If nothing happens, the chasm between those who can participate in the growing prosperity and those who are left out of it will only continue to grow. The reforms of recent years have clearly failed to reach one of their two goals. More temporary labor and short-term employment relationships were intended to make the labor market more flexible and thereby lead to more employment, and this has been achieved. But they were also expected to form a bridge from unemployment into well-paid staff positions, which hasn't happened.
"The hopes of non-core and temporary workers of entering the core workforce and thereby participating in prosperity have hardly been fulfilled so far," says Lutz Bellmann, a labor market specialist at the Institute for Employment Research (IAB) in Nuremberg, a division of the Federal Employment Agency. Only about 8 percent of temporary workers are permanently hired within a year by the companies they are used in, he explains, and very few successfully negotiate the transition from mini-jobs and short-term work contracts into the safe world of wage-agreement tables and bonuses. As in society at large, Bellman says, "permeability decreases as you move up."
Ulrich Walwei, the IAB's deputy director, has just examined all the available labor market data. The results are clear: As qualifications decline, the risk of unemployment multiplies. In other words, education exponentially increases job prospects. As Walwei notes, the gap "between the wages of people with good and bad qualifications has grown in recent years." Those with poorer qualifications are highly likely to end up in precarious employment situations.
In fact, this growing chasm between the top and the bottom is not only growing in Germany, but also in many countries across the world, according to organizations such as the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD). Experts see the growing divide as a threat to long-term economic growth. "We will only achieve this goal if prosperity is distributed more widely throughout incomes," says Peter Bofinger, a prominent economist and government adviser.
Different Times, Different Challenges
But how can employees be given a share in the continually growing prosperity? And what role should politicians play if the parties to wage agreements are too overwhelmed to solve their problems?
Ten years ago, when Germany was stuck in a reform bottleneck and thousands of jobs were being lost to low-wage countries, there was a need for policies that promoted more jobs and economic competitiveness. But, today, the challenges are different. To narrow the gap between rich and poor, the labor market and the tax and social systems must be fundamentally altered:
The Needed Agenda 2020
Those hoping to narrow the gap between rich and poor cannot put all their trust in the power of the unions and the forces of demographic change. They also have to emphasize political reforms. More spending on education and changes to the tax and transfer systems that would benefit low earners are needed. The series of labor market and welfare reforms known collectively as Agenda 2010, which Chancellor Schröder put in motion in 2003, completely reorganized the welfare state and were necessary for making Germany's economy globally competitive again. But, to achieve more social equality, we now need an Agenda 2020.
Indeed, what's needed is nothing less than a change in the system so radical that it would make the painful Hartz reforms (named after former Volkswagen exectuve Peter Hartz, who advised the Schröder government closely on its ambitious structural reforms) seem like cosmetic surgery by comparison. Hilmar Schneider, director of labor market policy at the Bonn-based Institute for the Study of Labor (IZA) and one of Germany's best-known employment experts, agrees. He notes that there is no alternative to making the working world more flexible, adding: "The days of small changes are over."
REPORTED BY SVEN BÖLL, MARKUS DETTMER, CATALINA SCHRÖDER, JANKO TIETZ AND FLORIAN ZERFASS
Translated from the German by Christopher Sultan
There are many ways in which the extreme differences between lower and higher income groups could be placed on a fairer basis. Some are so simple that they are completely overseen. The biggest problem however, is that those [...] more...
Very true it is. Each day adding to miseries of salaried and jobless people. If some one can meet both ends feels happy to live on. Enjoyment or some extra spending seems to be stories of the past. How long it will continue is [...] more...
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