up not only in transition countries but in all modern societies, thus compelling collective and individual actors increasingly to deal with new challenges. This makes it worthwhile to study the East German example of dramatic social change. Not least the production of this book has its biographical components. If it is able to provide insights into the process of East German transformation, then this is especially due to the fact that from its start in 1990 the East German Life History Project was a joint venture of both East and West Germans. While for the West Germans among us, German unification was mostly an academic challenge, for our colleagues Gaby Bendmann, Anne Goedicke, Britta Matthes, Anja Rampolokeng, Karola Rockmann, Heike Solga, and Heike Trappe it was an existential turning point. Without them as native guides, we would have done much worse.

Preface

xix

In this book we examine the process of transformation of East Germany after the fall of the Berlin Wall in 1989 through the lens of individual life histories. In contrast to ethnographic approaches, we do not rely on a handful of biographical case studies. Our empirical material consists of a very large number of detailed, but quantifiable life histories for representative samples of the East German population. Thus, we cannot only look at individual life course dynamics, but we can also clarify distributive and structural mechanisms. The study is part of a longer and larger research program—the German Life History Study (GLHS)—which was initiated by Karl Ulrich Mayer in 1979. It has since produced nine surveys of a series of birth cohorts and collected data from more than 12,000 respondents in West and East Germany altogether. The East German Life History Study (EGLHS) was started in 1991/92 with a study of 2,323 women and men of the birth cohorts 1929 –31, 1939 – 41, 1951–53, and 1959 – 61 and supplemented by panel studies in 1993 and 1996/97 as well as the addition of the 1971 birth cohort in 1996/97. Over the years, we have become indebted to many persons, to those closely connected as well as others unconnected to the EGLHS, without whose help and support we could have never brought this project to a successful completion. We owe special gratitude to our colleagues in the East German Life History Project: Johannes Huinink, Britta Matthes, Heike Solga, Annemette Sørensen, Heike Trappe, and Sylvia Zühlke. The late Erika Brücker gave us not only precious advice on matters of survey practice—without her we would have hardly dared to carry through the momentous work of the GLHS. Ralf Künster, Beate Lichtwardt, Maria Martin, Sonja Menning, Renate Minas, Karola Rockmann, Petra Spengemann, Karin Visser, Sandra Wagner, and Sigrid Wehner were responsible for data editing and data organization. We also owe special thanks to a large number of student research assistants who helped us in the data editing process. Doris Hess of INFAS (Bonn-Bad Godesberg) had the courage to break away from survey routines and carried out the data collections with her professional staff. The collection of the data on which most of the analyses are based, and a large part of the research time and research support, were financed by the Max Planck Society for the Advancement of Science (MPG) through the Center for the Study of Sociology and the Life Course at the Max Planck Institute for Human Development in Berlin. We owe special thanks to Nina Körner and her administrative staff, Wolfgang Assmann and his computing xix

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Preface

support group, Ursula Flitner and her librarians, Gaby Bendmann, Helena Maravilla, and Anja Rampolokeng for their administrative assistance. Anja Rampolokeng edited the manuscripts, the bibliography, and the registers, and prepared them for the publisher. We owe her special thanks for putting up with our delays. Fran McGinnity, Helena Maravilla, Michael Bailey, and Daniel Koffler helped in transforming German sentences into intelligible English. Cheryl Hauser, Judith Hibbard, Kirsten Oster, and Kate Wahl from Stanford University Press stood by the book project with determination and professional support. Yale University granted Karl Ulrich Mayer an early sabbatical and thus contributed to the conclusion of the project. We dedicate this book to our families who provided a healthy balance of support and obstruction during the long period of its gestation: to Margret, Laura, Hannah, and Elias, to Martin and Maika, and to Martha, Antonia, Uljana, Roman, Stephen, and Jonathan. June 2005 Martin Diewald, Bielefeld Anne Goedicke, Duisburg-Essen Karl Ulrich Mayer, Berlin and New Haven

a f t e r t h e fa l l of t h e wa l l

chapter one

After the Fall of the Wall: Living Through the Post-Socialist Transformation in East Germany Karl Ulrich Mayer

1

introduc tion

The years of 1989 and 1990 were memorable for millions of people in East Europe. The communist parties that ruled these countries for decades, closely supervised by the leadership of the Soviet Union, lost power or had to share it with civil rights movements and newly founded political parties. Against fears in the East and West, nearly all of these regime breakdowns were peaceful, whereas some decades or even years before the same regimes did not hesitate to bring their armies and secret police into action against their own citizens. Political turbulence, economic restructuring, and ethnic conflict in some countries characterized the years following the political events of 1989 and 1990. Long-held beliefs and orientations had to be reconsidered. Traditional ways of living lost credibility. Hardly any aspect of life remained untouched by the force of events. It is this breadth and speed of changes that poses a challenge not only to historians but also to social scientists— especially those interested in institutions and their development, in stratification, and in the life course. In this book we are taking up the challenge. The fall of the Wall in Germany in 1989 signifies in many respects an exceptional case of an abrupt social change. We examine this transformation of the society of the former German Democratic Republic (GDR) through a particular lens, namely by tracing the life trajectories of East German women and men. The incorporation of former socialist East Germany into the Federal Republic of Germany (FRG) can be seen as just one of the cases of transition from socialist societies in Eastern Europe and beyond. Seen in this manner, it 1

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was a transition from a centrally planned command economy to an economy with a large private sector governed by market forces, from a one-party authoritarian rule to pluralistic democratic government, from a paternalistic welfare state with full employment to a society with much higher real incomes but also a higher risk of unemployment and unequal life chances. In regard to all of these transitions three questions can be raised. First, how did the former socialist society work not only in theory, but also in practice. Thus, what does the transformation experience tell us about the characteristics of the former GDR society? The second question addresses the process of transformation itself, its initial conditions, timing, and particular direction. Is there, for instance, a universal logic of “market penetration” (Nee 1989), of modernization, meritocracy, and accentuation of social inequalities, or did specific national conditions lead to country-specific pathways and results of transition? Do we observe a more or less continuous development over time or can we distinguish different phases and paces of development? Third, we look at the society of destination: Which society evolved in the course of the transformation, and how have the initial conditions and the course of the transition shaped the outcome? Although the East German transformation is just one case among several post-socialist transitions, it is also unique. Not only was the former GDR part of a larger Germany until 1949, but East Germans were also already before 1989 strongly oriented toward West Germany in regard to language, sense of belonging, media exposure, and family relationships. In 1989 and 1990 it became clear very rapidly that the reunification with and incorporation into the Federal Republic of Germany would be the only option to deal with the challenges of the transition. It was an option, because after some hesitation the United Kingdom, France, and the United States supported it and the dissolving Soviet Union was too weak to prohibit it. It was the only feasible option to accommodate the political will of both East and West Germans as well as to ease the threat of mass migration from the GDR to the FRG. The institutional blueprint for the future of East Germany was ready-made and very purposively imposed by West German decision makers. The particular form of the transformation was massively influenced by the liberal economic convictions of the Conservative-Liberal West German coalition government, the inclusion of the East Germans into the West German welfare state, and by many billion Euros transferred from the West German taxpayers. The expectations were high, because the East Germans did

Living Through the Post-Socialist Transformation in East Germany

3

not only have their own past as a benchmark for assessing their new fortunes but also and increasingly their West German neighbors. The East German path of transition from a planned to a market economy, from a communist party state to a parliamentary democracy differed, therefore, remarkably from the trajectories of transition in other post-communist countries in Europe. Backed by substantial financial support, the integration of the former GDR into the West German system of institutions that accompanied German unification was quick and thorough with tremendous consequences for the lives of East Germans. These consequences give rise to several questions: Is the result of the East German path of transition a catastrophe, or is it a success? And in which respects do we have one German society, or still two different German societies: a Western and an Eastern one? Did the transition of East Germany from a communist state to a part of the Federal Republic of Germany simply create a clone of West Germany, because all old institutions got abolished and the former West German institutions got imported? Or was a new society of its own formed, distinct from the old GDR and also from West Germany? What role did the West German institutions play for the outcomes we observe, and what role did the legacies of the GDR, incorporated in the life courses of the East Germans, play? The other thematic focus of this book is on the life course. We want to use the case of East Germany to unravel the complex linkages between the macro worlds of structural and institutional change and the micro worlds of individual life histories. General life course theory provides a systematic schema to link individual lives with institutional configurations and social structures in a diachronic fashion. Life courses interconnect historical time, individual age, and process time. The aggregation of the life courses of whole birth cohorts allows us to represent both the social structures of a given society at various historical points in time and the processes by which their change is mediated. In this sense, the observed life trajectories, on the one hand, reflect structural and institutional changes; on the other hand, they represent one of the causal mechanism of the transformation. Life courses do then serve both as an object and as an instrument here. By observing life course dynamics and outcomes as an object, we can describe the distribution of life chances and their changes during the post-socialist transformation. By using data on life histories as an instrument we can reconstruct institutional and system changes. Finally, in this book we are not just looking at the universal interweav-

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ing of individual lives and social change, but on the impact of a very sudden and very radical system change on life trajectories. One could expect that by restructuring the whole fabric of society the post-socialist transformation might have affected lives in an even more pronounced manner than has been demonstrated for the “Children of the Great Depression” (Elder 1974) or the “Children of the Chinese Cultural Revolution” (Zhou and Hou 1999). What degree of continuity and stability could East Germans maintain under the conditions of the “shock therapy” applied? Were the skills and competencies developed under conditions of scarcity and repression of any help in the renegotiation and reconstruction of their lives? How specific was East Germany among the former socialist countries, and how specific were the impacts of its specific way of transformation on the individual life courses? The analysis of life courses is particularly well suited for the study of post-socialist transformation because individual biographies link the society of origin and the society of destination. Individuals bring their biographical past as resources and constraints into the transition process. There are several other ways to study transformation processes, such as the post-socialist transition of the former GDR (Schluchter and Quint 2001), for example, by describing the change in institutional rules (Czada and Lehmbruch 1998, Wiesenthal 1996), the transmission of property rights (Stark 1996, Stark and Bruszt 1998), changes in mentalities and attitudes (Meulemann 1996, Trommsdorff and Kornadt 2001), or the shifts in the power structure (Staniszkis 1999, Szelényi and Szelényi 1994, Welzel 1997). In this book when we employ the lens of individual life trajectories to describe and analyze the processes and outcomes of the transformation in East Germany, we do not believe that this approach can replace the other aforementioned modes of analysis. Yet we believe that we can ask questions and add insights that are not possible otherwise. But, in turn, the study of life courses can also significantly profit from studying such a sudden system change. Most of the knowledge we have about the mechanisms underlying the linkage between life course transitions and historical change stems from the evidence of stable systems and gradual social change. This is due to the fact that, with some notable exceptions (Elder 1974, Elder and Conger 2000), almost all life courses systematically studied unfolded in the relatively stable times after World War II. Life course patterns and mechanisms regularly found in these studies easily get a status of law-like assumptions, and their embedding within these specific historical

Living Through the Post-Socialist Transformation in East Germany

5

circumstances falls into oblivion. The post-socialist transition offers a natural experiment to address the general questions of how institutional configurations and structural conditions constrain and facilitate life trajectories, and how earlier experiences and conditions affect later outcomes, because contexts changed suddenly while the persons involved remained the same. Analyzing life courses under the extreme conditions of system disruption should also allow us to come closer to answering questions about the role of agency in life courses. Are persons largely subject to forces outside their influence and control or do their personal assets, frames of decision making, mentalities, and motives significantly contribute to the directions their lives take? Sudden change should accentuate rather than diminish the effects of personal characteristics, abilities, and dispositions (Caspi and Moffitt 1993), and should therefore provide a good laboratory to assess the role of personality and agency. Thus we tie together four different but interrelated threads. We look at post-socialist transition in general and at the specific case of East Germany. We have in mind how large-scale social change is related to individual life courses in general, and we study the particular processes that link life courses to sudden system disruptions. We think, and we will hopefully demonstrate, that these multiple perspectives are fruitful for both transition research and life course research.

2

tr ansition and tr ansformation

So far we have used the terms transition and transformation interchangeably in regard to their impacts on life courses. If these two processes were in fact identical, this would result in a straightforward implicit research design. One would just compare differences between East German life courses before and after the short transition period from 1989 to 1990 as effects that could be attributed to the socialist and post-socialist society moderated by the continuities embedded in individual biographies. Unfortunately, such a research design would be far too simplistic. Besides system differences, we also have to allow for (temporary or lasting) effects that have to be attributed to the prolonged transformation process itself. In other words, it would be highly misleading to conceive of the transition from communism to Western democracy, from redistribution to market, simply as a quasi-linear process with different paces of change or as a short, conclusive transition (see also

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Burawoy and Verdery 1999: 16). Therefore, in this study, we take special care not to restrict ourselves to a static comparison before and after the transition but to pay special attention to changes people experienced during the most important years of the transformation. We find at least two historical periods (before and after mid-1992) with very different institutional and organizational conditions resulting in particular patterns of social mobility. Quantitative life history analysis is especially useful for capturing impacts that vary during the transformation process, because it traces the probability of life events along a continuous time axis since the transition. However, only comparative research allows us to separate specific consequences of political and economic transitions from other processes of social change. We, therefore, employ a comparison with Poland to observe systematic variation in the way and the timetable the transformation was engineered as well as a comparison with West Germany to be able to differentiate “transformation change” from a more common pace of social change. In the remainder of this introductory chapter we make a first pass at each of our four major themes—transition from communism, the East German case of transformation, life courses and social change, and life courses under conditions of sudden system disruption. In addition, we provide basic information of the East German Life History Study (EGLHS) and give an overview of the chapters of the book.

3

post-soc i alist tr ansitions

In this book we are interested in the macro level of the post-socialist transformation in a twofold manner. Looking in a deductive manner from the top down, we ask what influences the properties of pre- and post-transformation societies exerted on the working as well as private lives of East Germans. Looking in an inductive manner from the bottom to the top we ask what our observations about life courses tell us about the characteristics of the origin and destination societies. The answers to the first question do greatly depend on the way the transition is conceptualized and analyzed. Claus Offe (1991, 1994) viewed the transformation as a triple transition: from a bureaucratic one-party state to democratic forms of political decision making (“glasnost”), from a planned economy to capitalism (“perestroika”), and from statehoods defined by Soviet hegemonic rule to redesigned population

Living Through the Post-Socialist Transformation in East Germany

7

and territories (“European common house”). Detlev Pollack (1990) saw the main deficiency of former socialism in its reduced form of functional differentiation incapable to respond flexibly enough to economic, political, and social demands. Thus, the transition was to lead to higher degrees of flexibility and pluralistic differentiation. Eyal and his coauthors (1998) paint the transition as a project of the Central European Bildungsbürgertum composed of former nomenklatura technocrats and intellectual dissidents. In their book, Making Capitalism without Capitalists, they view the transformation primarily as a change in the dominant form of power (from sociopolitical to cultural capital) and a transfer of power between elites and thus a process of class formation. Mayer (1996a) frames the transition as a breakdown of discipline, conviction, and repression as dominant modes of control and action coordination and a changeover to material incentives as prevalent basis of action. Stark and Bruszt (1998) focus on the changes in the definition of property rights and thus on the process of privatization of firms and the rise of new hybrid forms of public and private ownership. Kornai (1992) sees the hoarding of inefficient labor forces with too egalitarian reward structures as a major shortcoming of the prior systems and thus the shedding of excess labor power as a main dimension of the transition. The integration of many socialist economies in a division of labor in production dominated by the Soviet Union and their dependency on Soviet provision of oil greatly determined not only the economic implosion of the eighties but also imposed a large-scale downsizing, restructuring of production, and loss of markets for manufacturing goods. Finally, the former socialist societies were paternalistic welfare states (Lepsius 1997), which could not survive—among other reasons—because despite the relatively low level of living standards they could not afford the many subsidies they granted to their citizens for political reasons, for example, guaranteed employment, housing, and family allowances.

4

(east) german uniqueness

East Germany reached statehood as the German Democratic Republic in 1949 as a consequence of the defeat of Nazi Germany in World War II and the establishment of occupation zones by the four Allied Powers. Reduced in territory by the Oder-Neisse line and its new Eastern border to Poland, East

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Germany covered less than one-third of the geographical area and about one-fourth of the population of postwar Germany.1 The Soviet Union quickly dispossessed the large estate owners, industrialists, and persons prominent in the Nazi regime in its military zone after 1945. It also dismantled and exported large parts of the manufacturing infrastructure of its military zone to the Soviet Union and established communist rule by enforcing a united party formed by Communists and Social Democrats. Until the construction of the Berlin Wall in 1961, about 3 million East Germans fled to West Germany. They were mostly very qualified and belonged often to younger groups of the former Bürgertum. This resulted not only in massive upward social mobility for persons from farm and working class backgrounds, enhancing some degree of political legitimacy to the system, but also resulted in a relatively homogeneous and egalitarian social structure. It also induced a lack of and yearning for bourgeois culture, a deficit in cultural distinctions that later was blamed for the low degree of attraction this socialist society could inspire (Engler 1992). Fostered by the increasing East-West confrontation, a huge Soviet military presence, and exposed to permanent propaganda from West Germany, the Communist SED party exerted tight control in all political, economic, and cultural affairs. The secret police of the Staatssicherheit employed about 91,000 full-time functionaries and more than 100,000 informants penetrating all walks of life. On the other hand, after the workers’ revolt of 1953, the SED was hesitant to exert too much pressure on workers. Many East Germans had family ties to the West and received myriad parcels of food and consumer goods in a situation of widespread shortages. This, together with the almost total prohibition of travel to the West and the uncontrollable exposure to West German radio and television in nearly all Eastern regions, created a constant sense of economic and cultural relative deprivation. A relatively stable period followed the building of the Berlin Wall, which blocked the last escape route to the West. In the early 1970s even the West German government under Chancellor Willy Brandt accepted the existence of the GDR, established diplomatic relations, and provided financial payments and credits in exchange for secure transit to West Berlin, travel permits for West Berliners to East Berlin, and exit permits for East Germans to the West. In the early 1970s, the SED massively extended the paternalistic welfare state in the GDR with work premiums and a multitude of family allowances and

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housing subsidies. From the early 1980s the economic position of the socialist system and its popular support gradually declined. East Germany sold off many of its tangible assets in order to raise badly needed foreign currency to compensate for manufacturing and consumer shortages. Ever more East Germans applied for exit visas. Unable and unwilling to allow for economic and political reforms, the German Democratic Republic “imploded” in the summer and fall of 1989 when it became apparent that the Soviet Union would not back the use of force against demonstrators. Mass exits via Hungary and Czechoslovakia and mass demonstrations forced the breakdown of the Honecker regime and led to the rise of new political parties. Government by “roundtables” and a pro-unification outcome of the March parliamentary election made any continuation of an independent, reform communist GDR impossible. Under extreme time pressure representatives of the East and West German governments negotiated the unification treaty basically on West German terms. The economic and monetary unions and the political union were put in place by July 1, 1990, and October 3, 1990, respectively (Jarausch 1995, Maier 2000). East Germany was to be “incorporated” into West Germany politically, socially, and culturally. The East German state, party apparatus, and military were dissolved. Only the establishment of the five East German Federal States (Mecklenburg Western Pomerania, Brandenburg, Saxony-Anhalt, Saxony, and Thuringia), the reconstruction of the former communist party into the Reform socialist PDS, and the inclusion of East Germans into the German parliament gave the East Germans their own voice. But given the dismal economic situation and the transfer of West German administrative, judiciary, entrepreneurial, and higher education elites, this voice was weak. And the popular call for unification soon gave way to widespread feelings of resentment to the imposed incorporation. The “shock therapy” of rapid privatization of the economy, the favorable terms of currency exchange, and the premature rise of wages that reduced the labor force by more than a third, was moderated economically but not psychologically by programs of early retirement and generous social wages. It also belongs to the uniqueness of the East German way of postsocialist transformation that its destination was not a mixture between the pre-socialist phase and a future to be defined as in most of the other transition cases. The destination was the West German institutional blueprint of the Soziale Marktwirtschaft, the Rhenisch model of capitalism (Streeck

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1997). Ironically, it was already in the 1980s that this model demonstrated the positive sides of West German federalist and corporatist consensus and coordination for the last time. It is characterized by coalition governments based on rules of proportional rather than majoritarian voting system, by power sharing between state and national governments, high skills and high wages, economic competitiveness not least in the export sector, an independent Federal Bank and a strong currency, sector-wide collective agreements, trade union codetermination and low rates of industrial conflict, and by high qualification levels due to the dual system of vocational training. This model also meant corporatist autonomy in research, health, and welfare institutions; a tightly woven net of social insurance such as unemployment insurance; sick leave and health insurance; pensions and early retirement schemes; free education, but also lower levels of women’s employment; a highly selective system of secondary and higher education. Toward the end of the 1980s it was already apparent that this West “German model” had outlived its competitive advantages and financial soundness (e.g., in regard to collective agreements, the uneven size of federalist states, the coupling of social contributions and benefits to earnings, the generosity of welfare payments, universities unfit for either mass or elite higher education, and so on). The unification process, therefore, should have been a welcomed opportunity to engage in institutional reforms. In contrast, governmental and nongovernmental decision makers insisted on an almost wholesale extension of West German laws, rules, and institutions irrespective of whether they were still worthwhile to be applied or especially helpful in the transformation process. As to the former, they consciously defended the status quo especially out of fear of the diffusion of socialist practices (like public health care centers, full women’s employment, daycare). And of the latter they were truly convinced. In the end, the very high time pressure for unification—just a couple of months—probably did not leave much scope for joint institutional reform (Schäuble 1991). To identify particularities of the East German path of societal transition and to judge results of the economic and institutional reform, our book includes comparisons with West Germany and Poland. Poland provides a reference point to assess the specific pros and cons of the East German path of transition. The case of East Germany has often been regarded as too special to be included into the lively debates on transition in Eastern and Central

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Europe. And in much other comparative research, which includes Germany as a whole, East Germany is left out.

5

life courses and soc ial ch ange

In this section we want to introduce some of the fundamental concepts of general life course theory. By the term life course sociologists denote the sequence of activities or states and events in various life domains spanning from birth to death. The life course is thus seen as the embedding of individual lives into social structures primarily and institutional settings in the form of their partaking in social positions and roles, that is, in regard to their membership in institutional orders. The sociological study of the life course, therefore, aims at mapping, describing, and explaining the distribution of persons into social positions across the lifetime. One major aspect of life courses is their internal temporal ordering, that is, the age distributions at various events or transitions, the relative duration times in given states (activities) as well as the sequencing of events and states. How do order and regularities in life courses come about? Sociologists primarily look for three mechanisms to account for the form and outcomes of life courses. The first mechanism is the degree and kind to which societies are internally differentiated into subsystems or institutional fields (Mayer and Müller 1986). This is often taken to be the most obvious and important mechanism. The second mechanism lies in the internal dynamic of individual lives in group contexts. Here, one searches for conditions of behavioral outcomes in the prior life history or in norm-guided or rationally purposive action. The third mechanism derives from the basic fact that it is not simply society on the one hand and the individual on the other that are related to each other, but aggregates of individuals in the form of populations such as birth cohorts or labor market entry cohorts (Mayer and Huinink 1990). Let us illustrate each of these three life course mechanisms in turn. How do institutions corresponding to various subsystems shape life courses? The educational system defines and regulates educational careers by its agegraded and time-scheduled sequences of classes, its school types and tracks, its institutions of vocational and professional training, and higher learning with its hierarchical and time-related sequence of courses and certificates. Labor law defines who is gainfully employed and who is unemployed or

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out of the labor force and, thus, employment trajectories. The occupational structure defines careers by conventional or institutionalized occupational activities, employment statuses and qualification groups, segmentation, and segregation. The supply of labor determines the opportunity structure and, thus, the likelihood of gaining entry into an occupational group or of change between occupations and industrial sectors. Firms provide career ladders and the boundaries for job shifts between firms and enterprises by their internal functional and hierarchical division of labor. In a similar manner, the institutions of social insurance and public welfare define the status of being ill, the duration of maternity leave, the age or employment duration until retirement, and so on. Family laws define the boundaries between being single, living in consensual unions, being married, or divorced. The second mechanism for shaping life courses focuses on life trajectories and their precedents. Descriptively, research tends to concentrate on transition or hazard rates, that is, the instantaneous rates at which a welldefined population at risk makes certain transitions, for example, into first employment, first motherhood, retirement, and so on, within given time intervals. The explanatory question for life course research then is whether certain life course outcomes are shaped not only by situational, personal, or contextual conditions, but also by experiences and resources acquired at earlier stages of the biography such as incomplete families in childhood (Grundmann 1992), prior job shifts (Mayer et al. 1999), prior episodes of unemployment (Bender et al. 2000), educational careers (Henz 1996), or vocational training and early career patterns (Hillmert 2001a, Konietzka 1999, Solga 2005). The third mechanism that one can look for in unraveling patterns in life courses has to do with the fact that it is not single individuals but populations that are allocated to, and streamlined through, the institutional fabric of society across the lifetime—for example the size of one’s cohort, as well as the preceding and succeeding cohorts, influences individuals’ opportunities way beyond individual or situational conditions (Hillmert 2001b, Ryder 1965, 1980). Similarly, the dynamics of union formation and marriage through which one’s own chances to find a partner are shaped change over time depending on the behavior of others searching at the same time (Hernes 1972, 1976). From the perspective of sociology, then, life courses are not considered

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as life histories of persons as individuals, but as patterned dynamic expressions of social structure. These dynamics operate in populations or subsets of populations, are governed intentionally or unintentionally by institutions, and are the intentional or unintentional outcomes of the behavior of actors. Patterns of life courses are, however, not only products of societies and a part and parcel of social structure but also important mechanisms for generating social structures as the aggregate outcome of individual steps throughout the life course. One transparent example of these processes is evident in the fact that the age and cohort structure of a population is the highly consequential result of a multitude of fertility behaviors and decisions. Likewise, the employment structure is the outcome of a multitude of individual employment trajectories. The relation to historical time is crucial for the sociological study of life courses because life courses are embedded in definite strands of historical periods as well as in the collective life history of families and birth cohorts. Life courses are subject not only to historical circumstances at any time but also to the cumulative or delayed effects of earlier historical times on the individual life history or the collective life history of birth cohorts (or marriage cohorts or employment entry cohorts). Social change impacts life courses in several ways. First of all, individuals are at any time in their lives exposed to forces from the larger socioeconomic context such as business cycles, legal rules and policies, and cultural climates. Technically such impacts are measured as period effects. Second, historical impacts in certain life phases are often especially consequential for later life. For instance, adverse conditions at the time when crucial decisions have to be made in regard to schooling, training, labor market entry, and family formation can impair life trajectories in the long term (Brückner and Mayer 1995, Hillmert and Mayer 2004). Such impacts can be captured as age effects when they occur relatively uniformly across historical time or as cohort effects when they differ across historical time. Finally, besides age and historical time, process time is an important element for life course outcomes. Duration of exposure to risk or opportunities can lead to cumulative advantages and disadvantages. Age can operate either as a liability or as an asset. In our context process time is of special interest in several ways. The transformation threatened the accumulation of experiences, skills, and entitlements earned during the socialist past and, as

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an opportunity, it started the clocks anew for occupational careers. Also, the transformation started a process time by itself with exposure to new risks and opportunities. Under normal conditions life courses are subject to social and economic change primarily through the prevalent institutional rules that constrain and facilitate individual decisions throughout life and through the opportunities that individuals face at important life junctions. As members of given birth cohorts, persons are exposed to positive and negative risks particular to specific historical periods. Their life chances depend on the economic circumstances of their parental families during childhood and adolescence, the opportunities for education and training, and, crucially, on the labor market situation when they enter employment and start their occupational careers. That adverse economic conditions in early adulthood can be consequential for the whole of adult life despite booming economic growth in later years (Brückner and Mayer 1987, Elder 1974) leads to the assumption that there are “sensible phases” (Blossfeld 1988) in the life course when external conditions are especially consequential. Also being a member of a very big or a very small cohort can have massive impacts on the collective later life history (Easterlin 1980, Hillmert and Mayer 2004). Applied to our case, what are the central questions suggested by life course theory? First of all, how does the historical context shape life courses, that is, how did the transformation period affect the lives of East German women and men? To what degree could they continue their prior life patterns and to what extent were their lives disrupted and steered into new directions? Second, how do institutional configurations and structural conditions constrain and facilitate life trajectories? The post-socialist transition is a “crucial experiment” in this regard because the institutional context changed suddenly while the persons involved remained the same. Third, how do experiences and conditions early in life affect later outcomes, that is, how did the experiences East German women and men had in the former GDR shape their trajectories through the transformation? To what extent could they retain the value of their economic, cultural, political, and social capital? To what extent could they convert resources accumulated in the GDR for their new starts after 1989? Who were the winners and who were the losers of the transformation? Fourth, did the transformation impact members of different generations and age groups similarly or differently? How did birth

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cohorts differ in their vulnerabilities during the transformation and in the opportunities they could make use of? Fifth, what impacts did experiences in the earlier phase of the transformation have on later outcomes? How did the transformation process itself channel the life trajectories and influence the life chances of East Germans? Sixth, how do the life courses of East Germans differ from those of West Germans who were also exposed to accelerated socioeconomic change in the 1990s? Seventh, how similar or different have the transformation experiences in the lives of women and men been? Can we identify trends toward increasing equality of opportunity, or has gender inequality remained constant or even increased?

6 life courses under conditions of sudden system ch ange Life courses are in many ways shaped by the institutional configuration of given societies. Cross-national differences of life course patterns suggest strong institutional effects that are, however, hard to prove (Mayer 1997, 2001, forthcoming). The transformations of former socialist societies entail a sudden and almost total change of the institutional setting and should therefore provide a crucial natural experiment for testing the strength of institutional mechanisms. But as we argued above, life courses are not just products of each short historical period. They are also and probably even more cumulatively shaped across age and later outcomes are contingent on earlier conditions, experiences, identities, and decisions. Persons enter periods of upheaval with their past biographies and might be increasingly resilient to change the older they are. Thus, the former “socialist lives” must be assumed to act as specific constraints and resources for the challenges imposed by the transformation. In times of a disrupting system change, people may have a special need to cling to some degree of continuity in some areas of life while they are forced to change in others. Life course theory suggests that the initial endowment with resources may be especially consequential in times of major and sudden disruptions. Glen Elder (1974) has shown in his study of the “Children of the Great Depression” how differential family assets led to a pronounced divergence in later life pathways via a mechanism of accentuation. Caspi and Moffitt (1993) argue that personality characteristics show most salience in times of

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sudden change and turbulence but are also more vulnerable to modification. Because the transition to post-communism in itself implies a change from a more egalitarian and homogeneous society to a more differentiated society with a larger degree of socioeconomic inequalities, tendencies toward interindividual differences should have been even more acerbated. The breakdown of the socialist systems interrupted the daily lives of their citizens in manifold ways. They had to deal with an unfathomable tax system, a stratified school system, and different postal codes. They had to adapt to a new legal system not only in regard to opportunities of property ownership and self-employment, but also in the realm of family law. They had to become familiar with a different set of rules for social insurance and welfare entitlements, for example, in regard to health care, housing subsidies, unemployment benefits, and pension rights. They especially valued the abolition of restrictions on choices of places of residence, occupation, places of work, and travel. But the major disruptions resulted from the breakdown of the socialist state apparatus and the command economy. In East Germany, large groups lost their employment and status as functionaries of the party, the national state apparatus, the mass organizations, and as soldiers of the border troops and (partially) of the military. The career advantages enjoyed by party members were endangered. The loss of economic integration within the COMECON division of labor in industrial production and the rapid inclusion into the West German economy exposed the low productivity of East German firms, their lacking supplier and customer networks outside the COMECON and their difficulties to suddenly adapt to different markets. This led to a massive shrinking of the labor force in agriculture and manufacturing. As a consequence, all workers faced a devaluation of their skills and many of their former status entitlements. To maintain their position or line of work, retraining became mandatory even for older workers. Suddenly, a rigidly regulated labor market with high levels of employment and employment stability was transformed into a labor market with much lower levels of protection. The rapid privatization of firms meant the loss of privileges of seniority, firm-internal positions of authority, and in many cases the immediate or delayed loss of employment. Early retirement programs allowed workers above the age of 54 to retire and to claim pensions. We can therefore expect that the impacts of the transformation on life courses

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were most pronounced in the disruption and termination of employment trajectories, occupational careers, class position, and level of social status. Accordingly most of the analyses in this book concentrate on these areas. When we ask for potential elements of continuity and stability in the area of work lives, then two aspects are likely candidates: occupational credentials and private bonds. One aspect is the educational and vocational or professional credentials East Germans had acquired before the transition. Because firm-specific skills were likely to be devalued, formal credentials were likely to gain special significance in the renegotiation of employment conditions both within existing firms to be restructured and in the case of attempts to find employment with new employers. In the case of the East German transformation, the role of credentials was strengthened by the provision of the Unification Treaty of July 1990, which formally acknowledged the continuing validity of credentials acquired in the GDR. East German society was similar to West German society in the high degree to which the training system and labor markets were occupationally structured. Therefore, we can expect that occupational and professional identities remained an important source for maintaining a sense of continuity and self-worth. Private lives were also affected but in more indirect ways. The web of social relationships underwent a massive transformation. The massive control imposed by state and party was counteracted by relatively closely knit family ties during socialist times. Would they endure or weaken under the new competitive pressures of work and consumption? Also, under the former severe conditions of scarcity social relations were an important resource in the access to goods and services. Would they be maintained after this function became much less important? Because the private sphere of family networks and friendship relationships were much less subject to institutional disjuncture, one can expect that they would be relied on in the turbulence brought about by the transformation. As we argued above, the impacts of socioeconomic change on life courses should systematically vary with age and position in the labor force. Comparably younger persons still had a long working life before them at the time of transition and were therefore more likely to invest in job changes and retraining. They can also be expected as having been more attractive for new employers and therefore better able to make use of newly arising opportunities in contrast to older workers.

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the east german life history study

Our book is also a monograph presenting the major results of the East German Life History Study. The East German Life History Study is part of the bigger research program of the German Life History Study started in the early 1980s in West Germany. To complement this study after German reunification, we conducted the East German study between 1991 and 1992 as a survey of retrospective and life course interviews with East German men and women belonging to five different birth cohorts (1929 –31, 1939 – 41, 1951–52, 1959 – 61, and 1971), supplemented by two panel waves in 1993 as well as in 1996/97. In the appendix we provide essential methodological information. This information base is supplemented by other longitudinal data from the German Socio-Economic Panel (SOEP) for the East German– West German comparison, and by data of the Polish Social Structure and Social Mobility Panel and the Polish 1971 Cohort Study for a comparison with Poland.

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overvi e w of the ch apters

In the following section we provide a short overview of the chapters in this book. Altogether it is structured into three parts. Chapters 2 and 3 provide institutional and historical background information on the former GDR and the unification process. Chapters 4 to 8 contain empirical analyses to various aspects of life courses and specific groups in the transformation: individual characteristics, the context of firms, women, elites, and class mobility as well as changes in family formation. Chapters 9 and 10 look at “softer” areas: social networks and personality dispositions—how they affected the transformation and were affected by it. Chapters 11 and 12 draw systematic empirical comparisons to West Germany and Poland, and Chapter 13 highlights a number of controversial issues and how the book helps solving or clarifying them. In Chapter 2, “Society of Departure: The German Democratic Republic,” we address the question from which kind of society the East Germans entered the process of reunification. We ask for those characteristics of the former society of the German Democratic Republic that can be assumed to have been most salient for the process of transformation and the way it was experienced. As a socialist state, the GDR was widely assumed to be

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a repressive, authoritarian system where politics pervaded both public and private lives. As a centrally planned command economy it was assumed to have rigidly controlled working lives and economic processes. As a paternalistic welfare state it was committed to gender equity, employment friendly family policies, and fairly homogeneous standards of living. On the basis of our own prior studies of life histories of GDR citizens, we check such claims and cast some doubts, among else, on the degree to which the GDR actually succeeded to control and regulate the lives of its citizens, to effectively equalize the opportunities between men and women, or to do away with invidious status distinctions. Although the GDR regime was less repressive than it appeared and aspired to and often even triggered individualistic responses as flexible adaptation to control and material shortages, the chapter nonetheless concludes that the biographical baggage East Germans carried over from their GDR past might have proven more as a liability than an asset in the transformation. Chapter 3, “A ‘Ready-Made State’: The Mode of Institutional Transition in East Germany After 1989,” provides a condensed history of the political and institutional aspects of East German transformation. Four characteristics make the East German transition path unique in comparison with other cases of post-socialist transitions. First, by push from the West and pull from the former GDR, Germany was quickly united with the Federal Republic of Germany and, with many consequences, by accession rather than merger. Second, by pressure of time, but also by conscious political intent, almost all West German institutions were introduced in or, as many Easterners saw it, imposed on the former GDR. Third, East Germany was the first socialist country to be exposed to the shock therapy of a very rapid and—in comparison— extensive process of privatization. The selling and restructuring of firms resulted in a labor force more than a third smaller and 230 billion Euros in debt. Fourth, the introduction of private ownership and free markets was complemented by massive transfer of financial supports from West to the East in the form of direct subsidies (between 80 and 150 billion Euros annually) and shared social insurance funds. As a result, East Germans enjoy higher real incomes, but also suffer from lower rates of growth and higher degrees of deprivation and alienation than their former socialist neighbors. Chapter 4, “Old Assets, New Liabilities? How Did Individual Characteristics Contribute to Labor Market Success or Failure After 1989?,” is

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the empirical centerpiece of the book. It examines, in a number of arenas, the role that resources and experiences acquired in the former GDR played as conditions for success and failure in the new labor market. This involves several aspects. One is the issue of whether differences in skills remained important or became even more significant after the transition or whether the arbitrariness of structural location in regions, firms, or sectors outweighed individual characteristics. The second issue is whether educational and occupational achievements or acquired political capital helped more for maintaining or improving one’s job situation. The third issue is whether specific biographical experiences like prior occupational mobility proved to be assets under the new circumstances. In answering these questions, at the same time the chapter informs about the relative fortunes of women in comparison to men and unravels how various labor market processes varied in intensity across the stages of the transition. Thus, we get a glimpse at open and closed “Windows of Opportunity” as well as their beneficiaries and victims. Several findings stand out: Prior credentials and qualifications, age, and gender proved to be most fateful for fortunes in the transformation labor market. High skilled, younger males did better than less skilled, older women (among the latter with the exception of semi-professionals and professionals). Prior experiences of occupational and employment shifts were surprisingly more a liability than an asset. The findings also demonstrate marked phases in the transformation process. The phase until mid-1992 was a period of very high labor turnover, but also of the opening of new opportunities, while in the period thereafter job exits were still frequent while chances for reentry were very dim. Overall, the system rupture, albeit a collective experience, still led to diverse outcomes between groups and increased rather than leveled socioeconomic inequalities. While Chapter 4 looks at the aggregate outcomes and processes, Chapter 5, “Firms and Fortune: The Consequences of Privatization and Reorganization,” focuses on one of the most important mechanisms of change, that is, the closings, privatization, and restructuring of firms. Most of what happened to East Germans after 1989 happened as a consequence of the fortunes of their work organizations and of new personnel strategies of employers. And, conversely, most of the restructuring of the East Germany economy was achieved by reconfiguring working lives, predominantly by involuntary shifts between firms and job loss. Until 1996 more than four out of ten had experienced a spell of unemployment and almost three-fourths

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of our respondents had left the place where they had worked in 1989. This applied to four out of five in agriculture but only one out of two in the public sector. Early privatization helped the remaining workers in the firms concerned to keep their employment in contrast to employees of firms that were privatized later. This kind of selection of risks also manifests itself in the fact that job loss was lower under new West German owners than under East German ones. Those East Germans who could hold onto their firms were also much more likely to be able to stay in their former occupations, while firm shifts were often accompanied by occupational changes as well. Thus, the German labor market model of occupational segmentation did not work well in the context of transformation. Under the perspective of firmbound labor markets, the East German transformation led to cumulative processes of exclusion brought about by reshuffling and shedding of labor. In regard to the periodization of the transformation the chapter corroborates the distinction between an early phase until mid-1992 with predominantly collective risks and strong sectoral dynamics, and a period after mid-1992 where labor market fortunes diverged on the one hand between those who were pushed out and those who remained, but also within the group of those still in work because the economic situation of firms and their personnel strategies diversified. Chapter 6, “Lost in Transformation? Disparities of Gender and Age,” focuses on the relative fortunes of women in the transformation: How are gender and life course stage interlinked with respect to employment outcomes during the transformation of East Germany? Was there a generation of women who were able to realize employment outcomes comparable to men? If so, why was this the case for a particular generation but not for others? These questions touch on the issue of the significance of age for employment prospects in a rapidly changing occupational structure. Age commonly signals employment experience, but it might turn into a liability if the related knowledge is devalued as a result of changing economic conditions. Two employment outcomes are investigated, one of defeat and one of success: becoming and remaining unemployed and obtaining and sustaining positions of authority or stable employment positions. Over the course of the 1990s a shift occurred in the gender regime in East Germany and thus a partial convergence toward the gendered arrangement prevalent in West Germany, with some evidence of continuing differences between both parts of the country. This shift involved a move from a dual-earner/state-carer

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society toward a dual-earner/female part-time homemaker arrangement, in which men are employed full time while their partners hold part-time jobs and retain the majority of care-giving responsibilities. This shift resulted primarily from some voluntary reduction in East German women’s labor supply, compounded by severe demand-side constraints that hit women especially hard. However, in this macro-level account of social change, the degree to which different generations contributed to that development remains hidden. Was there a change across cohorts toward a more traditional division of paid and unpaid work within families? Were women with poor employment prospects in each cohort affected to a similar extent, resulting in an overall employment disadvantage for women? Or did both younger and older women bear a disproportionate disadvantage? With respect to transitions to unemployment, only men of the middle cohorts were in a better position compared to older and younger men and to women of all cohorts. In the process of downsizing and firm closures, “middle-aged” men were preferred by employers. This refers particularly to men with family responsibilities, whereas those commitments had the opposite impact on women’s employment prospects. In this regard, gender inequality was even greater for the “middle generation” than for the others. Although unemployment rates were highest among members of the youngest and the oldest cohorts, gender differences were less noticeable. Among men, reentering employment after periods of unemployment was hardly affected by their age but among women, leaving unemployment was more likely and thus unemployment episodes were shorter the younger they were. Reentering employment after periods of unemployment depends to a much greater extent on age for women than for men. Therefore, the relative chances of women to escape unemployment were worse in the oldest cohort, followed by the “middle generation,” and best in the youngest cohort. In that sense, the restructuring of the East German labor market is a good illustration of a situation where age and gender inequality (and possibly age and gender discrimination) are not simply additive but tend to be mutually reinforcing. With respect to holding and keeping positions of authority, evidence shows that women born around 1952 were somewhat more successful than older or younger women compared to men of their age. Women of the youngest cohort needed slightly more time than men to find a stable job that corresponded to the level of their qualifications. Overall, success and failure did not universally follow the same gendered pattern across cohorts. Neverthe-

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less, it is safe to say that women of the oldest cohort were particularly disadvantaged as indicated by their exceptionally long unemployment episodes, their high incidence in employment positions in the secondary labor market, and their low presence in middle-level leading positions. This is even more remarkable because men of this cohort lost employment opportunities and positions of power and prestige disproportionately as well. Chapter 7, “The Rise of Meritocracy? Class Mobility in East Germany Before and After 1989,” examines the class structure and class mobility in East Germany before and after 1989, paying special attention to the changing role of political capital. Two analytical perspectives are followed: social mobility as a process of transformation of the class structure and the life course as a process of continuity or discontinuity in class membership. The GDR started with some opening of the class structure and ended with a quite closed mobility regime. The gap between the top and the bottom increased over the generations as the social structure became politically entrenched. Mobility chances were not only a matter of origin, but also a matter of a second selection criterion “political loyalty.” Access to the upper service class was increasingly restricted to university graduates and educational opportunities in general were differentially distributed according to social origin and political loyalty. In this sense, meritocratic allocation in the GDR was ideology, but not practice. For the time after 1989 our empirical findings show that the rate of class reproduction stayed rather high. Class restructuring was mainly brought about by massive early retirement, and an enormous extent of unemployment (stratified by age, gender, and class position in 1989), as well as an increasing gender difference in terms of access to privileged class positions. These are all well-known patterns of job competition in market societies. What is special in the East German context is their astounding extent. The answer to the question raised in the chapter title “The Rise of the Meritocracy?” is affirmative. Political loyalty lost its advantage. The political segmentation of the class structure was replaced by more meritocratic recruitment patterns. This rise of meritocracy has, however, the slightly bitter taste that—among else—it “transferred” the blocked access to upper service class positions for the younger generation before 1990 into handicaps for the job competition after unification. While disruptions in working lives is indisputably the life domain where the system transformation created the biggest turbulences, impacts on family lives were also considerable. The consequences for marriage and fertility

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behavior in East Germany after unification were drastic and encompassing. Age-specific marriage and fertility rates dropped at all ages in 1991 and the mean age at marriage and family formation rose. This resulted in an unprecedented decline in total fertility and marriage rates. They have only very gradually recuperated since. Chapter 8, “Family Formation in Times of Abrupt Social and Economic Change,” compares the fertility patterns of East German women born in 1971 with those born 1959 – 61. It provides descriptive statistics on first birth, second birth, and first marriage. To highlight just one finding, at age 26 only about 40 percent of the postunification cohort (the 1971 cohort) had a first child, while for the preunification cohorts (1959 – 61 cohorts) this applied to roughly 85 percent then. This shows how drastically changes on the macro level manifest themselves in individual life course patterns. Beyond that, the chapter investigates the extent to which the employment characteristics of both women and their partners influenced first births in East Germany. Two potential explanations for the postponement of fertility are tested: “women’s work commitments” and “economic uncertainties.” Being faced with a more competitive labor market and greater career options, particularly highly educated women should have been inclined to postpone parenthood. Unemployment and other forms of employment uncertainty should lead to a postponement of family formation. Two major results stand out. First, the increase in educational participation and the stronger incompatibility of child rearing and education explains a good part of the postponement of first birth after unification. Second, against expectations, employment uncertainties do not under all circumstances contribute to delayed fertility. On the contrary, unemployed women display significantly higher first birth risks than employed women. A further question is how the East German behavior can be understood in the context of fertility in transition countries. The unprecedented drop in annual birth rates dominated the popular debate. Almost fifteen years after unification, it is clear that this fertility decline was primarily due to the postponement of first birth to higher ages. However, a high age at first birth is not necessarily an indication of a particular crisis-related behavior. East Germans are still younger at first parenthood compared to their counterparts in West Germany. In 2002, roughly 75 percent of the East but only 60 percent of the West German women of the 1971 cohort had a first child. There are widespread beliefs that social networks in the GDR networks were built less on choice and achievement and more on close-knit commu-

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nities in family and the workplace. Moreover, social relations in a socialist society may have been precious as a resource to obtain scarce goods and services and as attempts to maintain some degree of uncontrolled private sphere. If so, the East German transformation should have led to extraordinary changes in the density and character of such networks. Chapter 9, “Community Lost or Freedom Gained? Changes of Social Networks After 1989,” investigates the patterns of social networks before 1989 and after the first periods of transformation in order to assess the impacts of both system change and transformation. The core family especially proved to be a haven of stability in an unstable environment and, moreover, a most reliable buffer against individual strains and losses. In contrast, the formerly close social networks centered on the workplace did not survive. In most of this book individuals enter the process of transformation as a bundle of both biographical and concurrent characteristics as well as as members of social categories and networks. Yet, as agents and purposive makers of their fortunes in challenging times, they do not come to surface directly. In Chapter 10, “Spirals of Success and Failure? The Interplay of Control Beliefs and Working Lives in the Transition from Planned to Market Economy,” we are taking up this alternative perspective. The specific question addressed here is whether the situation after 1989 opened up new avenues for creating and mobilizing effort and self-initiative. The chapter introduces the concept of control beliefs in the contexts of working lives and abrupt system change and investigates on the basis of three waves of longitudinal data whether personality dispositions such as control and efficacy beliefs differentiated actors in their coping with new and adverse conditions and whether massive changes in social context and one’s individual life inversely changed personality dispositions. The results presented show that the most frequent working life transitions—moves into unemployment and downward mobility—were not driven through perceived control during the whole period under observation from the very beginning of the transformation until 1996. However, to achieve the comparatively infrequent upward moves, East Germans could profit from internal control beliefs. This only limited impact of control beliefs is quite astonishing and against all expectations for a situation of abrupt social change. Structural forces seem to have been overwhelming for the fate of most East German employees. Inversely, perceived control was strongly influenced by positive and negative employment and work experiences. Thus, the notion of a “mutual interplay” of

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individual development and the life course may be true, but not necessarily and always in the sense of reciprocal relationships. Influences of the life course on personality were stronger than the reverse. And, at least in our case, the effects of personality were not amplified and accentuated under conditions of massive external change but rather even institutions under stress and in transformation could through the conditioning of life course outcomes shape personalities. Accentuation occurred, that is, but rather as an outcome than as a cause. In the case of Germany, the result of either transition or transformation seemed to be highly fixed by political assent of the East Germans, the joint unification treaty, the political will of the Kohl government and massive financial transfers (Chapter 3) as well as a superimposition of West German cadres (Chapter 7). However, such a view neglects that in the late 1980s and 1990s the West German economy and society were a far cry from being in stable equilibriums. Like in other advanced countries, pressures to adapt to new European and global competitive conditions, declining revenues to finance the welfare state, and challenges by the new information and biomedical technologies had been building up for some time. Unification could have been a welcome opportunity to upgrade the institutional framework in West and East Germany at the same time, and also to transfer more modern institutions, like the organization of community medicine, health insurance, childcare, and the employment participation of women from the East to the West. This opportunity was not realized, and it seems that unification slowed down rather than accelerated the reforms necessary for economic competitiveness and viable social insurance. In such a situation there was even the chance that East Germany would, through radical privatization, labor shedding, and renewal of production, infrastructure, and services, surpass West Germany and become the more modern part of Germany. The metaphor of transition suggests a path from a socialist economy, polity, and society to a fixed and known destination: capitalism, democracy, and stratified pluralism. The metaphor of transformation leaves open whether there is one or multiple destinations and whether the character of the transformation system itself will affect the outcome (Burawoy and Verdery 1999: Fn. 1). In Chapter 11, “Comparing Paths of Transition: Employment Opportunities and Earnings in East Germany and Poland During the First Ten Years of the Transformation Process,” we use comparisons to Poland for three purposes: to document how exceptional the East Ger-

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man rules of transformation were in comparison to other countries in East Central Europe, to show whether these exceptional rules led to exceptional results, and in doing this, to pinpoint the specific successes and failures of the East German case. The development of earnings is at the heart of how countries move away from state-controlled redistribution toward markettype exchange, because the remuneration rules address questions of market autonomy, bargaining power of old and new interest groups, and labor market institutions generating different patterns of social inequalities. We find some striking commonalities between the two cases despite diverging institutional preconditions and strategies of transition. In both East Germany and Poland, education and training emerge as predominant determinants of individual earnings. Labor force experience based on specific rather than general skills was devalued in both countries. Furthermore, the earnings distance between jobs with high skill levels (managers and professionals in East Germany, managers in Poland) and skilled work widens. Third, contrary to the market transition theory put forth by Nee (1989), we found very severe relative losses of earnings opportunities for entrepreneurs and the self-employed in both countries over the first transition years. Besides these commonalities, important differences between the two countries come to surface. First, in Poland a successful “owner capitalism” evolved to some degree during the second five-year period under observation, while East German entrepreneurs even lost ground against strong competition from West German trade, services, and industrial “conquerors.” Second, in East Germany education and training only pay off in jobs with matching high skills, whereas in Poland education and training seem to pay off across the whole range of the occupational structure. Which of the two pathways was more successful or more painful? Seen from the angle of individual welfare, both pathways brought about mixed blessings. In East Germany the reunification provided a level of material improvements unknown in Poland and in any other transition country. However, the first years of transformation led to an amount of discontinuities in employment careers and even exclusion from the labor market, which not only considerably exceeded those found in Poland, but also tended to have become stable rather than temporary. In Poland the transition shock consisted of a highly increased risk of considerable real earnings losses in the first phase of transformation. At the same time, occupational stability was higher there. For later years, the Polish development toward market economy can be considered a success story. Backed by solid

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economic growth, unemployment risks were reduced, broad segments of the population experienced substantial upward mobility in terms of real wages, and general opportunities for successful self-employment improved. Chapter 12, “The Quest for a Double Transformation: Trends of Flexibilization in the Labor Markets of East and West Germany,” takes up the crucial area of labor market regulation and labor market dynamics to address the question whether the two parts of Germany were developing into the same direction and with the same pace of change during the 1990s. In particular, the empirical analyses focus on job shift patterns, unemployment, and the implementation of internal as well as external flexibility measures. As to the major findings, the results rather support the view of a simple export of outdated West German regulations to the East, leading in both East and West Germany to low dynamics, and a sharp division between insiders and outsiders in the labor market. In the years observed, between 1993 and 2002, West Germany exhibited more downward moves—an erosion of within-firm promotion entitlements and of seniority rules. However, this rise in external flexibility was rewarded neither by more upward mobility within the firm, nor by opening up job shifts between firms or creating new jobs. Thus, East Germany does not seem to follow a road different than that of West Germany. The pace of flexibilization is about the same in most respects in both parts of Germany, but due to the more severe initial situation in East Germany, the signs of a labor market catastrophe are more visible there, as exemplified in the double amount of unemployment. More important, there is no trend to show that East Germany will reach, at least, the still problematic West German level of growth and employment. Rather, the gap even widens. In other words: the somewhat lesser regulation in the East does not help to avoid unemployment, and there is also no trend of improving the low upward mobility.

chapter two

Society of Departure: The German Democratic Republic Karl Ulrich Mayer

What was the society like from which the East Germans entered their new lives in reunified Germany? What kind of biographies did they bring with them? In this chapter we set the stage for our investigation of life courses during the transformation of East Germany. We reconstruct the main features of the German Democratic Republic by highlighting some of the issues in the controversial debate about its societal character and by calling on findings from our own empirical studies. These studies are based on retrospective life history data of four birth cohorts born between 1929 and 1961 (Huinink et al. 1995, Solga 1995a, Trappe 1995). The following questions serve us as overall guidelines: What was the relationship between the state of the GDR and its citizens? To what extent did the GDR reach its goal of building a classless and egalitarian society? To what degree did this political regime succeed in controlling and regulating the lives of its citizens?1 However, we first need to address the question whether there is any good reason to still concern oneself with the society of the former GDR. Was there anything surprising, after all, about the rapidity and thoroughness with which that society disappeared? Is it not a waste of time after the downfall of the GDR to study the clearly failed attempt of the building of a society, which was initially established by the external force of the Soviet Union and could survive only as long as Soviet troops guaranteed its stability? We offer some arguments to the contrary. The collapse of the GDR as a state does not preclude lasting effects on its former citizens, and indeed their life courses should be thought of as a decisive starting condition of the transformation and the reunification of Germany. The society of the GDR, far from being merely an object of con29

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cern only to historians, is very much a living part of contemporary German society. It would therefore be premature to regard the East German transformation solely from the point of view of the target society of the West German Federal Republic. Though little remains of the GDR’s institutional framework (Lehmbruch 1993a, Lepsius 1994), its social composition, the ways in which people lived, and what they believed in, endure after the reunification and continue to influence life in former East German territory. The builtup social capital available to the new citizens of the Federal Republic was either a resource or a handicap for the transition. The reconstruction of the GDR society, clearly, is important for the understanding of the reunification process as a whole. Let us take, for example, the widespread image of East Germany as an authoritarian and repressive society. Certainly, the conditions of its formation and its resulting history lend themselves to the conclusion that the GDR had only limited chances for successful political self-organization (Bassistow 1994). But for the assessment of its relative degree of autonomy, it is important to ask whether the GDR was not more than a mere imitation of the Soviet model of society. Was it totalitarian and dictatorial, or authoritarian, or a paternalistic welfare state, or some synthesis of these societal forms? The answer to this question deeply affects the way West Germans view today’s East Germans and how the latter see themselves. To paint a realistic picture of the GDR one must find a balance between two seemingly opposing premises: first, that the GDR was a successful collectivist dictatorship that was able to completely regulate the lives of its citizens and to seal them off hermetically from the outside world and, second, that the GDR populace obstinately maintained an autonomy of self-regulated lives despite the party’s and state’s massive efforts to the opposite.

1 wh at ki nd of a soc iet y was the gdr? consensus and controversy In this section we summarize how the GDR as a society is predominantly seen, but also where interpretations tend to diverge2 (cf. Belwe 1989, Kocka 1994a, 1994b, Lepsius 1994, Zapf 1994). As far as the system and structural characteristics of the GDR are concerned, academic observers tend to agree widely about the following elements: The GDR society was primarily a repressive political order, manipulated and regulated in almost all its

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facets. It was a system with goals and directions imposed from above and in this sense a planned society (Meuschel 1992). As a social system it was characterized by a low degree of institutional differentiation in comparison to Western societies, and in this sense was less modern (Pollack 1990). At the same time, it is seen as a socially relatively undifferentiated, homogeneous, and classless society with a very small reigning elite. This elite is perceived as not only politically powerful, but also socioeconomically privileged and eager to preserve privileges for its offspring. In order to ensure its own security against subversion by both internal and external enemies, the East German regime set up a vast and paranoid apparatus of oppression. Its efforts included broad and intrusive surveillance mechanisms, complete control of the media, and information (with the exception of exposure to Western television and radio stations that the regime could not prevent). The regime was further able to repress civil society through the control of all associations (with partial exceptions within the Protestant and Catholic churches). Additionally, the East German judicial system was subject to strict political guidelines, and political loyalty for many citizens became a prerequisite or at least important asset for professional advancement. The regime was thus able to politicize professional careers that frequently led to the unwanted consequence of crippling technical and professional expertise. The atmosphere of forced conformity weakened efficiency and performance in all aspects of society (Grünert and Lutz 1994). The GDR was also a society heavily centered around labor (Kohli 1994, Kornai 1980). Its citizens had a right to employment but also a duty to work. The GDR had very high employment rates for both men and women coupled with long working hours and many additional work obligations disguised within the framework of campaigns and mandatory participation in political events and mass organizations. Companies served dual functions, providing both the means of reaching production goals as well as providing places of leisure and social activities (including the illegal distribution of goods); the workplace of the GDR was simultaneously a welfare institution. Economic management was weakened by central planning and external intervention into firms. Company management was likewise weakened by the glorification of the working class and the regime’s acute lasting fear of open industrial conflict mainly brought about by the workers’ uprising of June 17, 1953. The deficits of the commodity and financial markets forced a maximum mobilization of workers and company hoarding of personnel. It

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is also widely believed that the rigid labor force planning, small income differences between firms, and the fact that housing was often provided by the employing firm greatly hindered intercompany mobility. It is widely accepted that women in the GDR—at least in comparison with the old Federal Republic—reached a high standard of equality and independence. Women were able to achieve this high standard through policies supporting the combination of family and employment. GDR family policy included entitlements to stop the declining birth rate favoring early marriage and earlier parenthood. However, this policy arguably destabilized the East German family by inducing high rates of divorce and a rapid rise in illegitimate births. Social policy with its manifold safeguards and subsidies characterized the East German paternalistic welfare state. Furthermore, scholars share a consensus about the reasons for the economic crisis of the GDR in the 1980s. Aside from the technological backlog and the dependence on the Soviet Union for raw materials (Pirker et al. 1995), the crisis was triggered by an increasing discrepancy between economic performance and consumption. The GDR was living beyond its means and was ruined by an excessive amount of welfare entitlements. GDR leaders did not dare to downscale these entitlements for fear of losing popular support when political and ideological support had already eroded. Since the 1960s, academic controversies over the predominant character of GDR society did not primarily concentrate on conditions of daily life and ways of living. Instead, the major focus were arguments about the proper classification of the GDR as a whole: whether it should be seen as a totalitarian dictatorship, a special case of the development of real existing socialism on the way to a modern industrial society, or an authoritarian welfare state. This controversy flared up anew after reunification. A major interpretive fault line concerns the primary means by which East Germans were integrated into the GDR social order: by conscious inner agreement and conviction, by physical force and repression, by habitually internalized discipline and conformity with authority structures, or by material incentives (Mayer 1994a, b). Conversely, appreciable differences exist over the correct interpretation of certain individual patterns of conduct accompanying integration into the social order. Specifically, should such conduct be understood as concurrent conformity and arranged collaboration, or as resignation, inner reserve, disappointment, alienation, and retreating privately? Did the GDR

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lose the consent of its people because they agreed less and less with the goals of the system, or because the system was incapable of reaching those goals?

2

findings from our gdr life history study

What light does empirical research shed on both the points of consensus and the points of divergence in the interpretation of the former GDR society? How successful was the GDR in achieving socialist goals? Do we find evidence for individual autonomy and self-regulation? Where could one detect processes of self-organization, whether intentional or not? To which extent was the GDR a “normal” modern industrial society, and where did presocialist patterns survive? We concentrate on five areas to shed light on these questions: class structure, labor market allocation, gender equity, social networks, and status distinctions. 2.1

Did the GDR Become a Classless Society?

The GDR was undeniably successful in reaching its own goals, insofar as it indeed, although by force, radically altered the preexisting structures of social class and property ownership, and created new classes through massive measures of advancement and exclusion (Solga 1995a, 1995b). In a remarkable example of a successful social revolution, it is also apparent that more recent generations of women were nearly as able as men to achieve positions in middle and upper ranks of the occupational hierarchy. Above all, the abolition of the old classes was achieved through the collective downward mobility of former bourgeois groups and through mass exodus before the building of the Wall, consequently producing not only temporary stability but also the ultimate and lasting instability. The GDR was not able to compensate the loss of skills of those migrating to West Germany despite great efforts to do so. Nonetheless, the GDR was not a classless society. It just became a society with a different class structure. In contradiction to its ideology, a ruling class, that is, the party elite, not only held control over social, political, and economic assets but could also increasingly recruit from its own ranks and close itself off from the rest of society. A new service class was able to establish itself in the succeeding generations through occupational and professional qualification. Especially in the cohorts born around 1930 and

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1940, upward mobility from the ranks of the working class was widespread but sharply declined later. Despite class restrictions superimposed through political selection criteria, the GDR also had the appearance of a relatively modern industrial society. For instance, the proportion of the labor force in agriculture decreased rapidly, the proportion of workers in the administration and service industries increased, and formal qualifications played a significant role in occupational placement. Our findings support a picture of the GDR as a society with class contrasts whose mechanisms for the reproduction of class strata differ from those of Western societies, especially in the demands for political loyalty. Both the particular significance of class positions, as well as the additional factor of political loyalty, intensified even more noticeably for the younger generations. 2.2 State Control and Individual Choice: Education and Labor Markets The educational system was thoroughly reorganized and ideologically controlled by the East German regime, and the distribution of educational attainments as well as occupational opportunities were closely regulated (Huinink et al. 1995). On condition of political conformity it opened up a variety of educational opportunities and provided chances for occupational advancement especially for women. The inequality in training opportunities between women and men was almost completely abolished. The regime was able to reduce the number of unskilled workers to a minimal proportion that was significantly below that in West Germany. Despite relatively rigid regulations and quota allocations, the system not only afforded widespread opportunities for individual advancement through further training but actively encouraged workers to make use of them. The GDR achieved the goal of making almost complete use of the potential of employed persons at first through force and pressure and then through the setting of norms and social policies. Did the GDR succeed in its rigid manner of labor force allocation? One criterion to evaluate is the resulting fit between initial occupational training and actual occupation. Often in the GDR one’s first job placement, although strongly predefined by occupational training, did not correspond to one’s own initial occupational aspirations. Therefore, the level of horizontal job shifts not only was high but also increasing over time. East Germans engaged

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in countermoves of additional training and job mobility in order to escape the traps of imposed initial placement. This supports the view that the actual system of tight labor market control frequently led to placements unsatisfactory to the individuals concerned. In addition, the small remainder of unqualified labor and the larger remainder of unskilled and semiskilled work as well as the ever-present tendencies of occupational dequalification reflect the limits of planned allocation of labor. The marked discrepancies of the occupational pathways between different birth cohorts demonstrate these limits as well. We find, for example, an extraordinary amount of qualification gains and occupational career ascent for those born around 1930, as against contrasting evidence for mobility blockades and dequalifying processes for those born around 1960. In particular, we were able to verify that managerial positions held by the older generation during the period of reconstruction and the period of the buildup of collective enterprises (Kombinate) were closed off for the younger generation (Mayer and Solga 1994). The pronounced stagnation and even reversal in the expansion of upper secondary and higher education (Lenhardt and Stock 1997) and corresponding career prospects clearly signaled a downturn in the opportunity structure in the last decades of the GDR. On the other hand, the fact that the proportion of under- and overqualified workers did not increase with the length of working lives appears to demonstrate that policies of labor force allocation did work to some extent. But this outcome at the same time manifests the narrow limits for individuals to choose their occupational destinies and to move away from externally influenced placements. This is not least reflected in our finding that opportunities for career advancements clearly depended on party membership and occurred, surprisingly, on all levels of the occupational hierarchy. Men (but not women) could make careers based on political allegiance without any or much further training. This in the end induced political conformism and undermined selection criteria based on merit. Upward mobility during working lives did not compensate for disadvantages of social origin and thus followed mechanisms of “normal” social reproduction. This glaringly contradicted the publicly professed goals of an egalitarian society. 2.3

Gender Equity in the GDR: Marriage, Family, and Employment

Even though the family in the GDR functioned as an area of private retreat from ever-present party and state control, there can be no doubt that the

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party objectives and state family and social policies did have a strong influence on family decisions and living conditions (Huinink and Wagner 1995, Sørensen and Trappe 1995a, Trappe 1995). The regime, from the 1960s at the latest, increasingly employed combinations of persuasion and material incentives instead of the older methods of discipline and force. On the whole, the regime became less interested in directly steering the programmatic goal of a new “socialist family.” Family policies were rather brought in line with the paramount targets of economic and population policy. Tying material incentives to desired behaviors led to a standardization of life courses in the family arena unequaled in any other area of life, marking a clear success for the regime. The regime was able to manufacture a high degree of congruence between individual orientations and sociopolitical objectives. We should remember that the influences between the state and the young men and women in the process of family formation cut two ways. The individuals themselves certainly used welfare incentives to realize their own objectives. Young men and women would get married and have children earlier, for example, in order to live together in the same place or work in the same city. Furthermore, the incentive system found clear limits in individual preferences and partly also brought about unintentional results. Although the trend toward decreasing birth rates in the GDR could be stopped and even be reversed, the number of children per family did not increase despite early marriages and early births. The ideal vision of a family with two children developed over time as a social norm in conflict with the official objectives of the regime’s family policies. The GDR regime certainly did not intend for the proportion of illegitimate births and the number of divorces to increase, but in fact these tendencies were induced by special benefits for single mothers, such as their ability to maintain themselves through employment guarantees as well as their privileged access to housing. Like in West Germany, the trends toward increased illegitimacy and divorce were accompanied by a probably even higher degree of tolerance for nontraditional family arrangements. But unlike in West Germany, these trends did not imply fundamental change in family values, but rather coexisted with more traditional attitudes toward partnership and family. It is obvious that in family policies, the GDR to a large extent relied on an already existing materialist orientation of its citizens and perhaps even promoted an appropriate social character. Behavioral control via material

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incentives may have been more efficient than the exclusive use of repression and force, particularly because general conditions of scarcity in the GDR surely promoted a constant concern with a decent standard of living. On the other hand, our analyses show clearly that the family could obstinately maintain its private sphere of life against permanent attempts to make it subject to political intrusion, and families made instrumental use of welfare entitlements within a context of solid emotional bonds. The political penetration of the private life sphere also included extensive measures aiming at gender equality. It meant, among other things, legal equity, the establishment of equal training qualifications, full employment, the consideration of women when filling a management position, minimizing the consequences and costs of employment interruptions due to births and childcare, extensive childcare services, the preferential allocation of adequate housing for families with children, and finally, the establishment of an egalitarian culture in regard to official norms, values, and role models. These measures were not, however, extensively put in place before the 1970s. The leaders of the GDR were actually able to realize their own objectives in this field to a large extent and one could assume that there was general consensus regarding this social policy among the population. These measures did not, however, lead to complete equal opportunity for men and women. Deficits can be shown in a clearly lower presence of East German women in the professions (in contrast to their disproportionately high presence in semi-professions) and higher management. East German women did not have equally good career prospects despite all the promotion measures, had higher risks of descending the job ladder, a smaller “reward” for system loyalty in view of their job commitment, and, above all, lower salaries for the same services rendered, even if they were equally qualified. A gender-specific segregation according to occupation definitely contributed to this discrepancy. The limits to establishing full equality between men and women can be traced not least to the survival of traditional patriarchal attitudes and behaviors in the private area. For example, women accepted a descent in the job ladder after the birth of a child in order to reduce their job load, because they still had to carry the main burden of housework and childcare in the division of labor within the households (Meyer and Schulze 1992). This led to a frequent use of “downtime” by women that companies had to anticipate and in turn negatively affected women’s chances for career advancement.

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2.4

Personal Networks: “Collectives,” “Vitamin B,” or “Niches”?

Assumptions about informal relationships, their extent, intensity, and characteristics play a crucial role in the interpretation of the East German social structure (Diewald 1995). They are seen in many ways as a buffer against the unreasonable demands and deplorable state of affairs of the formal structures: as space to retreat to and to build up informal associations of trust, as a means to establish counter public spheres, and as channels for exchanging goods and services that were hard to come by. Many observers apparently confused emotional and instrumental rationales in most relationships. This gives cause to be cautious and not to exaggerate and even to mistake these as “traditional” (Srubar 1991). The strong and meaningful personal relationships and mutual support, particularly within the close-knit family (including parents and in-laws) and within the workplace, neither fit the interpretative schema of the privatized retreat from a repressive and public sphere filled with mistrust nor the schema of primarily instrumental exchange relationships to compensate for the lack of markets. Undoubtedly the high subjective salience of “work collectives” for the individual reflects the frequent spread and larger significance of traditional, but symbolically elevated forms of group-like cooperation at work in the socialist economy as well as job security, the reality of longer daily work hours, and the absence of competition and a high pressure to perform. The close-knit as well as instrumentally important family relationships between generations reflect further the large part of time spent in families with children, the narrow generation gap due to early ages at birth, but also the lack of alternative kinds of social gatherings. That the instrumental exchange relationships carry special weight in an economy plagued with shortages does not rule out that relationships also showed the marked emotional quality. Thus, the personal networks in the GDR are not so much to be seen as “premodern,” that is, conditioned by tradition and economic necessity but more as less “individualized” compared with the Federal Republic, that is, more often tied to kin bonds and tied to the workplace. In conjunction with the “multifunctionality” of firms and workplaces described above, the social integration of East Germans was probably more institution based than in West Germany. Informal relationships of exchange could not—as often assumed—really compensate and correct for inequalities resulting from occupational sta-

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tus. Rather they exacerbated the advantages enjoyed on the basis of rank at work and political status. But we should also note that superiors at work lost their instrumental value over time as channels for the provision of goods and services, while personal friends tended to become more important. Thus, even before the Wende3 in 1989 the predominant forms of social networks had started to change just as the social convention in regard to the proper age of marriage and parenthood. 2.5

Inequalities of Status—Fine Yet Distinct Differences

When we claim that at least in the final decades of the GDR there existed in fact quite noticeable social distinctions, and that this was a far cry from a fully egalitarian and homogeneous society, then this claim stands not only in sharp contrast to official GDR ideology but also to strongly held beliefs of many internal and external observers (Diewald and Solga 1995). In fact, there was even a highly controversial political debate within the GDR whether wage differences were too small and therefore limited their incentive value for better economic performance (Lötsch 1981). In regard to inequalities in material and cultural consumption from the end of the 1980s, at least three status groups existed besides the small party elite: (1) upper managers (Leitungskader) and professionals occupying a distinctly privileged position at the top, (2) semiskilled and unskilled workers and routine nonmanual employees at the bottom of the social hierarchy, and (3) a very large group of qualified blue- and white-collar workers, although some status differences were also prevalent within this group. It is worth noting that such distinctions maintained themselves despite the fact that differential access to Western currencies, which allowed buying many goods otherwise not available, was not correspondingly distributed. Functionaries of the system were generally denied any contacts with West German relatives and acquaintances and were, therefore, even underprivileged in regard to buying in Western currency shops. Our observations on residues and even increases in socioeconomic inequalities could easily be mistaken as a piece of blatant anti-communist ideology. It would appear that we challenge the little that is undoubtedly positive in the GDR. How do these discrepancies come about? First, the low level in the quality of living standards, in comparison with the Federal Republic, strongly suggests a concurrent low degree of socioeconomic and sociocultural differences within the GDR. In contrast, even

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small differences had large subjective significance. Second, East Germans had little opportunity to show off status differences publicly—for instance, in regard to clothing, housing, or car ownership. In addition, the net household income in West Germany was, of course, more unequally distributed than in the GDR, particularly in upper income levels. The SED government definitely took the equality norm seriously and made great and partly successful efforts to honor the norm. But given these policies, the remaining social inequalities seem even more remarkable. This makes it especially intriguing to ask for the causal mechanisms that are responsible for these remaining inequalities. Our own analyses support four interpretations. First, the socialist society of the GDR was not able to counteract effectively the universal tendency of families to use their resources to secure the best opportunities for their children. Second, even a socialist economy could not function without hierarchies of command and inequalities of rewards. A comparison between professionals, the selfemployed and semi- or unskilled worker provides ample evidence. Third, the socialist power structure had imminent tendencies to generate specific forms of inequality. Among those that count are the advantages linked with position of political power, the informal nonmonetary exchanges resulting from ever-present supply shortages, and the special value of currency and material gifts from the West. Finally, traditional distinctions based on education, occupation, profession, and social origin were highly attenuated, but did not fully vanish.

3 collec ti vism en g in eered by the part y state or autonomy of self-regu lated lives? What did we learn then from the life histories of East German women and men born between 1929 and 1961? Can we resolve some of the controversies about the predominant social character of GDR society? No doubt, drastic socialist reorganization resulted in a social order of its own kind. Therefore, convergence theories, which simply subsume societies like the GDR under the generic category of industrial society and modernization, must be misleading. However, while political, economic, and cultural institutions, as well as public life, were politically defined and tightly controlled, this was still to some extent much less the case for the ways East Germans lived their lives. The intended and often successful pursuit of socialist poli-

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cies was just as much part of GDR reality, so were the many unintended results of policies and counteracting individual actions. Despite fairly narrow confines imposed from above, individuals did their best to strive for their own goals and to realize their own objectives. The East German citizens were not merely passive objects of external forces, but rather agents who were socially integrated not only through pressure and discipline but also by inner conviction and material incentives. GDR life courses were shaped not primarily through repression and force but more through a mechanism of consciously taking up behavioral incentives. The GDR was neither a classless nor an egalitarian society; it was just a more egalitarian society when compared with the Federal Republic. Its biggest success in this regard was achieved in regard to equity between women and men, although women never did in fact equal status and life chances. A leveling out in living conditions was reached through subsidizing basic material needs, but this severely constrained the ability of the regime to satisfy growing consumer expectations. The GDR, however, both in the income and living conditions, clearly remained a stratified three-class society. This differentiation was in part based on merit and effort, just as in any other industrial society. However, universalistic criteria of allocation were also limited and undermined by rewarding political loyalty, by an increasing tendency of class inheritance, and by a rigidly planned and regulated labor market. The GDR was above all characterized by discontinuities: by mass migration in the immediate postwar period, by the refugee movement in the years before the building of the Wall, and by major changes in the political directions of the communist party. These discontinuities found their expressions in unusually large differences in the life chances and living conditions of different generations and birth cohorts. That is why one captures East German social history well by analyzing the different experiences of successive birth cohorts. The breakdown of the GDR was in the end also due to clearly declining educational and occupational opportunities of younger citizens. The legitimacy of the system could only temporarily be bought off through welfare benefits, and the fact that the regime did not dare to lower these entitlements to match economic productivity was one of the first steps in the sequence that led to the downfall of the SED regime. The metaphors of the collective on the one hand and of obstinate individuality on the other hand seem equally applicable if one wants to capture the particular character of GDR society. The ambivalences of security

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versus control, supports versus restrictions, inclusion versus confinement both in personal relationships and in public lives cannot easily be reduced to straightforward and ideologically one-sided interpretative formulas. The life courses of women and men in the GDR were in their collective character shaped by constraints set from above and outside, but also by internalized norms and values. They were to a much larger extent the product of socialist social engineering and therefore less up to individual preference and choice if compared with West Germany. But these kinds of social casting should not be misinterpreted as traditional or premodern. Apart from the excesses of intrusions of the state security police, the private sphere was relatively shielded, and the state badly needed to create incentive structures to realize its objectives. These monetary and material incentives like housing or child benefits could not help at the same time to appeal to individualistic life goals and thus undermine the desired collective orientation. Life courses were therefore always also an expression of obstinate private goals. This found its most distinct expression within the boundaries of family and personal networks but also in the pursuit of occupational aspirations. The German Democratic Republic had a highly developed system of occupational qualification and further training and succeeded in including a larger proportion of their populace, especially women, in employment and qualified jobs than West Germany. To the extent to which these skills could be made use of in the restructured new economy, they should have been important assets. Where occupational aspirations in the GDR were thwarted due to rigid labor market allocation, inefficient production and distribution, or political controls (as, for instance, for the small group of self-employed), this should even have created a significant pool of motivations for the new start in the transformation period. The situation is somewhat more ambivalent in regard to the work commitment of women. Their high level of training and work experience as well as their stronger employment in service occupations in comparison to men should have made them an attractive resource in the post-socialist economy. But to the extent to which their integration into full employment in the GDR was imposed rather than voluntary, they might opt for partial withdrawal during the periods of family formation. The institutions of the GDR as environments for concrete individual actions have, however, also promoted orientations and competencies that differed in several respects from their West German counterparts. In organizing their lives, GDR citizens had to struggle more with shortages and

The German Democratic Republic

43

state controls and less with confusing opportunity structures, with weighing difficult options, and with dangers of exclusion. The pursuit of one’s own life goals inclined East German actors partially to withdraw from work commitment and to invest less actively in their work careers, because wage incentives and wage-related consumption possibilities were limited. Trust in individual persons was more important, and the dependence on social networks was therefore higher. This resulted in a different kind of balance between personal autonomy and social integration, wherein collectives held greater significance with regard to support, solidarity, but also control. Without requiring much active involvement, the GDR welfare state took care, albeit on a low level, of employment, housing, and other basic provisions. One could, therefore, expect that East Germans would exhibit less flexibility and initiative and would tend to rely more on the state. In this regard, then, the biographical baggage of their past GDR lives can be expected to have been more a handicap than an advantage in the transformation.

chapter three

A “Ready-Made State” 1: The Mode of Institutional Transition in East Germany After 1989 Anne Goedicke

1

the startin g poin t: a friendly takeover

Even before 1989, the communist countries of Eastern and Middle Eastern Europe were anything but a homogeneous ensemble of societies with respect to culture, politics, and economic capacity. Yet, the historical events set in train by the fall of the Berlin Wall on November 9, 1989, put the former German Democratic Republic in a situation that differed dramatically from the experience of other reform states in Eastern and Middle Eastern Europe. In East Germany, the peaceful revolution against the communist party regime was not followed by a tedious search for reform strategies. Instead, it triggered a series of other political events that determined the historical course: the “Two plus Four” Agreement with the victorious powers of World War II relinquishing their remaining occupation rights and confirming the Polish-German border (Zelikow and Rice 1995), the rapid inclusion of the former GDR into the European Union and NATO, and, of course, the fast (re-)unification of Germany on October 3, 1990 (Schäuble 1991, Teltschik 1993). After the mass demonstrations in fall 1989, the eroding socialist regime had to share power. The roundtable decision making that dominated domestic affairs during the next months included the opposition movement and a variety of societal groups. Soon, German unification became an important issue on the political agenda and the Federal Republic started to determine political navigation. In a mix of political conservatism and willingness to accelerate the unification process, West German political leaders, especially

44

The Mode of Institutional Transition in East Germany After 1989

45

the Christian Democrats ruling the Federal Republic government together with the Liberals, decided to avoid the adoption of a new German constitution that was suggested by the “unification” Article 146 of the Basic Law (Grundgesetz), the West German Constitution. Instead, they opted for a simple extension of West German institutions and legal structures to the five newly found East German federal states according to Article 23 of the Basic Law. The approval of East Germans to this accession of their country was taken for granted, because the conservative “Alliance for Germany” had won the first free elections in the GDR in March 1990 with the promise of a fast unification (Jarausch 1995, Maier 1999). Not least, across parties, politicians wanted to stop the mass exodus of East Germans who would not wait for the economic consolidation, but voted “with their feet” for West Germany. What were the conditions for reforms in the 1990s resulting from this incorporation of the former German Democratic Republic into the Federal Republic of Germany? How did the new formal institutions affecting the working lives and families of East Germans evolve? To provide background information for our analyses of life courses in the remainder of the book, this chapter depicts the massive reconfiguration of formal institutions, the introduction of a market economy, and a capitalist welfare state that East Germans experienced after 1989. It proceeds in four steps: A first section explains the macroeconomic and political reform strategy and their elements that set the stage for the societal transformation. From the abundance of formal institutions that were transferred from West Germany to the East, some are illustrated in more detail in a second part, notably those that were central for the disruptions and continuities in working careers and educational histories of East Germans after 1989. A third short section deals with a dimension of the transformation that is often neglected in institutional accounts of post-socialist reform countries—the dimension of time. The rebuilding of formal institutions takes time, and it takes time for those new institutions to manifest themselves in life courses. Political transitions are multistage processes, not single events, and in East Germany, the conditions for individual scope of action differed between the early years of transformation and later periods. Therefore, the timing of these shifts, its economic determinants, and institutional conditions are outlined. A fourth section sketches the current conditions in East Germany and is followed by a short conclusion.

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2 the blu eprin t: deutsche marks, private propert y, and tested i nstitu tions In many respects, the transformation of the East German society after 1989 can be regarded as a textbook example of a holistic and radical reform toward a capitalist market economy and a parliamentary democracy. The adopted pathway aimed to spread quickly the West German version of social capitalism of that time. Without delays and experiments, East Germany should adopt faithful copies of the established West German formal institutions regulating the economic, political, and social life (Windolf et al. 1999: 15). On the other hand, neither the East German opposition movement nor the West German government were equipped with strategic plans to handle the situation. The results of the East German transformation have to be understood as emergent consequences of the partly cooperative, partly competitive acting of political elites in both parts of Germany (Wiesenthal 1999: 17). 2.1

Macroeconomic (De-)stabilization

Scholars have highlighted the shock therapy character of the resulting path of transition, which lies in its “rapid, comprehensive, and simultaneous approach on the main fronts of macroeconomic stabilization, institutional reform and privatization” (Pickel 1997: 212, see also Lehmbruch 1993a, 1993b). Such a judgment refers, however, predominantly to the short-term nature of the East German transformation, whereas its macroeconomic and political circumstances were in many respects quite the opposite of what standard neoliberal shock therapy would have suggested (for a detailed discussion see Wiesenthal 1999). In spring 1990, the last GDR governments abolished state control of prices. On July 1, 1990, the Monetary, Economic and Social Union between the two German countries came into effect and, from one day to the other, the deutsche mark was introduced on the territory of the former GDR. The German Federal Bank became legal successor of the Central Bank of the GDR and took over the national debt of the GDR. Generally, good news for the purchasing power of East German consumers, but a disaster for the competitiveness of most East German enterprises was the low exchange rate of 1:1 or 1:22 of Deutsche Mark for GDR Mark. It had practically the effect of revaluating the East German currency by plus 300 to 400 percent, and resulted in an instantaneous breakdown of trade with the Soviet Union and

The Mode of Institutional Transition in East Germany After 1989

47

other COMECON (Council for Mutual Economic Assistance) countries. On October 3, 1990, Germany celebrated unification, and, as a consequence, the former GDR was integrated into the European Union. Thus, East Germany lost control of its borders and (protective) duties. West German and foreign firms got the same conditions of access to the East German market as to other markets in the European Union, and West Germany saw the beginning of a short economic unification boom. The rush toward the Monetary, Economic, and Social Union meant that Germany refrained from monetary policy or protection to back economic reforms in the former GDR. The government of Chancellor Kohl opted for this way against warnings by economic experts and the Bundesbank, but in a conscious attempt to stop the ongoing migration of East Germans into West Germany, to make use of a fortunate constellation in foreign politics, and to demonstrate—together with the last GDR government—the determination to quickly part from the socialist past. As Windolf et al. (1999: 28f) pointed out, the political logic dominated the economic logic: While the economy called for delay, self-restraint, closure, and lasting inequalities between East and West Germany, politics called for acceleration, integration, and quick adjustments of the East Germany living standards. Experts continue to debate whether the fast political and economic union between former East and former West Germany was unavoidable or the cardinal mistake of the transformation strategy (see, e.g., Lepsius 2001, Reissig 2000, Beyme 2001). In any case it improved the financial situation of private households at the cost of East German firms (Wiesenthal 1999: 42), thereby creating immense financial burdens that have to be paid for by taxpayers and unemployment, health, and pension insurances, and by coming generations. 2.2

Privatization

The privatization of formerly public-, state-, or party-owned property was a crucial and debated issue in all post-socialist reform countries. The introduction of market economies based on private property was widely agreed on by the citizens. Yet the speed, the exact procedures, preferential treatments, price setting, and solutions for unprofitable firms were not. As Mummert and Raab (2001) point out, privatizations in post-socialist countries had a multitude of partly incompatible aims: They should allow the accumulation of private property and lay the foundation of market exchange, stimulate investment, promote economically rational and efficient behavior of firms

48

Goedicke

and persons, compensate for expropriations by the socialist regimes, help to restructure the big firm conglomerates that dominated the economies, replace the socialist nomenklatura, support the rise of middle classes and a shareholder culture, demonstrate the irreversibility of the path to capitalism, raise living standards, and create legitimacy for the staff of firms, the public, potential investors, and external observers such as the World Bank. Specific national privatization strategies—for example, vouchers for workers or the wider population, and centralized or decentralized auctions—make priorities among these aims and are the results of a specific political constellation in the early years of transformation. In East Germany, public- and state-owned firms and property as well as land and property owned by the parties or the state security service were privatized in a fast and highly centralized procedure by a privatization agency, the Treuhand. On the one hand, the economic adaptation shock put an enormous financial and time pressure on the Treuhand because few firms fit the new market situation. On the other hand, using Treuhand, Germany could provide a functioning legal system, capital markets, private and public financial resources as well as the staff for top management positions in firms, and a privatization agency. This was unique among the reform countries (Mummert and Raab 2001: 472). The predecessor of the agency was established between the fall of the Wall and German unification by the last two GDR governments and paralleled attempts of managers to separate their companies from the large socialist firm conglomerates (Bluhm 2000). One of its aims was to prevent the appropriation of capital assets by party cadres. With German unification, the Treuhand became directly controlled by the FRG government and shifted its mission.3 The Monetary, Economic, and Social Union between East and West Germany had placed all formerly public- and state-owned firms and assets under the control of the agency, organized as a holding. The requirement was to quickly sell these establishments and assets to private investors while spending a minimum on reorganization and restructuring even if jobs were threatened or prices were low. The Treuhand slogan of these days was “Privatization is the best reorganization” (Fischer et al. 1999). Reorganizations and breakups of enterprises resulted in gross stock of more than 13,000 units and made the Treuhand the world’s largest holding and the world’s biggest public employer with a workforce of 4 million people (two-

The Mode of Institutional Transition in East Germany After 1989

49

fifths of the GDR workforce) (Czada 1994: 15). Several thousand managers of the Treuhand rated companies, supervised their everyday business, and tried to find buyers, thus extending for the East German firms the familiar experience of being controlled by a centralized state agency. The first sales of the most attractive enterprises as well as the privatization of shops, restaurants, pharmacies, cinemas, and other small units, and the restitution of privately owned small firms were quickly accomplished. After 1992, however, privatization became arduous. For economists this was no surprise because the firms were in a precarious economic situation—the privatizing procedure created a unique and massive surplus of supplied companies at the market for firm control (Sinn and Sinn 1992, Windolf et al. 1999), and the units offered by the Treuhand were generally too large to be bought by persons, thus making other firms the preferred buyers (Windolf 1996). Silently, under the pressure of public opinion, politicians, and the unions, the Treuhand changed its privatization strategy. It started to support management buyouts with the aim of preventing bankruptcies, engaged in job creation schemes, and entered regional dialogues to limit deindustrialization. A considerable number of establishments were sold to municipalities and other public agents. Commitments to maintain at least a small share of jobs in the companies were included in selling contracts. In the end of 1994 the Treuhand was dissolved. The remaining few privatizations and the control of thousands of contracts with investors and buyers became the task of four other agencies. The Treuhand had done a good job to change ownership in the East German economy—about 53 percent of its firms were privatized and 13 percent were reprivatized, 30 percent were liquidated, and the rest were transformed into special forms of ownership (Brücker 1995b: 326). But the financial result was as worrysome as the employment balance. At the end of 1994, the Treuhand finished its business with a deficit of 230 billion deutsche mark (Czada 1994: 15). In 1995, fully privatized Treuhand companies employed only about 950,000 people. Another 350,000 jobs were created in spin-offs. Since 1993, the jobs that were lost in existing privatized firms outnumbered the jobs that were added to the private sector by the sale or privatization of firms (Bach 1998). Other collective forms of property such as cooperatives in agriculture and crafts had to dissolve or reconstitute themselves according to the new legislation after October 1990.4 Rural areas are now dominated by modern successor firms of the former cooperatives, which are technically well

50

Goedicke

equipped and more profitable than West German family businesses. With a strongly reduced staff, they cultivate much larger areas than farms in West Germany (Clasen and John 1996, Land 2000). Therefore, the number of East German employees in agriculture dropped from 848,200 in 1989 to 164,800 in 1994 (Clasen and John 1996: 207). In the middle of the 1990s, East German employees per unit of agricultural area had dropped to only half of the West German number. Knowing about the tight budget of small farms in West Germany, few East Germans decided to start or restart their family business again. 2.3

The Transfer of Institutions, Persons, and Finances

With the unification, on October 3, 1990, the five newly found East German states became part of the Federal Republic of Germany. With few exceptions,5 they took over the complete structure of formal institutions and the legislation of the old Federal Republic. Reforms of the administrative and judicial system started in fall 1989, directly after the breakdown of the socialist regime. Especially between May 1990 and August 1990 a flood of bills preparing the unification passed the GDR parliament. On August 30, 1990, both governments signed the Unification Treaty that regulated the accession of the GDR to the former Federal Republic according to Article 23 of Basic Law. Its 360 pages (including the appendices) contained transformation rules for all spheres of public administration. Thus, the East German political-administrative system was reformed via institutional transfer (Lehmbruch 1993b) by anticipating adaptation of the last GDR government as well as external pressure from the Federal Republic. Yet, how could the political administration at once guarantee the everyday functioning of procedures and the “paradigmatic break” with the socialist state (Wollmann 2001: 34), the break with the incorporated interests of the communist party and their claim to power? The solution was as obvious as it was unique among the post-socialist reform countries: About 35,000 West German civil servants, judges, and political experts swept into the East German administrations and offices between 1990 and 1994 (Wollmann 2001: 38). They came for limited periods of time or permanently, and their comparative hardships of living in East Germany were compensated for by steps on their career ladder and extra pay. On the other hand, the GDR public servants were generally integrated into the new administrative structures, even if they needed retraining or if their former office was dissolved. This

The Mode of Institutional Transition in East Germany After 1989

51

combination of transferred West German elites who knew the rules of the(ir) game and local public servants who knew the East German situation did not prevent East-West stereotypes and frustrations, but it was certainly an efficient mechanism to establish and legitimize the new administrative structures. The parties, unions, employer associations, other political bodies, and private corporations took a similar approach. These groups also relied on the transfer of qualified personnel from West Germany to the East (for further details see Schmid et al. 1994, Derlien 2001). Besides legislation and personnel, financial transfers were the third decisive building block for the “exogenous integration” of East Germany into the Federal Republic (Wollmann 2001). Between 1990 and 1994, the newly found states and the East German municipalities were cofinanced by the Fund “German Unity” and by direct allocations of federal budgets.6 In 1994, about 60 percent of their expenditures were still provided through these channels. Since 1995, the East German states were integrated into the general financial equalization scheme between the federal government and the states. They get extra payments on the basis of federal consolidation programs, and they benefit from development schemes of the European Union. Other financial resources are provided by internal reallocations of the health and unemployment insurance systems and the pension funds. This number of financial redistribution mechanisms makes it almost impossible to calculate the financial net effects. From 1990 to 2003, however, the estimated net transfers of public resources from West to East Germany added up to the impressive sum of about 980 billion Euro, about 83 billion Euro were still paid in 2003 (Sachverständigenrat 2004: 466). This is nearly one-third of the East German GDP. In any case, the Marshall Plan funding for West Germany after World War II amounted to less than 10 percent of the transfers that East Germany received in the 1990s (Beyme 2001: 417). A comparable dimension of funding was unattainable for other post-socialist countries.

3

selec ted fields of reform

For a study of life courses it is necessary to go beyond macroeconomic and macropolitical constellations. The development of intermediary formal institutions and social structures especially deserves attention. What were the main institutional factors that shaped the working and family lives of East Germans after 1989? Three institutional fields that are most important for

52

Goedicke

the empirical issues elaborated in this book will be depicted in some detail: education, employment and unemployment, and welfare entitlements.7 3.1

Schools, Universities, and Professional Education

Formal institutions of the education system serve as road maps in the development of aspirations and life plans between school and first job (Meulemann 1999). This road map was considerably redrawn for young East Germans. The current school and university systems as well as the institutions of professional training were created by a fast and determined adoption of West German rules in the beginning of the 1990s. The ten- or twelve-year general comprehensive school that nearly all children attended in the GDR was quickly replaced by different versions of the tracking systems that existed in West Germany. With unification, the responsibility for schools and universities was handed over from the central government to the newly found states, and they often copied the school model of their West German partner state. In all East German states children attend primary school up to grade 4 (in Brandenburg grade 6). Afterward, they are sent to Gymnasium or Real- or Hauptschule (upper, middle, or lower secondary schools), depending on their performance. The states differ greatly in their provision of schools or classes that integrate two or more of these tracks, in the opportunities to change tracks and their procedures of allocating children to schools (for details see Hauser et al. 1996: 187, Kornadt 1996). The school reforms in East Germany allowed (closely controlled) private management of schools. Curricula were modified and schedules differentiated. Religion (or ethics) became a school subject. The role of parents and their responsibility for the school results of children were emphasized. The combination of apprenticeships with the Abitur (university permit) that existed in the GDR was done away with, but rates of school leavers with Abitur rose by more than 10 percent due to the abolishment of the restrictive centralized planning system for higher education in the GDR, which had allowed few young people to proceed to the university. On the other side and contrary to the past, a considerable number of East Germans pupils leave school without any certificate. Their share started to exceed the West German average in 1994 (Below 1997: 160). Due to shared institutional traditions in the GDR and the Federal Republic even before 1989, the adaptation of the occupational training system seemed much easier than the school reforms. In both German states, em-

The Mode of Institutional Transition in East Germany After 1989

53

ployment careers were centered on occupational qualifications. The GDR and the FRG had preserved systems of skill formation that were marked by standardized and formalized certification procedures in a variety of different trades and occupations (Konietzka 2003). Central schedules and controlled exams guaranteed the general acceptance of occupational certificates by employers, and labor market allocation of persons, especially the access to qualified jobs, was powerfully predefined by those credentials (ibid.). The roots of this distinct German training tradition can be traced back to the early period of industrialization (Greinert 1994). Particularly few differences existed for occupations that were trained in the so-called Duales System (dual system) combining school-based with firm-based learning though apprenticeships lasted generally two years in the GDR as compared to three years in the FRG. The segregation of occupations by gender was strong in both German countries (Rosenfeld and Trappe 2002). Young men and women followed often separate tracks of training, although women earned the same and sometimes higher degrees than men. In the GDR, more female occupations were integrated into the dual system. Until August 1990, East Germany adopted the West German legislation regulating the content and setting of occupational training, the exams, and certificates. The vocational schools, formerly attached to firms, were shifted to the municipalities. While the transfer of formal rules for occupational training proceeded without major difficulties, the system did not function properly in the 1990s. Due to the economic crisis, firms would not provide the necessary apprenticeships. Many companies were closed, the need for job applicants diminished, and contrary to the West German pattern, young people with certificates experienced high levels of insecurity when entering the labor market (Konietzka 2001). In East Germany, the dual system has to be subsidized by the federal government and shifted toward a tripartite system with state-subsidized practical instruction outside firms as an additional form of training for apprentices. Universities and colleges had more difficulties than vocational schools to adapt to the West German legislation. Especially Fachschulen (colleges for the training of semi-professionals) would not fit the West German system of higher education. In the GDR, Fachschulen provided especially young women three years of education in social, pedagogical, and artistic subjects. Other schools provided education below the university level in economics and engineering. While the latter were often reorganized into Fachhochschulen

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(technical and commercial colleges) according to West German standards, the former were often dissolved or reorganized into Berufsfachschulen (vocational schools). The East German states became responsible for the universities, passed new regulations for the course of studies, and restructured faculties. University teachers and scholars were evaluated by commissions of West German and international colleagues. Particularly in the social sciences, in economics, in law, and in teacher education nearly all chairs were newly filled according to the criteria of West German academic life among them publication records and international experience. The role of universities for basic research got strengthened, and the institutes of the Academy of Sciences of the GDR, the central research organization, were closed down or transferred to the universities with only a small part of their staff. 3.2

Employment and Unemployment

The differentiated systems of education and training that channeled young people into employment resulted in high levels of content-fit and status-adequate work at labor market entry in both German states (Solga and Konietzka 1999). Also later on, working lives tended to follow occupational lines. Therefore, the recognition of their credentials was maybe the most important decision for East Germans’ employment opportunities after unification. For women and men who had obtained their certificates before 1989, Article 37 of the Unification Treaty stated that all degrees from universities, colleges, vocational schools, and other apprenticeships had to be recognized and regarded as similar to the corresponding West German certificates. They could continue to drive labor market mobility and job matching (Solga and Diewald 2001). The contribution of Article 37 of the Basic Treaty to the convergence of training and employment patterns in East and West Germany, and to the continuity of occupational careers of East Germans can hardly be overestimated. For those who were able to keep their jobs or to stay in work, the character of the employment relationship and their bargaining power vis-à-vis employers were thoroughly shifted. Coming from a labor hoarding socialist economy (Kornai 1986) with a constitutional right (and obligation) to work, East Germans experienced a decline of jobs that was unprecedented in modern German history. The number of nonsubsidized jobs in East Germany plummeted by about a third during the first years of the transformation. Despite the foundation of new firms, the decline of jobs continued

The Mode of Institutional Transition in East Germany After 1989

55

25

20 East German women East German men

15

percent

West German women West German men

10

5

0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Figure 3.1. Unemployment rates in East and West Germany by gender. s o u r c e : Bundesanstalt für Arbeit, Sozialpolitik-aktuell.de

throughout the first half of the 1990s. Consequently, the rate of registered unemployment, which was zero in 1989, rose dramatically. Even though job losses were widespread in West Germany as well, Figure 3.1 confirms remarkable differences in the relative unemployment risks across East and West Germany. The unemployment rate of East German women doubled as compared to the rates of West German women and men throughout the 1990s. Moreover, the figure illustrates a dramatic trend for East German men, whose unemployment rate rose from below 10 percent to more than 20 percent within one decade, thereby approaching and even surpassing the results for women. Underemployment amounted to more than 30 percent of the labor force potential in 1992 and did not fall below 25 percent in 2002 (DIW et al. 2002: 214). The rise of male unemployment during the 1990s was substantially due to sectoral dynamics in East Germany. With the exception of some service industries and construction, job losses affected all sectors of the economy in the first years of the transformation. Yet, they concentrated on manufacturing and agriculture. East Germany experienced a “passive” structural change toward a service economy that was less borne by a real growth of service industries than by an enormous shrinking of the primary and secondary sectors, as Figure 3.2 demonstrates. Quite special was the employment

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Goedicke

10000 9000 8000

employees in tsd.

7000

D other services

6000 5000

traffic, communication, trade and catering

4000 3000 2000 1000 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Figure 3.2.

• • •

manufacturing, mining, energy construction agriculture and forestry

Number of workers across sectors in East Germany 1989 –2003.

s o u r c e : Statistisches Bundesamt Fachserie 1 Reihe 4.S.1, Fachserie 1 Reihe 4.1.1, Sonderreihe Heft 14 (1994)

trend in the construction industry. Private spending and public infrastructure programs had produced an exceptional boom in the beginning of the 1990s with the effect that, in 1996, the share of construction in East German employment exceeded the share of manufacturing. With the weakening of private demand and the end of public investment programs in the mid-1990s, the construction industry came into trouble. Investments and employment started to shrink (DIW et al. 2002: 187), thus contributing to male unemployment. A bad side effect of the earlier boom was that a high share of East German apprenticeships was concentrated in this area. Not least because of the pressure to act, labor market policy was the first political area in East Germany to have its institutions in place and operational (Bach 1998). In the beginning of the 1990s, the federal government reacted to the mass unemployment in East Germany with an extraordinary expansion of active labor market programs and subsidized retraining in private firms. Between November 1989 and November 1994, more than half of the East Germans of work age participated in labor market policy measures (some several times) (ibid.: 15). During the early 1990s, participation in state-financed training and retraining programs as well as work on subsidized short-time work schedules increased dramatically. By April 1991, the number of short-time workers exceeded 2 million and remained high until the end of that year when the measure was stopped. Besides, Article 249h of the Labor Promotion Act (Arbeitsförderungsgesetz) provided lump-sum

The Mode of Institutional Transition in East Germany After 1989

57

10000 9500 9000

\~---+-~--

~

-- ---

Retraining measures

-

Early retirement

Absolute - in 1,000

8500 8000 7500

-----

~

Labor force potential (without commuters and labor migration) Total labor force

. _i' ' '

Non-/Unemployed

\

7000

\\

---

---

- - -measures ~ ---r-..... Job-creation

Short-time workers

-··

6500 6000

-·- -··-

Employed persons (incl. short-time workers)

5500 5000 1989

Figure 3.3.

1990

1991

1992

1993

1994

1995

1996

Employment trend in East Germany after 1989.

s o u r c e : ANBA-Arbeitsmarkt 1993 –1996, ANBA-Arbeitsstatistik 1993 –1996; Bevölkerung und Erwerbstätigkeit Fachserie 1 Reihe 4.1.1. (Statistisches Bundesamt); Tabellensammlung zur wirtschaftlichen und sozialen Lage in den neuen Bundesländern (Statistisches Bundesamt 1995)

wage cost subsidies for jobs in environmental protection, social services, youth welfare, popular sports, independent cultural work, and preparatory conservation of monuments. Structural adaptation measures, job creation schemes, and large-scale job creation measures (Mega-ABM) relieved the pressure on the regular labor market. Another million persons left employment through the extensive use of early retirement schemes, which, until the end of 1992, allowed subsidized transitions into retirement at the age of 55. More than 500,000 persons started to commute to West Germany and West Berlin, another million migrated permanently to the West between 1989 and 1995. In summary, Figure 3.3 depicts the shifting shares of several types of employment, subsidized work, and nonemployment for the observation time of the East German Life History study. The fear of losing employment was a completely new threat for East Germans. They had to understand the functioning of labor markets and learn the new differentiations provided by the employment law between employees in the private economy, employees in the public service, and civil servants. Although layoffs for political reasons concentrated on the public sector, especially on public servants who were high functionaries of the SED

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regime or worked as informers for the state security service, the private sector carried the main burden of layoffs for operational circumstances. With the Unification Treaty, East Germany adopted the labor legislation of the Federal Republic, including rules for dismissals, special dismissal protection for employees with seniority, and laws that regulate fixed-term contracts, temporary work, and other forms of “atypical employment.” Collective bargaining and workplace codetermination are important elements of labor relations in Germany, and collective agreements define standards for employment conditions. A well-balanced division of labor between industry-wide unions and company-based works councils makes it possible to keep fierce disputes over wages and working hours mostly at the level of bargaining between industry-wide unions and employer associations. This provides works councils with the opportunity to concentrate on the implementation of collective agreements and on local issues like reorganization measures and retraining. Because the right to strike is reserved to the unions, works councils tend to pursue cooperative strategies toward the management and enter “productivity pacts.” With unification, the system of collective bargaining was extended to East Germany, but it took some time for the unions and employer associations to become fit for work. Whereas the latter had no tradition to build on, the unions took over the members from their predecessor organization. Soon, conflicts of interest started between West German and East German union members: To prevent competition and a decline of working standards in the West, the unions extended their high-wage strategies to the East. The weak East German employer associations initially joined this course, but soon conflicts broke out that delegitimized industrylevel bargaining.8 In the early 1990s, East German wages have jumped far ahead of productivity,9 which resulted on the one hand in further job losses and on the other in an erosion of the whole system of collective bargaining in the longer run. East German firms started to circumvent collective agreements and this overexpansive wage strategy, often with the agreement of their staff (for further details see Bergmann 1996, Hyman 2001). The membership in employer associations as well as unions declined. In 2004, 74 percent of the firms in East Germany, as opposed to 55 percent of the firms in West Germany, were not covered by collective bargaining. The same was true for 46 percent of the employees as opposed to 30 percent in West Germany (Ellguth and Kohaut 2004).

The Mode of Institutional Transition in East Germany After 1989

3.3

59

Welfare Entitlements

The foundations of the German social security system were established at the end of the nineteenth century by Chancellor Bismarck, who wanted to integrate and pacify the rebellious working class in the German Reich. From its beginning, the German welfare state was employment centered and aimed to stabilize the social status of the clientele. It relied on a system of social insurances that were gradually introduced and extended: accident insurance, pension funds, health insurance, unemployment insurance, and finally the compulsory long-term care insurance. Separate schemes with different benefits cover different groups of employees. The nonworking population—typically housewives, children, and widows—is expected to profit from rights they derive from (formerly) employed spouses or parents. The insurance system is complemented by means-tested provisions for all citizens in need, independent of their insurance status. Politics and historical path dependencies promoted a welfare state that supports the “male breadwinner model” and treats women predominantly as wives and mothers. Not without reason, the Federal Republic serves as an example of conservative welfare states in comparative research (Esping-Andersen 1990, 1999b). For East German women and men, the integration into the West German welfare state in 1990 meant at least three paradigmatic shifts. First, the GDR had provided a general insurance system that covered employees independently from their social status. After unification, the status of particular jobs determined insurance schemes, and within those schemes further decisions had to be made. The monitoring of the insurance status became part of career planning and job decisions. Second, the GDR welfare state had treated persons, especially men and women individually. The principles of subsidiary and derived rights modified entitlements and changed relations of power within families. Third, East Germans were confronted with new existential risks like unemployment, homelessness, and poverty. Due to the abolishment of guaranteed employment, the willingness to work did not protect them any longer against social exclusion as it did in the GDR. Except for pensions, where amendments had to be made for some groups, the transfer of formal institutions of social security was managed quickly and without major turbulence. The real challenge is, however, the financial situation of the insurances and pension funds, which was severely

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tested by the bad economic situation in Germany as a whole, and the Eastern states in particular (for further information see Maydell et al. 1996).

4

periods of soc ietal ch ang e

Despite a sometimes breath-taking speed of events, the East German transformation was not a linear process. Relying on research in Latin America and Southern Europe, Schluchter (2001: 151ff.) employs a three-phase model of political transitions from authoritarian rule to a democratic order. He distinguishes liberalization as a time of political upheaval, democratization as a time of shift to the new democratic society, and consolidation as a time when the new order becomes institutionalized and anchored in the minds of citizens. The empirically interesting questions are: How long are these periods? Are they intertwined or do they follow each other? Do the political agents (old elites, new elites, population) and their strategies (reforms, revolution) change? According to this scheme, the first period of the East German transformation lasted from October 1989 to the first free election in the GDR, in March 1990. The second period ended in October 1990 with unification, and the third period— consolidation—lasts into the new millennium (ibid.). As helpful as such a model is in understanding the political reform process, it is less suited to highlight opportunity structures for individual action and the unfolding of life histories. For the empirical analysis of life courses in the remainder of this book, we rely on a periodization of institutional reform and economic restructuring by Lutz (1996a: 7, 1996b: 134, 1997: 440, see also Mickler et al. 1996). This model describes the early years of transformation between 1989 and mid-1992 as a Window of Opportunity, because this first period was a time of rapid institutional reform, of plant shutdowns, mass layoffs, fundamental restructuring of establishments, and accelerated tertiarization. Yet these two and a half years were also characterized by rapid privatization, administrative reorganization, and a wave of business startups (for further descriptions of the two periods see also Chapters 4 and 5). Contrary to expectations of a stepwise consolidation, the Window of Opportunity was, in fact, the only period that provided a considerable amount of new employment opportunities. In the period after 1992, the transfer of formal institutions and most privatizations were finished. Even active labor market policies were cut back, and the creation of new jobs stagnated. Firms

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consolidated their performance and market position, but jobs were scarce, employees hesitated to change jobs, and the unemployed had few chances to enter the first labor market again. Dismissal rates in East Germany continued to be higher than in West Germany throughout the 1990s (Brussig and Erlinghagen 2005, see also Chapter 12). Studies of labor market mobility have shown that the quality and quantity of job mobility did indeed vary between the Window of Opportunity and the time after (e.g., Diewald and Solga 1997, Diewald et al. 2002, Goedicke 2002, Zühlke 2000, see also Chapter 4).

5

the end of ambition? east germany after 2000

A glimpse on the current macroeconomic and political situation in East Germany shall round off this sketch of institutional reform. More than fifteen years after the fall of the Wall, East Germany is still on its way. Despite growing regional differences and an ever-increasing number of young people who know the GDR from hearsay only, the five new states remain an entity that differs economically, socially, and culturally from the rest of the country. The economic situation remains tight, in spite of the slow recovery of the manufacturing sector where surviving firms were able to enter international markets and capital intensity surpassed the West German level (Sachverständigenrat 2004: 304). Yet, industries with higher productivity levels than in the West are still exceptions. Among them are the chemical industry, the wood industry, and the measurement and control devices industry (DIW et al. 2002: 203). Reductions of staff continue not only in the private sector but also in the public services sector. One reason are huge debts of the public authorities (ibid.: 188f). Domestic demand is curbed by slow growth and stable or even declining real incomes. This development is mainly caused by the persistent mass unemployment, not only in the East but in unified Germany. Most alarming is that the process of catching up in comparison to West Germany stopped in the second half of the 1990s after a dynamic development in the early 1990s. In some fields the disparities are even growing. While the disposable income per East German resident stagnates at about four-fifths of the West German level, the GDP per resident stagnates at about three-fifths (Sachverständigenrat 2004: 304). After 1997, the quite modest rise of the GDP in West Germany became again higher than the growth

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in East Germany (Sachverständigenrat 2004: 305). Capital formation—investment in relation to the GDP—is slower, even in manufacturing. The productivity gap persists. In 2002, the average productivity of East German firms amounted to only 62 percent of the productivity of West German firms (Bellmann et al. 2004). The East German economy is characterized by a fragmentation of economic prospects and a lack of embedding of firms in regional economic cycles (Land 2003). In spite of a general discomfort with the situation among politicians, managers, and observers and in spite of occasional initiatives to emphasize the importance of the East German developments for the country as a whole (Dohnanyi and Most 2004), particular East German interests are badly represented within the political system. As parliamentarians, as members of parties, associations, or unions covering whole Germany, East Germans are always in a minority position. The only party based primarily in the East, the communist successor party PDS, maintains strong minorities in the East German states. It entered some coalition governments at the state level and is represented in the federal parliament by a two-party alliance. The only official in the government specialized on East German issues, the commissioner for East German affairs, has a position that is neither high profile nor well equipped with rights and resources. After more than a decade, the East German situation is more and more sidelined as a regional problem of structural development familiar from the old Federal Republic. This idea is, however, called into doubt by some silent, but disturbing trends in East Germany. Large groups of the East German population of all ages have no hope to be reintegrated into regular employment or, in the case of graduates, to enter the labor market successfully. Their trajectories between unemployment, nonemployment, training measures, and employment schemes lead to only “secondary integration” as Land (2003) calls this loss of reference to standard institutions of the working life. The migration to West Germany and abroad continues, especially among young women, leaving East German regions with demographic problems, empty houses, disrupted social networks, a lack of qualified young people, and low confidence into the future. Right-wing extremism seems to increase in some areas, and is mixed with disorientation, frustration, undirected protest attitudes, and low self-esteem. Surveys show that East Germans have distinct feelings of relative deprivation and are, across age groups, more worried than their counterparts in the West. They expect more help from the state and munici-

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pal authorities, and they are more sensitive to social inequalities than West Germans (DIW et al. 2002: 227f, Gabriel 2001, Kaase 2001). Postmaterialist values and striving for self-fulfillment are less common than in West Germany (Deth 2001: 26, 29). There is, however, no empirical evidence that East Germans want to return to a socialist society, the basic ideas of democracy are in high esteem and the related survey results are quite similar to those of their fellow countrymen. Yet, East Germans are much more critical when asked about their satisfaction with the actual working of democracy, with the functioning of the political system, and with their possibilities to exert influence (Gabriel 2001: 108, 116, 119, Kaase 2001: 139).

6 particularities and dynamics of the post-soc ialist reforms in east germany This account of institutional transfers and political reforms in East Germany after 1989 pointed to common challenges for post-socialist reform countries as well as to more specific circumstances of the East German situation. All reform countries faced the necessity to fundamentally change the institutional rules. Simultaneously, they had to replace administrations riddled with interests of the communist parties; to establish markets for goods, finances, and labor; to introduce parliamentary democracies and encourage the creation of intermediate associations; to make provisions for basic needs of the poor population; and to ensure public support for the transformation (Elster et al. 1998). Monetary politics, foreign policies, and privatization strategies set the agenda for distinct pathways of transition. The varieties of transition added to the varieties of capitalism (Hall and Soskice 2001). Every reform country had to find its balance between the speed and irreversibility of reforms, between the wish to provide security for investors and to shorten the time of transition at the one hand, and the necessity to control costs, to keep productive assets within the country, to legitimate the reform process, and to allow for individual adaptation and institutional innovation on the other. The holistic reform strategy in East Germany was unique in many respects. Although it can be characterized as a shock therapy with regard to the speed of macroeconomic change, the transfer of formal institutions, and privatization, it did not at all follow the neoliberal prescriptions of a

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release of currency controls and the withdrawal of state subsidies. The first steps of reform were decided on by a small group of central government actors in East and West Germany in a Machiavellian manner (Beyme 2001). Later reform periods were determined by a larger number of mostly West German (corporate) actors that were embedded into Germany’s corporatist political system and had special skills and privileges (Wiesenthal 1995). German transformation politics has to be understood as the contingent result of intertwined actions by political representatives, managers, parties, interest groups, and the public in a unique historical situation, neither as result of a detailed preexisting agenda nor as one-sided enforcement of West or East German interests. As Pickel (1997) points out, the agents of transformation and its objects were not identical. This resulted in feelings of alienation and frustration among East Germans. Widespread notions that qualification and motivation could not compensate for property, place of birth, and luck strengthened left- and right wing extremism. The speed of reform and economic restructuring was highest from 1989 to 1992, in the Window of Opportunity. In the second half of the 1990s, societal change slowed down dramatically and the adaptation of East Germany to the West German states stagnated. Persistent mass unemployment and a lack of economic resources continue to be central problems in the East German states. Taken together, the costs of the post-socialist reform strategy in East Germany were immense. The societal transformation was paid for by huge financial transfers, by high debts, by widespread deindustrialization, and mass unemployment in East Germany. It was also paid for by diminished growth, by unemployment, by erosions of the system of industrial relations, and a great strain on welfare and employment institutions in West Germany (Czada 1998, Dohnanyi and Most 2004). Obvious benefits of the East German path of transition to a market economy and parliamentary democracy were an impressive speed of privatization, thorough institutional reforms, and a comfortable living standard of the population. The “readymade state” successfully limited mass migration to the West, stabilized the political situation, and bridged the “valley of tears.” The following chapters of this book examine how the lives and work careers of East German women and men unfolded under these institutional and economic circumstances.

chapter four

Old Assets, New Liabilities? How Did Individual Characteristics Contribute to Labor Market Success or Failure After 1989? Martin Diewald, Heike Solga, Anne Goedicke

1 career mobilit y in times of tr ansition— the research question In this chapter we study how different kinds of human resources accumulated before the collapse of the Berlin Wall in 1989 helped to promote career mobility afterward, or lost their value, or even became handicaps to get ahead. Intragenerational mobility is essential to accomplish structural changes (DiPrete and Nonnemaker 1997: 389), and it is an indicator of basic societal institutions and social inequalities. Therefore, observations of mobility patterns in the labor market are essential to understand the nature and dynamics of the East German transformation. The general logic of the institutionalization of post-socialist labor markets can be characterized as a paradigmatic shift of basic institutions from redistribution and political control to market exchange (Nee 1989), leading to a shift of criteria for status mobility. Capitalist market exchange is generally assumed to be superior to state-socialist redistribution in mobilizing human resources such as ability, self-initiative, and effort for accomplishing economic innovation and growth (see also Chapter 1), among other things by rewarding differences in these productive forces more than planned economies do. Therefore, formerly “hidden” or “blocked” human resources (in the form of ability, self-initiative, effort, and career orientation) can be assumed to have become more decisive after 1989. Hence, especially persons with such characteristics should have been able to seize the new opportunities offered by structural change, and to replace old elites and supervisors. However, the system change should not have evoked gains only, but 65

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losses of former investments and assets as well. Two expectations have to be mentioned here. First, contrary to human capital whose significance should have been accentuated (e.g., Nee 1989), political capital that was very important for careers before 1989 (Solga 1994) should have been devalued drastically and lost its advantage. It might even have turned into a handicap for a successful working life (Eyal et al. 1997). Second, whereas the importance of general human capital accumulated before 1989 should have increased, specific skills and other individual assets may have been subject to a “windfall loss” (Bird et al. 1994: 395). Work experience accumulated under socialism might have been less worthwhile than work experience gathered after the transformation. In this sense, general human capital, like schooling and vocational training, may have been less devalued than human capital specific to the former socialist work contexts as it is represented by labor force experience and firm tenure. Aside from these general, academic issues of post-socialist transformation, further questions relate to the specific case of East Germany and to the causes of the persisting East German labor market problems (see Chapters 3, 11, and 12). A first explanatory story argues that the East Germans have been too apathetic to seize new emerging opportunities and to take their fate into their own hands. This behavior is attributed to legacies of the GDR, which supposedly led to a lack of competencies needed for an economic takeoff in East Germany (see, e.g., discussions in Andretta and Baethge 1995, Drexel 1997, Grünert et al. 1996). In this view, the East Germans simply lack the self-initiative and effort to copy the West German Wirtschaftswunder after World War II. Due to their habituation to the lowtech and low-speed economy of the GDR, they are considered to be more or less “spoiled” for the requirements of a modern capitalist labor market (Engler 1996, Pollack 1996).1 In contrast, a second story refers to failures of the imported West German labor market institutions. They are seen as being especially unable to mobilize and promote existing human resources in the field of self-initiative and effort and to provide structural opportunities to make use of these potentials (Andretta and Baethge 1998). Only a dynamic economic development provides chances for voluntary job mobility. In this line of reasoning, the East German labor market exhibits the illness of the imported West German labor market institutions (Esping-Andersen 1999a; see also Chapters 3 and 12), and the East German situation is just a further indicator for their crisis (see Chapter 12). If persons who were more

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mobile, flexible, proactive, and career driven than others before 1989 have been more successful in the new society, then the imported West German institutions seem to have been effective in mobilizing existing resources and competencies of East Germans. The bottleneck for economic development might then have been the dearth of such human assets. Counterevidence would point toward a lack of structural and institutional opportunities for making use of existing human resources. Individual skills and assets would then have been blocked and wasted again after 1989. Nevertheless, the expectation of exceptional upward and downward mobility is not self-evident. Some facts suggest that the differences between socialist and post-socialist mobility patterns might not have been that pronounced. Despite the overwhelming role of state redistribution and political control, most researchers agree that even in socialist economies, labor allocation was connected with some monetary incentives for job mobility and returns to human capital investment (cf., Atkinson and Micklewright 1992, Domanski and Heyns 1995, Schwarze 1993). A hierarchically as well as vertically segmented occupational system fostered differential human capital investment in lower and higher education and training (Solga and Konietzka 1999). Therefore, in comparison to the socialist allocation of labor, the institutionalization of post-socialist labor markets after 1989 might not necessarily have resulted in a complete reversion of hitherto existing criteria of success and failure. To deal with these questions, we investigate the incidence and determinants of career mobility processes in East Germany in three steps. First, we ask for the types and the extent of intragenerational mobility after 1989. We measure the frequency of several labor market transitions from the end of 1989 until 1996 to explore the level of job mobility that East Germans exhibited in their adaptation to the new employment system, and to find out whether there were enough chances (in terms of labor market transitions) for individual assets to realize their differentiating power. From existing literature and background knowledge, we expect that the mobility patterns varied over the course of the transformation depending on the progress in economic restructuring, which provided distinctly different opportunities and constraints in terms of institutions and economic structures (section 3). In a second step, we investigate the availability of different types of human capital in East Germany accumulated until 1989. The question is whether and which individual assets that were helpful for labor market allocation

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after 1989 can be identified (section 4). In a third step we model the impact of these assets on career mobility after 1989 (section 5). We pay attention to indicators of general human capital such as the level of education and vocational training, as well as to indicators of specific human capital such as firm tenure and experience of occupational mobility in the socialist past. Before starting our analyses, we describe the data we use.

2

data

The following analyses are based on the life history interviews of about 950 East German women and men belonging to three birth cohorts (1939 – 41, 1951–53, and 1959 – 61), who participated in the survey 1991/92 and the panel survey 1996/97 of the East German Life History Study (EGLHS, see appendix of the volume). The EGLHS is a unique data set to investigate these research questions. To derive indicators for different kinds of mobility experiences, detailed information about people’s work histories before 1989 are required. Such data were collected retrospectively in the EGLHS. They allow for controlling for age and cohort effects, that is, the timing of the dissolution of the GDR in regard to individual life courses. We know that job mobility generally decreases with age (Carroll and Mayer 1986). For the East German case this means above all that age at the time of the Wende determined the available time for the acquisition of competencies until 1989 in the GDR on the one hand, as well as the remaining time for the working life and adaptations to new requirements after 1989 on the other. By selecting these birth cohorts we neither investigate transitions into (early) retirement nor first entries into the labor market. The small bias of the EGLHS toward the better qualified persons as well as those who were not unemployed at the time of the first interview means that the results presented in this chapter might underestimate the amount of involuntary occupational mobility and unemployment. Yet, as will be shown below, this would strengthen rather than weaken our conclusions. On the other hand, in the 1996/97 survey, persons who had moved to West Germany after the first interview could not be located to the same degree as those who remained in the former GDR. In our sample, only thirty-nine people had migrated permanently to West Germany. More detailed information about operationalizations and methods are given in the following sections of this chapter and the appendix of the book.

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3 labor market mobilit y after 1989 and its ch anges over time: a “window of opportunit y ” On its path to post-communism East Germany was subject to a shock treatment (see Chapter 3 for a comprehensive overview). Consequences for the institutional setting of the employment system and the supply of jobs were immediate in all areas. Due to the accelerated privatization of firms by a state agency, the Treuhand, combined with a state-controlled reconstruction strategy (Brücker 1995, Stark and Bruszt 1998), as early as July 1993, 78 percent of the former state-owned enterprises were privatized, restituted, or communized; 17 percent were liquidated; and only 5 percent were still owned by the Treuhand (Bialas and Ettl 1992: 13).2 As could be expected from this initial shake-up, the East German labor market transformation was not a linear process. Transformation research has found at least two distinct periods whose different opportunity structures caused different quantities and qualities of labor market mobility (Diewald and Solga 1997: 187, Lutz 1996a: 7, Lutz 1997: 134, 440). First, there was a short historical period between 1990 and mid-1992, in which most changes of the East German employment system took place. In the literature, this period has been called the “Window of Opportunity.” The name is certainly well chosen. In this period, the institutional rearrangement of the employment system as well as an enormous number of plant shutdowns, mass layoffs, and simultaneous business start-ups required an extraordinary extent of voluntary and involuntary mobility from East German employees. Accompanied by large-scale deindustrialization, the accelerated tertiarization (see Chapter 3) fostered mobility across occupational and industrial boundaries. Yet, the few new jobs created in some service areas were not enough to absorb the vast numbers of displaced workers. In the second period, after the Window of Opportunity, firm restructuring slowed down leaving less space for labor market mobility. Thus, job shifts should have increased considerably after 1989, but the possibilities to be mobile and the conditions to utilize accumulated resources and competencies should have changed again over the course of the transformation. Though the existence of such a Window of Opportunity is widely acknowledged, questions remain: To what extent did this phase differ from the later one? What types of labor market mobility occurred more frequently until mid-1992? In which respect was the situation more open? Therefore,

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as the first step in our analyses, we look at various types of mobility covering important aspects of an employment system in transformation. On the one hand, the transitions described below address the processing of structural change, because they include sectoral shifts, occupational shifts, firm shifts, and becoming unemployed. On the other hand, they describe shifts into unemployment—lateral, upward, and downward moves inform about the opening of the labor market opportunity structure and the reallocation of employees in the occupational hierarchy. The following transitions are observed: Transition into unemployment3

Reentry into employment Direct firm shift

Inner-firm shift

Sectoral shift

Shift in occupation

Shift in occupational field

Upward move, Downward move, Lateral move

Transition into “unemployment” as reported status shift by the respondents as well as transition into training and retraining measures funded by the Labor Office Transition from any nonemployment status into employment Shift between two firms without employment interruption, regardless of changes in occupation or job level Shift between two positions within the same firm, regardless of changes in occupation or job level Shift between two economic sectors (five categories4), in case of an employment interruption defined after reentry into a new employment status Shift between occupations (thirty-four different types), in case of an employment interruption defined after reentry into a new job Shift between occupational fields (ten aggregated types), in case of an employment interruption transitions defined after reentry into a new employment status Shift between occupational class positions (ten classes5) or “gain or loss of supervisory functions,” in case of an employment interruption mobility is defined after reentry into a new employment status; the character of mobility of self-employed persons is based on income change or changes in the number of employees

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The incidence of these types of mobility is calculated as the number of events of a given mobility type occurring in a given month divided by the number of persons at risk (see Figure 4.1). The interpretation goes as follows: In the first period, among the persons who were employed in ti-1, about 1 percent (0.012) experienced a direct firm shift in the following month ti, whereas in the second period only 0.5 percent (0.005) did so. Contrary to expectations, the transformation of the East German economy did not lead to an upward opening but predominantly to a closure of the opportunity structure and a downturn of occupational careers. Most striking in Figure 4.1 are the results for exits into unemployment and downward moves. The amount of upward mobility was of minor importance and did not exceed the amount we know for West Germany during the same period (Diewald and Solga 1997). In both periods under observation, downward mobility was much more frequent than upward mobility! Furthermore, East Germans had a high risk to become unemployed, and the transition rate into unemployment even increased after mid-1992. In line with the idea of a Window of Opportunity, some types of mobility had indeed a much higher frequency in the first than in the second period. These types were direct shifts between firms, shifts within firms, and downward and upward moves. The exceptional position of shifts between firms in terms of their frequency as well as their unequivocal decrease in the second period certainly portray the Window of Opportunity as a period especially characterized by organizational restructuring. In the second period, firm shifts were rather achieved indirectly through reentries after a period of nonemployment. Compared to direct firm shifts, job shifts within firms played a subordinate role in firm restructuring, especially in the first but also (though to a lower extent) in the second period. Yet we can also observe types of mobility that took place throughout the entire time period under investigation (between January 1990 and March 1996). The quite stable intensity of shifts between occupations, shifts between occupational fields, sectoral shifts, lateral moves, and reentries into employment indicates that these types of mobility were caused by high labor turnover in both periods. The continuing high unemployment rate in the second period corroborates that high labor turnover was not restricted to the initial period of institutional transfer. Instead, these findings point to the fact that the East German labor market not only entered a short-term adaptation crisis but actually a long-term structural crisis. The increase of

0.006

Direct firm shifts

0.005

Innerfirm shifts

0.002

0.005

0.002

Upward

0.004 0.004

Downward

0.006

0.007

Lateral

0.009

0.005

0.008 0.006

0.008

0.009

Shifts Shifts Transition between between into occupational occupations unemployfields ment

0.007

Period 7/92 –3/97

s o u r c e : Own calculations, East German Life History Study, Max Planck Institute for Human Development, Berlin

Average monthly rate of mobility occurring in the first and second period.

Sector shifts

Figure 4.1.

0.000

0.007

0.012

Period 1/90 – 6/93

•

0.005

0.010

0.015

0.020

• 0.035

0.040

0.045

0.050

0.055

0.045

Transition from non-employment into employment

0.050

Labor Market Success or Failure After 1989

73

60

50

48

46

%

40 30

30 20

20

20 14

13 10

11

0 1/90 – 6/92 (N=649 shifts)

•

•

Direct firm shift Shift after unemployment

7/92 –3/96 (N=478 shifts)

• •

Inner firm shift Not (yet) reentered after unemployment

Figure 4.2. Comparison of mobility after unemployment and direct shifts. s o u r c e : Own calculations, East German Life History Study, Max Planck Institute for Human Development, Berlin

transitions into unemployment over the two periods refutes a scenario of fast exclusion whereby the “lemons” were sorted out within the first period and those who stayed in employment were protected afterward. We did not display transitions into self-employment in Figure 4.1, because this theoretically important labor market event has been surprisingly rare over the whole period of observation: Only 4.1 percent of our sample made this step during the Window of Opportunity, and 3.8 percent did so in the second period. The high transition rates in the East German labor market (see Figure 4.1) cast doubts on the assumption of a general immobility of East Germans. To corroborate this finding, Figure 4.2 depicts four mutually exclusive types of mobility and their proportional distribution during the first and second period, respectively. Especially during the Window of Opportunity from the end of 1989 until mid-1992, many East Germans were proactive in their job search, even if some firm shifts were probably due to collective outsourcings instead of individual applications in another firm. The share of direct firm shifts and inner-firm shifts accounted for more than 68 percent. Transitions

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into unemployment and reentries played an important, but still subordinate role. In the second period, when the pace of organizational restructuring slowed down, the share of direct shifts between and within firms decreased to about 44 percent. On the contrary, mobility after unemployment became the dominant pattern. The percentage of reentries increased from 13 percent to about 46 percent. Rather than to a slowness or passiveness of persons in the employment system, the distribution and trend of mobility patterns point to diminishing numbers of vacant jobs in East Germany.

4 the availabilit y of mobilit y competenc ies accumulat ed before 1989 We turn now to the question whether East Germans could acquire mobility competencies under the centrally organized labor force allocation of the GDR. The identification and measurement of such competencies is not an easy task. Because we cannot retrospectively measure in a psychological sense how competent GDR citizens were, we have to draw on exhibited behaviors and trajectories in their life courses. Besides certified success in the hierarchical systems of education and training (see the following section), we decided to rely on a couple of rather straightforward indicators for this purpose, which are, however, not available from other data sources. Successful direct job shifts between firms and successful shifts between occupations before 1990 —that is, shifts without income and status loss— are indicators of positive mobility experiences that could prove employability as an advantageous mobility competency.6 Complementary, we constructed an index of self-initiative in job search before 1990 to measure a person’s flexibility and competence in job search—a characteristic that should have become beneficial in a situation of high labor turnover. We do not claim that persons with a high index have been particularly mobile after 1989, but at least they have already been shown to be able to do so. If they had to change jobs or occupations after 1989 (e.g., because of a firm liquidation), they should have been better prepared for job search and, thus, should have faced lower risks of downward moves or occupational shifts. Finally, we have included two aspects of network assets that East Germans could utilize until 1989: personal and instrumental support resources. These social networks may have lost their particular worth after 1989 because of their boundedness to the specific situation in the GDR (scarcity of consumer goods,

Labor Market Success or Failure After 1989 100

75

96

80

60 %

49

47 41

40

43

37 32 28

27 23

31

25

20

16

1

0 Self-initiative in job search

Successful shifts in occupational field

Successful firm shifts

•

low

0 medium

4

Personal support

Instrumental support

•

high

Figure 4.3. Mobility competencies and network resources accumulated before 1990. s o u r c e : Own calculations, East German Life History Study, Max Planck Institute for Human Development, Berlin

scarcity of craftsmen for private belongings, and so on; cf. Diewald 1995). Moreover, we do not know whether persons did still have connections to those network acquaintances after 1989. What personal and instrumental support resources before 1989 rather indicate is a person’s social competence to establish supportive relationships. If this assumption is correct, we should find a positive effect on mobility for the entire time after 1989, that is, in both periods. In particular the discussion of the last indicators makes evident that nearly all of them are lacking some clearness of whether they measure competencies not only for the GDR but also for different stages of a system change and for a capitalist labor market as well. In other words, the question of their transferability is not unequivocally solved. However, the similarities between the two systems mentioned at the beginning of this chapter are grounds for optimism in this respect. Figure 4.3 displays the distribution of the mentioned mobility competencies of East Germans acquired during their occupational careers in the GDR. It shows that about one-fourth of the East Germans started into the new system accommodated with several experiences in self-initiated job search,

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Diewald, Solga, and Goedicke

successful shifts between firms, and successful shifts between occupations, respectively (“successful” means without losses of income or status). Of course, cohorts had different experiences: successful shifts between occupation and firms decreased across cohorts. However, self-initiative in job search did not differ for members of different cohorts. It did vary by gender, but contrary to expectations women showed a higher degree of self-initiative in the job search. Almost all East Germans were integrated in personal support networks and nearly half of them also possessed instrumental network resources. For the latter, older cohorts and men were privileged. According to these findings, the first story mentioned in the introduction—lack of competencies—is challenged. The GDR system did leave space to exhibit self-initiative and to acquire mobility competencies.

5 mobi liz ation of hu man capital and competen c ies? The question remains whether the East Germans could employ these competencies in the labor market after 1989. Did the restructuring of the East German employment system favor persons with more flexibility and selfinitiative as the ideology of exchange as superior allocation system pretends? Were the existing human resources actually mobilized for the restructuring of the East German economy? The following analyses turn to the empirical examination of these questions. We consider transitions into unemployment, reentries into employment, upward and downward career mobility, direct firm shifts without downward moves, shifts between occupations, and entries into self-employment. The following operationalizations and hypotheses address the impact of individuals’ resources and assets on labor market mobility.7 In order to specify the effect of former political capital on postsocialist employment careers, the political past of East Germans is defined in its different nuances, from an SED member without further commitments to an SED member plus holder of an official function in one of the major political organizations of the GDR.8 The assumption is not only that political capital—known to have been effective in the GDR (cf. Solga 1994)—lost its influence after 1989, but also that former SED membership did negatively affect employment opportunities due to political discrimination or the loss of network assets.

Labor Market Success or Failure After 1989

77

The hypothesis of an accentuation of general human capital and devaluation of specific human capital is examined with the following information: the vocational degree completed before 1990,9 the match between the job level and the level of the vocational degree (status match), and the firm tenure in the last GDR-employment episode, both measured in December 1989. Findings for vocational degree and status match indicate whether labor market allocation is driven by “certified” qualifications, whereas findings for GDR-firm tenure address the devaluation of firm-specific qualifications and competencies in labor market allocation after 1989. The assumption of a specifically high impact of general human capital follows from three arguments. First, it is based on the theory of market penetration and the accentuation of human capital as the main criterion of labor market allocation cited in the introduction. Second, the elaborated, hierarchically, and vertically segmented system of education and training and the shared German tradition of occupational labor market segmentation (see Chapter 2) should have even strengthened the impact of certificates.10 And third, the undoubted selection function of the GDR systems of education and training may have signaled differential abilities more reliably than other indicators easily available to employers. To test our hypotheses, we have estimated discrete-time logit models studying the impact of individuals’ resources on several mobility events (cf. Allison 1980, Yamaguchi 1991). They are based on models of hazard rates. The hazard rate expresses the instantaneous risk of having a given event at time t, given that the event did not occur before time t and that a person belongs to the risk group. In discrete-time logit models, the hazard at time ti is defined as conditional probability of having a given event at ti given that the event did not occur in time ti-1. The models have been estimated separately for the two periods of the Window of Opportunity and thereafter. This allows for the second period to control for prior transitions during the first transformation period.11 The unit of analysis is person months, including all months in which a person is at risk of a given transition. The dependent variable is the occurrence of a given mobility event (coded as 1 for yes and 0 for no). The types of transition considered follow: • Transition into unemployment (risk group: employed persons at time t -1) • Direct firm shift (risk group: employed persons at time t -1) • Upward/downward mobility (risk group: employed as well as unemployed persons at time t -1)

78

Diewald, Solga, and Goedicke • Shift in occupational field (risk group: employed as well as unemployed persons at time t -1) • Shift into self-employment (risk group: employed as well as unemployed persons at time t -1) • Reentry into employment (risk groups: nonemployed persons at time t -1)

The analyses consider all events of a given transition type. The final results of a stepwise estimation procedure12 are presented in Tables 4.1 and 4.2. The tables report the odds ratios for the independent variables included in the estimation. Odds ratios equal to 1 (or not significant) indicate that a characteristic makes no difference in the risk /chance of transition as compared to the reference group. Odds ratios between 0 and 1 indicate that persons with the given characteristic have a lower risk /chance than the reference group that the event occurs in the next month, and odds ratios greater than 1 express that persons with the given characteristic have a higher risk /chance that the event occurs during the next month. For shifts into self-employment, we considered only a reduced set of covariates because the number of events was quite small. The results are presented now in a summary fashion. With respect to SED members or officials of mass organizations, we cannot find any evidence for discrimination. Overtly politically involved persons did not have a significantly higher risk of unemployment, though especially the officials (of the communist party or one of the mass organizations) had to “pay” more often with downward moves or shifts between occupations for remaining in employment. Against our expectation, SED members with leading functions in one of the major political organizations had an even higher chance of upward mobility in the first period than “politically clean” non-SED members. In particular, they frequently took the initiative to start their own business. There are two possible explanations for this observation. First, there may exist a hidden qualification difference between the groups that is not completely controlled for by including the vocational degree completed. On average, organizations’ officials more often held a university degree than nonmembers, and quite often in economics or engineering, professions that were better acknowledged after 1989 than most others. Second, they may have had certain competencies and network resources that had been important in restructuring the old GDR firms in the first period (so-called situational rents). This interpretation would earn some credit if this effect disappeared in the second period, when the firm restructuring process came

Labor Market Success or Failure After 1989

79

more and more to its end and when these kind of situational rents became less exploitable. And indeed, the GDR political past of East Germans seems to have lost not only all its positive but also negative consequences on labor market performance in the second period. Thus, controlling for many other assets in our model, we tend to conclude that former SED members with leading functions could make use of their expertise, resources, and old political capital as long as the Window of Opportunity was open. In contrast, competencies acquired by successful shifts between occupations or firms before 1990 had only a minor impact on labor market allocation afterward, even in the Window of Opportunity. In accordance with our assumption of successful shifts between occupations before 1989 as an indicator of mobility competencies, these experiences increased the chances of reentry into employment and the odds of shifts between occupations. Successful firm shifts before 1989 increased the chance of direct firm shifts without downward moves as well as the probability of starting one’s own business. All four effects may indicate the specific ability of these persons to handle the difficult situation of societal transition better than others. It suggests that mobility experiences in the GDR resulted in competencies that were beneficial for realizing reentries in the first period, though accompanied by occupational reorientation. In the second period, formerly mobile persons had still an advantage but its quality had changed and it was now accompanied by a serious disadvantage. Persons who were successfully mobile in terms of occupation before 1990 were more vulnerable to unemployment after mid-1992 even if they continued to have higher odds of occupational shifts. In addition, they had lost their higher reentry chances and faced higher risks of downward mobility. The only remaining benefits in the time after mid-1992 were more transitions of the occupationally mobile into higher status positions and a lower risk of downward mobility for those who had been mobile between firms during GDR times. The findings for self-initiative in job search before 1990 may come as a surprise: In the first period, East Germans who showed more self-initiative in the GDR faced a lower risk of unemployment, downward mobility and shifts between occupations, and they more often seized the opportunity for selfemployment. Yet they also had lower chances of reentry when unemployed, of upward mobility and direct firm shifts without downward moves. This picture is not distorted by a hidden age effect because birth cohort and firm tenure control for age. What this pattern may reveal instead is the fact that

.92

University

0.89

1.39 1.09

Successful shifts between occupation* (1=yes/0=no)

Successful firm shifts* (1=yes/0=no)

-----

1 shift

2 and more shifts

Individual mobility competencies and network resources accumulated in the GDR Successful shifts between occupational fields* (Ref.: none)

.93

Official, but not SED-member

1.03 .98

SED-member

SED-member + official

1.23

---

1.25

1.80

1.85

.96

4.0

.94

.93

.85

.72

1.19

2.35

Reentry into employment

Past-political capital (Ref.: neither member of SED nor official of a political organization)

Log (duration of firm tenure in 12/1989, in months)

1.34 1.73

Employment above qualification

Employment below qualification

Status match in Dec. 1989 (Ref.: employment fits person’s qualification)

.90

1.87

Transition into unemployment

Technical college

No vocational degree

Degree of vocational training completed (before 1990) (Ref.: Apprenticeship/full-time vocational school)

Covariates

table 4.1

1.18

---

1.45

1.27

1.72

1.62

1.27

.96

0.23

2.51

1.44

.83

0.16

Downward mobility

1.53

---

.99

.97

1.25

.90

.78

0.92

1.18

0.35

1.81

1.08

.54

Lateral or upward direct firm shift

Discrete-time logit models on career mobility in the first period (odds ratios)

1.03

---

.99

.97

.89

1.96

1.38

0.87

1.44

.58

.79

1.96

.11

Upward mobility

1.08

---

1.81

1.62

1.74

1.12

.86

.95

1.16

1.28

.82

.87

.96

Shift between occupations

Index “Self-initiative in job search” (0-3)

1.54 1.10

Female (Ref.: male)

Birth cohort 1939-41 (Ref: 1951-53/1959-61)

---

Unemployment (without current unemployment episode)

942

Total number of persons

0.62

63.82 (df=33)

215

81

1,907

0.16

1.09

0.79

1.12

0.52

0.24

.91

1.00

93.84 (df=28)

943

173

27,769

0.005

3.37

---

---

.98

1.05

.97

.89

0.67

0.59

95.44 (df=29)

942

186

25,939

0.003

---

---

---

0.64

0.64

1.36

1.03

63.40 (df=29)

943

102

27,769

0.016

0.89

0.99

1.31

1.14

0.51

1.02

.77

0.67

0.57

128.84 (df=29)

943

215

27,769

0.006

1.01

1.01

1.00

0.72

0.49

1.01

1.08

source: Own calculations, East German Life History Study, Max Planck Institute for Human Development, Berlin.

Bold coefficients: p