Reduced Hours Redux? Employers and Unions Brace For a Downturn

As the economy slows palpably, German employers and unions are preparing for a downturn. Together, they are calling for the government in Berlin to continue funding short-time work programs that helped Germany to successfully weather the 2009 recession without mass unemployment.

Employers and unions want short-time options work to remain in place. Zoom
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Employers and unions want short-time options work to remain in place.

It was perhaps the most successful program implemented by Chancellor Angela Merkel's former grand coalition government, a strange bedfellows marriage comprised of her conservative Christian Democrats and its usual political opponent, the center-left Social Democrats. By expanding the short-time working programs known in German as " Kurzarbeit," her government managed to prevent the tough recession from crushing the country's labor market and causing the kind of mass unemployment seen elsewhere.

Fears of a new recession brought on by the euro crisis have now compelled employers' organizations and unions to call on Merkel's government to maintain the programs, often cited as a main tactic that helped Germany emerge from the last recession so strongly.

"Even in times when the economy is in a good place some potential risks should be prevented," Dieter Hundt, president of the Confederation of German Employers' Associations (BDA), told the Süddeutsche Zeitung newspaper on Thursday.

He suggested the government should create provisions so that the short-time work programs could be quickly reinstated "without time-consuming legislative procedures."

Michael Sommer, head of the German Confederation of Trade Unions (DGB), also suggested that the instrument be used past the expiration date of Dec. 31, 2011, warning that "the finance and euro crises can affect the real economy." Thus Berlin should keep the necessary instruments at the ready, giving them the ability to "react quickly and un-bureaucratically" if the economy takes a turn for the worst, he said.

Dark Clouds on the Horizon

Indeed, the economic outlook for the country appears to be suffering. Early this week, the federal government adjusted its growth expectations for 2012 to less than 1 percent, down from initial projections of 1.8 percent. Meanwhile, some economists are actually predicting negative growth.

Short-time working programs helped prevent company lay-offs during a recession by allowing firms to temporarily reduce working hours while the government funds some of the difference in workers' lost income and benefits. The programs have been popular with both employers and unions.

In 2009, the government expanded Kurzarbeit's reach considerably to pad the shock of the finance crisis, lengthening the maximum coverage timeframe to two years, among other things.

The reform was effective: Germany overcame the recession more quickly than other countries because the labor market didn't suffer as much. According to the Federal Employment Agency (BA), some 1.5 million German workers took part in the short-time work programs, preventing the loss of between 300,000 to 400,000 jobs. Since then labor market tensions have eased considerably, with fewer companies taking advantage of the programs, which are set to expire at the end of this year.

--kla, with wires

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