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.

25 MILLION JOBS NEEDED IN THE EUROPEAN UNION

ETUC protesters, Brussels February 2010

How should the economic crisis in Europe be addressed? The classical or conservative road is taken by German prime  minister Merkel.  She insists on a rigorous governmental financial policy with a strict budget control. The budget should not have a deficit bigger than 3%. Government debt should be limited to 60% of the GNP. These strict rules are signed by all EU Governments and laid down in EU legislation. Until now this policy has been fully supported by the Frech president Sakozy and countries like the Netherlands, Finland and Austria. Ireland, Portugal, Spain and Italy are working on it.

But there are also many opponents of this policy, mainly trade unions and leftist political parties. They believe that such a strict budget control destroys the economy resulting in massive unemployment and poverty. The European Trade Union Confederation repeatedly has stressed this point of view. The French socialist and presidential candidate Hollande supports this position of ETUC (the second round between the actual president Sarkozy and Hollande will be on May 6). If Hollande will be elected tensions on future European policy will increase again.

In the meantime the European Commission responded to this criticism  with the publication of a report called “Towards a job-rich recovery”. The report says that “Job creation is one of the EU’s most pressing concerns as it struggles to emerge from the economic crisis. Unemployment has risen to record highs – about 24.5 million people are unemployed, over 10% of the workforce.”

ETUC protesters, Brussels February 2012

The recommendations aim to provide jobseekers with more training and more job opportunities. Those in work would get help acquiring the skills they need to stay up-to-date with changing job requirements. Employers creating new jobs would also receive support. General recommendations include:

-   1. Encouraging job creation through support for businesses, entrepreneurs and self-employed persons, including decent and sustainable wages.

-   2. Targeting key industries where jobs are being generated: the green economy, health and social care sector, digital economy, etc.

-   3. Using existing EU programmes to fund job creation.

-   4. Reforming labour markets to meet future demand

-   5. Developing programmes to encourage lifelong learning and providing young people with training to advance their careers.

-   6. Investing in skills training, anticipating future job requirements removing obstacles to finding a job in another EU country.

-   7. Fine-tuning schemes – including the EURES jobs database – that match jobseekers with jobs across Europe.

-   8. Improving coordination of employment policies across Europe.

-   9. Increasing the involvement of employers' and workers' groups in employment policy making.

However, the ETUC stays very sceptical on these proposals as we can read in the press release of April 18. “The Commission’s proposals will do nothing to help create quality jobs, if the European Union and its member states continue to implement rigid fiscal austerity rules. On the contrary, cutting deficits in the midst of a recession will produce a deeper recession and even higher unemployment rates. Labour market policies cannot compensate for failing macro-economic policies. “

The ETUC believes even less in the proposals for labor market reforms like for example “flexicurity” : “Whilst the model has worked in some Nordic countries, in other parts of Europe it has resulted in increased insecurity for workers.” The ETUC asks for more positive proposals: “strengthening the involvement of social partners in the elaboration of macroeconomic and labour market policy, the role of decent wages in securing job quality and domestic demand, increasing minimum wages to help prevent growing in-work poverty, action to support youth employment and to tackle undeclared work. To replace the ‘governance of austerity’ with the ‘governance of growth and good jobs’, the ETUC urges all European policy makers to advance on these proposals.”