Ploger, Jorg

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Research Papers in Economics

 
 
 
 
 
 
 
 
  
 
 
 
Report to tainable Communities   the Academy of Sus
2008 
Photo: BMW plant in Leipzig 
Source: City of Leipzig / Office for Economic  Developmen
CASEreport 53 
By Jörg Plöger
Photo: BMW plant in Leipzig 
Source: City of Leipzig / Office for Economic  Development
CASEreport 53
2008 
Report to the Academy for Sustainable Communities 
Case Study 4: Leipzig’s Municipal Job Agency 
1.   Context 
 
City 
•  Leipzig is located in the German federal state of Saxony, Eastern Germany 
•  Its population totals 498,000, making it the second largest city in Eastern Germany after Berlin. 
•  The former Socialist East German regime collapsed in 1989 with the fall of the Berlin wall. Germany 
was reunified in 1990. Reunification meant that the Eastern regions were absorbed into the existing 
West German framework leading to a dramatic system change for the New Länder. 
•  Leipzig has become known as one of the few ‘success stories’ in Eastern Germany. This has been 
attributed to factors such as its political leadership, the will to make tough decisions, the active 
participation of civil society, well-designed public services and a high quality of life. 
 
Crisis 
•  In just a few years after reunification, Leipzig underwent an unprecedented deindustrialisation process, 
which was rather a ‘sudden death’ than a ‘long decline’ (as it had been in some West-German cities for 
example). The industrial workforce declined from 101,000 in 1989 to 11,000 in 1996 (see Fig. 1). 
 
Fig. 1: Number of employees in manufacturing (changes since 1989) 
0
20,000
40,000
60,000
80,000
10 0 ,0 0 0
12 0 ,0 0 0
1 989 1 991 1 993 1 996 1 999 2002 2004
 
Source: Stadt Leipzig 
 
•  Severe environmental damage due to the continuous pollution of air, water and soil by heavy industries 
and open-cast mining was a difficult legacy to wipe out. 
•  Many links with the Eastern bloc countries were suddenly cut by reabsorbtion into the West. 
•  There were major social consequences for the population: unemployment which was officially non-
existent until 1989 rose to 24% in 2005 (see Fig. 2). 
•  Population decline due to migration to more dynamic West German urban areas and rapid 
suburbanisation caused the city’s population to plummet (see Fig. 3). The consequence was that 
Leipzig – like most East German cities – became a ‘shrinking city’
1, posing a series of new urban 
1 
                                                      
1    A term used by an EU funded German project, Schrumpfende Stadt (or shrinking city), examining the phenomenon of declining cities 
  
problem such as an oversized technical infrastructure, decreasing tax base, housing vacancies and 
chronic decay. There were more than 60,000 empty homes in 2000. This overburdened the city budget 
and created an even stronger motive for unsustainable sprawl in the surrounding areas as the city 
became unviable. 
•  Since reunification massive transfer payments have been made to Eastern Germany to leverage its 
structural recovery. In 2003, federal subsidies still accounted for one third of the East German gross 
product. 
 
Fig 2: Unemployment rates in Leipzig and Germany (in %) 
0.0
5.0
10 .0
15.0
20.0
25.0
1 990 1 995 2000 2005
Leipzig
Germany
 
Sources: Stat. Bundesamt; Stat. Landesamt Sachsen; Bertelsmann Stiftung 
 
Fig. 3: Changes in population levels, 1914-2004 
400,000
450,000
500,000
550,000
600,000
650,000
700,000
750,000
1 91 4 1 933 1 950 1 975 1 989 1 993 1 998 2001 2004
 
Sources: Statistik Sachsen; Stadt Leipzig 
Note: The decline between 1993 and 1998 was caused by migration towards more dynamic West German regions and rapid 
suburbanisation to surrounding municipalities. The rise until 2001 is mostly attributed to municipal incorporation of some suburban 
municipalities. 
  
2 
                                                                                                                                                                                
     in different countries. 
  
2.   The aims of the new economic approach: focus on attracting new companies 
 
Among other areas such as housing and urban renewal, economic development was seen as a key factor in 
the recovery in Leipzig. The City Department of Economic Development and the Economic Initiative 
Mitteldeutschland, a lobby group representing large regional employers, designed a cluster strategy based 
on five economic areas: 
•  car production and automotive components 
•  media, telecoms and IT; 
•  healthcare and biotech; 
•  energy and environmental engineering; and 
•  enabling technologies and services. 
 
As there was no significant grouping of local companies, attracting major employers became a core task 
within the economic development policy. The city council was determined to ‘go the extra mile’. In order to 
achieve its objective in the context of increased competition for investment on regional, national and 
international levels, Leipzig designed several business services and reorganised its own structure. This 
included four main ingredients: 
•  effective land supply policy; 
•  quick, non-bureaucratic implementation of decisions; 
•  cross-departmental cooperation; and 
•  additional services to potential investors, e.g. the municipal job agency PUUL (see below). 
 
Leipzig has been impressively successful in attracting major companies, especially in the logistics sector 
(DHL, Quelle, Amazon) and car manufacturing (BMW, Porsche). These two sectors alone led to the creation 
of an estimated 5,000 and 6,000 new jobs respectively. 
 
The logistics sector was attracted by the proximity to the Leipzig-Halle airport, the only German airport 
without flight prohibition during the night. The airport was modernised through public funds (€660 million). 
Twenty-four hour flight access was central to the decision of DHL to open one of only 3 international logistics 
centres in the world.
 DHL plans to employ 3,500 staff when fully operational in 2010, and an estimated 7,000 
jobs are expected to be created indirectly (see Fig. 4). 
 
3 
  
Fig. 4: Logistics Park close to Leipzig-Halle regional airport, including new DHL hub (on the right) 
 
Source: GVZ Entwicklungsgesellschaft 
 
BMW chose Leipzig for its new manufacturing site out of 250 applicant cities. Production began in 2005. 
BMW’s investment of €1.3 billion was supplemented by €360 million in state subsidies. For BMW, the 
significance of the Leipzig site is symbolised by the company commissioning the internationally renowned 
architect Zaha Hadid to design the complex. As a BMW spokesperson said, the employers were attracted to 
locate in Leipzig because of: 
•  the availability of sufficient and conveniently located land; 
•  lower labour costs (approximately 23% below West German levels); 
•  longer working hours and lower security of labour in Eastern Germany; and 
•  the efforts made by the City of Leipzig to help companies with the logistics of setting up in Eastern 
Germany. 
4 
  
3.   Methods: the municipal job agency PUUL 
 
One of the most significant moves by the city was the creation of the municipal job agency PUUL (Personal 
support for companies in Leipzig); crucial to its creation in 2001 was the decision by BMW to build its new 
plant in Leipzig. The job agency has the following characteristics: 
•  a subsidiary company of the City of Leipzig; created by the Department of Economic Development; 
and 
•  a company responsive remit: offering special services to companies that plan to locate or expand in 
and around Leipzig. 
Its main fields of activity are finding and pre-selecting the necessary workforce for these companies; 
providing companies with information about the structure of the local/regional labour market (e.g. skills, credit 
levels, etc.) and running its own job data base (Jobimpuls). In joint cooperation with regional and federal 
labour agencies and companies, PUUL started the project Poleposition in 2002. Funding to 2004 amounted 
to €870,000. Its aim was to prepare unemployed jobseekers for future job openings and to make them 
compatible with the new labour market as it emerged. 
 
With the City of Leipzig as the main shareholder, PUUL is required to integrate as many jobless as possible 
into the labour market. Nevertheless, the agency is not thought of as part of the city’s social policy but as part 
of economic development. In this it is like Sheffield. This job agency is still a virtually unique case in 
Germany. To our knowledge, no other city has made a similar commitment until now. 
 
Funding 
Between 2001-2005, initial funding of €1.7 million came from the City of Leipzig supplemented by additional 
external funding of €0.8 million from federal and European sources. Since 2006, the agency has funded itself 
independently because the City of Leipzig is no longer providing funds. Sixty percent of the funding now 
comes from the public sector, mainly the federal and regional labour agencies and some additional funds 
from European Social Fund (EU). Forty percent is made up of private investment from companies in the 
region that have an interest in the provision of such a service. 
 
Outcomes 
The agency channelled more than 3,000 applicants into new jobs, approximately 1,500 of whom were 
formerly unemployed: 
•  approximately one-third of the jobs went to jobseekers from each of Leipzig, the inner commuting 
zone and the wider commuting zone. As Leipzig is located in a structurally weak region, unemployed 
residents of surrounding communities and nearby cities like Halle also come to Leipzig looking for 
work. 
•  Jobs were mainly created in two dominant economic sectors: 
o  automotive such as BMW (approx. 2,000 jobs), suppliers to BMW (approx. 350)
2; and 
o  logistics: DHL (approx. 400), Amazon (approx. 400) 
5 
                                                      
2    BMW received 109,000 job applications (!) 
  
•  The previously unemployed could more readily be placed in the logistics sector which required a 
lower skills base. Here, approximately 90% of jobs went to formerly unemployed workers, in the case 
of Amazon up to 100% (!). 
•  Halle (the closest city in the region with even higher unemployment) has evolved as an important 
location for call centres; spillover benefits in further call-centre jobs are expected for Leipzig in the 
near future. 
•  465 participants who attended courses funded through the Poleposition project run by PUUL 
managed to get permanent jobs at the BMW plant. 
 
 
4.   Challenges and Responses 
 
Challenges  Responses  
Securing inward investment, 
attracting major companies 
City went out of its way to make everything easy for the big companies 
(good cross-departmental cooperation, cutting down on bureaucratic 
procedures, offering special additional services) 
Preparing the unemployed for 
work 
Training application process and support (e.g. through Poleposition 
programme run by job agency PUUL) 
Making the city more attractive 
to investors 
Major renovation and some demolition of older housing stock 
Shifting the economy from 
planned Soviet style to Western 
market basis 
Adaptation of skills, system change, leadership 
Stopping the leakage of 
population away from the city 
Making it an attractive place to work while re-expanding job opportunities 
 
 
5.   Overall lessons and results 
 
•  Courting large companies in order to rebuild an economic base and close the huge employment gap is 
helped by investment in regeneration. 
•  Designing and implementing a long-term strategy about how to achieve urban recovery steered the city 
through years when outsiders lost confidence. 
•  The need to offer a broad range of services in order to ‘win’ new companies was taken seriously by 
Leipzig. 
•  Adopting an innovative approach to urban renewal greatly helped in restoring confidence in Leipzig as 
a place (see our City Reports). 
 
 
  
6 
  
6.   Concluding thoughts 
 
This case study illustrates the lengths to which the city council went to rebuild an economic base after the 
dramatic restructuring of the entire East German system. Skills are key to the success of this approach. This 
investment based programme aims to aid city recovery through: 
•  providing new employers with a suitable workforce; and 
•  chanelling the unemployed into employment.  
Any sustainable approach to economic recovery must focus on these issues, and Leipzig has been 
spectacularly successful in defying predictions of population and economic collapse through a determined 
drive to attract inward investors and link their population to the new opportunities. 
7 
  
Annex 
 
Literature 
BERTELSMANN  FOUNDATION  (2006) Demographiebericht Leipzig, Aktion Demographischer Wandel. URL: 
http://www.wegweiserdemographie.de. 
CITY OF LEIPZIG / EMPIRICA / BÜRO FÜR URBANE PROJEKTE (2004) Leipzig 2030, Final Report. 
LÜTKE DALDRUP, E. / DOEHLER-BEHZADI, M. (eds) (2004) Plusminus Leipzig. Stadt in Transformation (2030: 
Transforming the City), Wuppertal. 
MILJAK, V. / HEIDENREICH, M. (2004) The Leipzig Economic Region, Halle Institute for Economic Research. 
NUISSL, H. / RINK, D. (2003) Urban sprawl and post-socialist transformation – the case of Leipzig (Germany). 
UFZ Report, 2003, 4. 
Oswalt, P. (ed) (2005) Shrinking Cities, vol 1, International Research, Ostfildern-Ruit. 
WEIGEL, O. / HEINIG, S. (2007) ‘Entwicklungsstrategien ostdeutscher Großstädte – Beispiel Leipzig’, in: 
Geographische Rundschau, vol 59, no 2, pp 40-47. 
 
Reports by the City of Leipzig 
CITY OF LEIPZIG  /  DEPT. OF URBAN  DEVELOPMENT  (2004)  Einzelhandelsentwicklung – Monitoring zum 
Stadtentwicklungsplan Zentren. 
CITY OF LEIPZIG / DEPT. OF URBAN DEVELOPMENT (2004) Bericht zur Stadtentwicklung, Leipzig 2004, Beiträge 
zur Stadtentwicklung 42. 
CITY OF LEIPZIG / OFFICE FOR ECONOMIC DEVELOPMENT (2005) Leipzig means business, 2005. 
 
Webpages (accessed in 2007) 
Bertelsmann Foundation: http://aktion2050.de/wegweiser 
Centre of Environmental Studies (UFZ): http://www.ufz.de/ 
Chamber of Commerce (IHK): http://www.leipzig.ihk.de 
City of Leipzig: http://www.leipzig.de/de/index.shtml 
Employment Services, Leipzig (PUUL): 
http://www.personal-leipzig.com/front_content.php?sid=3b9732cd7d2f4d84a43ff3af502d3875 
Job bank run by PUUL (JobImpuuls): http://www.jobimpuuls.de 
Halle Institute for Economic Research (IWH): http://www.iwh-halle.de/default.asp?lang=e 
Institute for Regional Sciences (IfL): http://www.ifl-leipzig.com/ 
Marketing Initiative, Leipzig (Mitteldeutschland): http://www.leipziger-freiheit.de/de/index2.html 
Regional Economic Initiative: http://www.mitteldeutschland.com/ 
Statistical Office, Free State of Saxony: http://www.statistik.sachsen.de/ 
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9 
 
Interviewees 
Joachim Burdack  Researcher, Professor  Institute for Regional Sciences (IfL) 
Sigrun Kabisch  Head of division  Centre for Environmental Studies (UFZ) 
Torsten Oertel  Managing director  Job agency (PUUL) 
Michael Schimansky  Deputy head of department  City of Leipzig, Office for Econ. Development 
Oliver Weigel  Head of department  City Council /Dept. of Urban Planning 
Klaus Wurpts  Managing director  Economic Initiative for Mitteldeutschland region
 

Case study 4: Leipzig's municipal job agency.

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