The Federal Republic of Germany announced that it would cease all recruiting of workers from countries outside the Common Market, thus reversing a policy in place for more than a decade.

The termination of official recruitment of foreign labor on November 23, 1973, marked the end of the great postwar economic boom in Germany. From that point onward, unemployment began to rise in Germany, as well as elsewhere in the EEC. The shortage of labor that had characterized the developed nations of the EEC—not only Germany but also France, the Netherlands, Belgium, and Luxembourg—had turned into a surplus. Experts are divided on the historical causes of this unemployment, although the reintegration of East Germany, with its beleaguered socialist economy, and West Germany in the 1990’s must be seen as a major factor in the more recent increases. West Germany;immigration

A major cause of unemployment was the two oil shocks, the first in 1973 and the second in 1978. Chancellor Willy Brandt justified the decision announced on November 23, 1973, as a response to the anticipated economic effects of the first oil shock, caused by the announcement by Arab countries that they would curtail oil shipments to certain nations. These two shocks brought about a significant rise in production costs, hampering further expansion of industry. The result was a significant decrease in the number of manufacturing jobs in the years after 1973, and it was particularly these semiskilled factory jobs for which foreigners were recruited. As Germany expanded educational opportunities for its citizens, fewer of them were willing to take monotonous factory jobs; many submitted to unemployment rather than accept such positions.

In addition, during the period of labor shortages many employers substituted capital equipment for labor. This process continued well into the 1970’s and 1980’s, as electronic machine controls and new types of machines made such substitutions possible. Many jobs for which foreign workers had been hired were eliminated, yet those workers who had been in Germany for more than five years were entitled to remain. Foreigners thus added to the numbers of unemployed even though few new foreign workers were admitted. Labor Minister Walter Arendt declared that those foreign workers who already had jobs were not likely to be affected by the government’s decision, but as the number of manufacturing jobs declined, some did become unemployed.

Some economists argue that the substitution of capital for labor was accelerated by government and trade union policy. The socialist government that ruled Germany during the early 1970’s, under the chancellorship of Willy Brandt, was committed to a policy of income redistribution. The government taxed more heavily the incomes of the upper and upper-middle classes, and it encouraged wage settlements in which wages increased more rapidly than the growth of productivity. The result was that the availability of capital declined at the same time that real wages, and real wage costs, rose. Expansion of factories that might have taken place and provided new manufacturing jobs did not occur.

Europe’s less buoyant economy operated against a backdrop of declining world expansion. The two oil shocks transferred vast sums of money from the advanced industrialized countries to the Middle East. This money was therefore not available, or available only in more limited amounts, to fuel additional economic expansion in the industrialized world.

Conservative economists argue that another factor adding to unemployment in Europe was the ever-increasing social costs associated with it. Health benefits, unemployment benefits, substantial vacation benefits, and other social costs, many enshrined in collective bargaining agreements, left less money for production. Moreover, it became increasingly difficult to fire excess employees. This in turn led employers to use overtime rather than take on additional employees when the business cycle turned up, so that recoveries did not cause the job growth that had previously occurred. As a result, most of the job growth after 1973 was in the public sector.

Other factors also played a part. Although by the 1970’s the exodus from agricultural work was largely complete, the postwar baby boom added larger numbers of Germans to the workforce, even though the German birthrate had dropped below the replacement level by the late 1960’s. In addition, many women entered the workforce, taking many white-collar jobs that might otherwise have been occupied by men.

Although the announcement of Germany’s decision to cease recruiting foreign labor was the most striking sign of a fundamental change of direction in the European economy, it was not an isolated event. Most of the other advanced industrial economies of Europe took similar steps at about the same time. In 1976, the Dutch parliament passed a law on foreign laborers that limited the number of foreign employees to twenty per employer. Moreover, employers that wanted to hire a foreigner for a job had to demonstrate that the position could not be filled locally and that it was essential to their operation.

Most highly developed European nations took the position that their population densities were already such that they could not, and should not, in principle become immigration countries. They continued to welcome their own nationals who sought repatriation for any reason, but they took an increasingly negative view of people who wanted to immigrate but who had no prior connection with the land in which they wished to settle. In many European countries, housing was in short supply, and it was argued that this restricted supply should go first to citizens in need. In cases such as that of the Netherlands, which had one of the highest population densities in the world—more than three hundred persons per square kilometer—the rejection of further immigration is easier to understand.

Nevertheless, the end of foreign recruitment posed major problems for the areas from which the bulk of the foreign workers had been recruited. Turkey in particular was heavily affected. It was still in the process of urbanization, and employment opportunities in Turkey’s cities were inadequate to accommodate the large number of Turks pouring out of agricultural areas. Another area heavily affected by the end of recruitment was Yugoslavia, where the inability to export surplus labor may have contributed to the breakup of the country in the 1990’s and the early twenty-first century.

The pressures from the native unemployed also made more difficult the position of foreign workers long resident in the industrialized countries. The growth of xenophobia was expressed in acts of violence against foreign workers in almost all the highly industrialized countries of Europe. As unemployment persisted or increased, the number of acts of violence tended also to increase.

The decision of the German government to terminate the practice of recruiting foreign labor for German factories in 1973 marked a turning point in Europe’s economic progress since World War II. It signaled the end of the rapid economic expansion that had characterized the 1950’s and 1960’s. West Germany;immigration

• Böhning, W. R. The Migration of Workers in the United Kingdom and the European Community. London: Oxford University Press, 1972. Although this study antedates the termination of German recruitment of foreign workers and focuses on the likely impact of British accession to the EEC on international labor migration, it gives substantial information on the effects of the “free migration” policies of the EEC on various member countries.
• Drath, Viola Herms. Willy Brandt: Prisoner of His Past. Reprint. Lanham, Md.: Hamilton Books, 2005. An engaging biography of the former chancellor of West Germany.
• Entorf, Horst, Wolfgang Franz, Heinz Koenig, and Werner Smolny. “The Development of German Employment and Unemployment: Estimation and Simulation of a Small Macro Model.” In Europe’s Unemployment Problem, edited by Jacques H. Drèze and Charles R. Bean. Cambridge, Mass.: MIT Press, 1990. Although this study focuses on development of the appropriate algorithm to describe the evolution of the labor market in West Germany, particularly in more recent years, it gives many details that are helpful in understanding the relationship of the immigration ban to the unemployment problem generally.
• Franz, Wolfgang, and Heinz Koenig. “The Nature and Causes of Unemployment in the Federal Republic of Germany Since the 1970’s: An Empirical Investigation.” In The Rise in Unemployment, edited by Charles Bean, P. R. G. Layard, and S. J. Nickell. New York: Basil Blackwell, 1986. Account of the German unemployment problem gives numerous statistical details and applies some standard econometric models. Notes that although the concept of labor mobility implied the further migration of migrant laborers or return to their lands of origin when labor demand diminished, this did not occur to any degree in Germany, perhaps because the migrants were aware that they had become accustomed to a higher standard of living than they could hope to achieve at home.
• Organisation for Economic Co-operation and Development. Manpower Policy in Germany. Paris: Author, 1974. Booklet oriented toward public policy measures gives many details concerning how human resources policy operated in Germany in the years prior to the cessation of foreign recruitment. This work’s underlying assumption is that full employment can be achieved and maintained through governmental economic policy.
• Reimann, Horst, and Helga Reimann. “Federal Republic of Germany.” In International Labor Migration in Europe, edited by Ronald E. Krane. New York: Praeger, 1979. The Reimanns provide the best short description of the entire process of recruiting foreign labor for German manufacturers. They also discuss some of the social problems that developed in relations between Germans and “guest workers.”

East and West Germany Establish Diplomatic Relations

Kohl Becomes Chancellor of West Germany

Fall of the Berlin Wall

Gorbachev Agrees to Membership of a United Germany in NATO

Immigrants in Germany Become Targets of Violence

Unification of the European Market