The World from Berlin Full Employment Could Be in Germany's Future

Germany's latest unemployment figures indicate that the country could soon have under 3 million people out of work, a new low. While some media commentators praise the German economic model, which has helped the country ride out the recession, others warn that vital labor market reforms are still required.

A worker at a Siemens factory in Görlitz, Germany.

A worker at a Siemens factory in Görlitz, Germany.

Just five years ago, Germany was in the grip of an unemployment crisis with the jobless figure soaring to over 5 million in January 2005, the highest level since the Great Depression of the 1930s. Now, with the industrialized world still reeling from the effects of the financial crisis, Germany is in the fortunate position of seeing its unemployment figures falling steadily and could soon have fewer than 3 million people out of work.

On Thursday, the Federal Employment Agency (BA) released the latest unemployment figures. A total of 3.192 million people were registered as unemployed this month, an increase of 39,000 on June. The unemployment rate was 7.6 percent, up 0.1 percent compared to the previous month. The slight increase is largely due to seasonal factors.

The figure is an improvement on the same period last year when 271,000 more people were without work and the joblessness rate was 8.2 percent. The figures point to the success of the German policy of keeping workers on the job under a short-time work program as the country weathered the global crisis, as well as the fact that the country's exports are increasingly in demand.

The government-subsidized short-time work scheme has helped companies to ride out the crisis. While there are still 481,000 people on such schemes, that is just a third of the figure at the height of the recession.

"Germany's economy is experiencing a recovery, the situation on the labor market has improved further," BA boss Frank-Jürgen Weise said when announcing the figures. Labor Minister Ursula von der Leyen welcomed the figures as "good news," saying that the slight increase is due to the start of the summer vacation period when business activity slows down.

Word of Warning

There was, however, a word of warning. Weise said that job losses could be expected in the public sector once a massive government austerity program is implemented. The end of a number of stimulus packages and the weaknesses in the banking sector could also have an impact on the labor market in the coming months.

Economy Minister Rainer Brüderle said "the prospects are good that unemployment will go under the 3 million mark by the end of the year." His optimism is shared by Klaus Zimmermann, head of the German Institute for Economic Research (DIW), who said that this target might be reached as soon as September. "By October at the latest, the unemployment figures will be far lower," he told Reuters. He added that the country could even be looking at full employment further down the line.

On Friday, Brüderle said that in the next few years the real problem facing the German labor market would be a lack of skilled workers rather than unemployment. Speaking to the Handelsblatt business daily, he said that his priority now was to work on making Germany more attractive for skilled foreign workers. He suggested that some companies could even pay employees a "welcome premium" to move to the country.

The German press on Friday takes a look at the latest unemployment figures. While they welcome the improvements, some newspapers warn that the government still needs to implement major labor market reforms.

The center-left Süddeutsche Zeitung writes:

"One of the reasons the country is still in deeper trouble than it seems is the low birth rate. As early as 2015, the struggle to have enough qualified personnel such as teachers, doctors, nurses and engineers could reach new dimensions. Millions of potential job applicants will be lacking if schools, companies and politicians fail to make the country's young people fit for the job market in the future."

"Even though the number of full time jobs is rising, the nature of those jobs has changed. More than 2 million employees make less than €6 ($7.70) per hour and temporary employment is skyrocketing."

"The reforms needed to prevent a two-tier class system of workers start with creating more and better child-care places and full-time schools. Support for long-term unemployed has to improve and people on welfare need incentives to accept a full-time job."

"As of now, the government does not seem willing and capable to push through those necessary reforms. Instead, they are planning billions of euros in cuts relating to spending on the labor market."

The center-right Frankfurter Allgemeine Zeitung writes:

"Before the Merkel government went in to summer recess, they were faced with harsh criticism. Among the deficits and failures pointed out were a butchered stimulus package, sending mixed signals to the financial markets, ongoing bickering and in-fighting between the coalition partners about tax cuts, spending and health care. In addition, the governing coalition lost its majority in the Bundesrat, Germany's upper house of parliament, after the state elections in North Rhine-Westphalia and had to cope with resignations of key personnel."

"It comes as no surprise that the permanent criticism started showing in polls. ... In a recent poll, 61 percent of people asked said they did not believe that the coalition was able to recover from the deep hits it had suffered."

"At the same time, good news about the economy is making headlines. Consumers are buying more and companies are investing more, order books of Germany's export-driven industry are filling up, unemployment numbers are sinking and the finance minister could proudly announce he had to take on less debt than anticipated."

"Although at the moment those signs of recovery are still quite volatile and not yet attributable to good governance, the coalition will undoubtedly benefit from the improved mood -- just as they were blamed when the country wasn't doing well. Certainly, the public will soon notice the discrepancy between the purported apocalyptic mood and the not so hopeless reality."

The conservative Die Welt writes:

"The unemployment rate is below the average in the OECD group of industrialized countries -- something that hasn't been the case for a long time."

"This is good news. Unfortunately, politicians give the distinct impression that the figures are helping to dampen any great rush to reform the system. The problems on the labor market are by no means solved. For example, the number of those who are without a job for longer than 12 months is 45 percent, far above the OECD average. And there is no sign of major political offensives to fight against this expensive and socially harmful long-term unemployment."

"A disproportionate amount of people also work part time, even though they would like to work more. The taxation and welfare system dissuade many people from working more."

"If the economy continues to improve, then the government can lay the groundwork for achieving close to full employment during the next legislative period. This is a huge opportunity for the country, as well as the government. It would be sad if not everything was done to take advantage of it."

The business daily Handelsblatt writes:

"The strengths of the German economy are in stark contrast to the widespread skepticism of the past few years. The Anglo-Saxon world's assessment of Germany as an 'old economy' has now been proved wrong."

"The differences in the development of the labor markets here and in the United States is testament to that. While in Germany even the big companies are now hiring instead of firing, the opposite is the case in the US. There, the doubts about turnover prospects are prompting companies to let people go in the hope of increasing productivity."

"Jobless growth is now an issue in the US again. The job losses are easing somewhat ... but the creation of new jobs is far slower than in a more dynamic economy. While the question of what is the most appropriate business model is occupying many in North America, those voices have largely been silenced here. The successes are just too obvious."

-- Siobhán Dowling and Jessica Donath


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