MORE ABOUT GERMAN MINI JOBS

Below you find a reaction on the earlier published blog on German Mini Blogs (July 12 2013), written by Adalbert Ewen, President of the German Metal Union CGM affliated to the German Christian Confederation CGB. The CGM is affliated to the World Organization of Wokers WOW.

At the beginning of the new millennium, Germany was considered "the sick nation of Europe". How could it therefore be possible to reverse this situation and to grant Germany a role model– whether rightly or wrongly?

In the years from 2001 onwards, the Schröder government underlined the importance of national and international labor market reforms, particularly the so-called "Hartz reforms" of the years 2003 to 2005. The federal government applied the so-called flexicurity, that is, demanding a stronger activation of jobseekers, by fully deregulating the legal basis of individual forms of atypical employment opportunities. Thus, the creation of minor employment was considered the alternative to unemployment, especially in the expanding service sector. Nevertheless, during high times of the new economy, one resisted the temptation to expand this sector further, especially in the financial sector. Instead, all Länder-governments wanted to maintain and further strengthen the industrial 'Germany', including special support for the middle class with a total of 1,400 companies, belonging to the world market leaders. Here, the relationship between trade unions and employers has played a major role. The social partners established security of employment as a major element, which has been crucial for the German success and for our competitiveness.

Therefore, the importance of labor market reforms is often oversubscribed. Very flexible labor agreements with the trade unions contributed to strengthen the equity base of the companies and to increase profitability. Therefore, even at the peak of the financial crisis in 2009, closure of a larger number of companies could be avoided, among others due to short-time working.

Nevertheless, there is a correlation between high growth rate and income inequality. In Germany, thanks to reforms, unemployment has been reduced from five to three million. The appropriate wage policy secured many well-paying jobs in the industry. Therefore, Germany has a higher share of industrial employment than France or England, for example. Moreover, Germany presents a high trade surplus, because a large part of industrial productions goes into the world market.

The beginning of the millennium showed a real wage loss, but from 2005 onwards, trade unions increasingly managed to reverse this trend. The only problem left over, in fact, was the greatly increased number (more than 7 million) of atypical employments (mini-jobs, part-time and temporary work). As much as these jobs contributed to more flexibility on one hand, on the other, they also led to significant revenue losses for the social security institutions, and they will lead to increasing poverty among the elderly, especially women, whose average pension is already significantly below that of men.

So-called "mini-jobber" are not insured against unemployment and not affiliated to the statutory pension insurance of self employed. The latter has recently been made possible – though quite inadequately. Mini-jobs put increasingly tariff rates (rates established in collective agreements) under pressure, because since ten years, the former limitation to a maximum allowable working time has been dropped (crowding out effect of regular employment).

Conclusions:

• Unemployed people bear the greatest risk of poverty. About 56 percent of them are at risk of living in poverty (poor people perceive less than 60 percent of average earnings in Germany).
• Nearly 59 percent of the poverty threatened is able to escape poverty by means of a low-wage job.
• According to my union, this mini-jobber need better legal requirements, most notably the elimination or significant reduction of the minimum threshold of compulsory social security.

While maintaining a minimum threshold, the (re)introduction of a limit for allowable working time in hours (previously 15 hours per week) is essential, in order to allow an hourly wage corresponding to a minimum wage of 8.50 € for a monthly salary up to 450 € - as requested by the unions.

Adalbert Ewen

CGM-Bundesvorsitzender

23/07/2013

GERMAN MINI JOBS

The Marx and Engels Monument, Berlin 2011

The Britisch magazine The Economist of half June had a Special Germany Report*. Very interesting stuff to read even if you take in account that The Economist is one of the leading promotors of neo-liberal thinking. If you as a trade unionist want to know, what your opponents think it is therefore perhaps especially wise to read the Economist. One of the interesting parts of The Special Report is the one called “the working parts”. It is about those characteristics that explain why Germany is not doing so bad during this European crisis. Another reason to read The Special Report.

One very interesting question especially for trade unionists, is why Germany has such a favourable employment record? “A decade ago Germany had one of the worst jobless rates in the rich world. Today its employment rate of 5,4% (using OECD figures) is one of the lowest in Europe. Youh unemployment, below 8%, is half that in America and a third of the European average. It is also the lowest Germany has een for 20 years.”

According to The Economist's Special Report this is not the result of booming growth. “Over the last decade Germany's economy has on average grown more slowly than American's and Britain's and barely faster than that of the euro zone as a whole. But Germany managed to avoid a surge of lay-offs after the financial crisis and has done far better than others at getting the young and the hard-to-employ into work.”

The Economist wonders how Germany did manage that? “Most explanations heap praise on the Mittelstand model and the system of vocational training. Firms take on apprentices, mixing practical training with classroom tuition. The German Government also points out that the country “did its homework”, introducing tough labour reforms from 2003 (known as 'Agenda 2010') that freed up the labour market. And the system of Mitbestimmung (which gives trade unions seats on company boards) encouraged wage restraint.”

But for the Economist this explanation is not sufficient: “a cheap currency, some dumb luck ( this sounds irrational especially for the neo-liberal Economist) and a fair amount of fiscal pragmatism also played a part.(....) Shocked by high joblessness and the hollowing out of German industry, the Social Democratic Government under Gerard Schröder introduced a set of sweeping tax, regulatory and labour reforms in 2003. The most important part of this package were the so-called Hartz reforms ( after Peter Hartz, who headed the commission that drew them up), which brought fundamental changes to the low end of the German job market. They eliminated payroll taxes on earnings of less than € 400 a month (recently raised to € 450 ), thus encouraging the creation of part-time 'mini-jobs'. “

The Economist finds that these 'mini-jobs' brought back into work the long-term jobless and gave employers an incentive to create low-skilled and temporary jobs and the jobless a reason to take them. “The also made Germany more Anglo-Saxon. Some 20% of Germans now work in “low-wage” jobs, about the same share as in Britain, not much lower than in America and almost twice as much as in France. Germany's employment boom had less to do with the Mittelstand than with this overhaul at the bottom, which pulled a lot of low-skilled people into work – though it also exerted a downward pull on overall productivity.”

The reforms had also what the Economist calls “big knock-on effects.”: “In conjunction with a move east by many German firms, they persuaded Germany's unions to accept years of tight wage restraint. Between 2001 and 2010 German wages rose by an average of just 1,1% a year in nominal terms, leaving them flat in real terms. Unit labour costs fell sharply relative to those in other countries.”

* The Economist, The Reluctant Hegemony, Special Report Germany, June 15th – 21st 2013, page 12.