The World from Berlin Germany's Jobs Miracle is 'Wobbly'

German politicians tripped over themselves this week to announce that unemployment had sunk to an impressive low -- under 3 million. But German papers study the statistics and wonder how long the good times will last.

Ursula von der Leyen announcing "less than 3 million unemployed" in Germany on Wednesday.

Ursula von der Leyen announcing "less than 3 million unemployed" in Germany on Wednesday.

The news was so fabulous that German ministers couldn't leave it to the Federal Employment Agency, which normally releases jobless numbers at the end of the month. Labor Minister Ursula von der Leyen staged an unscheduled press conference to personally announce that German unemployment for October had sunk to 2.945 million, or 7.0 percent. Economics Minister Rainer Brüderle was also on the sidelines, hoping to crowd his way into the photo op, too. In fact, it was cause for celebration: The number of jobless Germans was now under 3 million for the first time in 18 years.

German unemployment has fallen steadily since mid-2009. Economists who call it a "jobs miracle" marvel that Germany, of all Western nations, has found found a way through the worst economic downturn since World War II. Ministers like von der Leyen and Brüderle -- members of Angela Merkel's new but ailing coalition, which came to power a year ago -- are breaking out the champagne. But who deserves credit?

What's kept the German economy from hemorrhaging jobs over the last two years is a "short-time" work program that encourages firms to keep workers even if they have to cut back hours (say, to one-third, of the usual week). The government covers up to two-thirds of a worker's regular salary, as well as monthly pension and health-care payments. It's a subsidy. Training for new jobs has also been subsidized, and the program has proven far more flexible in rough times than traditional welfare. It can't last forever, but conveniently for politicians it keeps jobless numbers low.

The short-time work program took its current form under former Labor Minister Franz Müntefering, a Social Democrat, during Merkel's first term. Müntefering was a holdover from the previous cabinet under Chancellor Gerhard Schröder. The former chancellor casts another shadow on the current bright news, for politicians across the spectrum. His neoliberal welfare-reform packages, known as Agenda 2010 and including the notorious Hartz IV, were radical rollbacks of benefits for a Social Democrat, and they literally cost him his job in 2005. But they also made the German labor market nimbler, which probably staved off more disastrous losses during the recent recession.

Will the numbers hold? The broader economy is recovering, but the jobless numbers may be soft. One Schröder reform was to allow more temporary employees, who work without contracts or benefits. They're different from employees on the short-time work program, but they count as "employed" under current statistics.

German papers bicker over the details on Thursday morning.

The Financial Times Deutschland writes:

"Labor Minister Ursula von der Leyen admittedly doesn't cast this as her own victory -- at least not yet -- but as 'a sensational triumph of the federal government under Angela Merkel.' Merkel inherited an unemployment figure of 5 million from the previous government (under Schröder)."

"But it's also true that the reforms Merkel inherited from the previous government are largely responsible for the current success: temporary employment, Hartz IV, changes in the Federal Employment Agency. Even the expansion of the short-time work program was overseen by a Social Democrat."

"The current results are wobbly because they rest on uncertain jobs. The numbers show an increase in temporary jobs to 850,000 -- 350,000 more than in the immediate aftermath of the financial crisis, and more, in fact, than before the crisis … Politicians may go wrong if they believe that the growth in temporary jobs will end soon, or that temporary workers may soon find more secure positions."

The center-left Süddeutsche Zeitung writes:

"In fact, jobless numbers have only fallen by 86,000 (from August to September) -- which is not an occasion for the labor minister to stage a press conference. If the total number had remained just over 3 million, she would not have announced it herself."

"But it's interesting that Economics Minister Rainer Brüderle has described this new development as 'stable.' It's interesting because he might actually like to do something. Is it not the right time to help employers resist the temptation, say, to hire only temporary workers during the economic upswing? Or to offer only short-term contracts to new employees? Such jobs are unstable, suited perhaps for unstable times. But they were made possible through laws that have now resulted in a new temptation. Young governments like to talk about a 'heavy inheritance' from previous administrations. Here's one Brüderle could jettison."

The conservative daily Die Welt argues:

"The Social Democrats -- who these days would rather not mention Schröder's Agenda 2010 -- have hailed the government's free-spending stimulus policies during the worst days of the recession as a foundation for the now internationally recognized 'jobs miracle.' In fact the Hartz reforms have probably brought more long-standing good news to the labor market than either the cash-for-clunkers bonus (a new-car subsidy) or the short-time work program, which have both achieved mainly temporary, psychological benefits."

"Anyone who questions the current idea of raising the German retirement age to 67, something Social Democrats as well as the unions have resisted; anyone who calls for dismantling Hartz IV reforms, anyone who demands a Germany-wide minimum wage -- those people want to turn back the wheel of history. Every effort to bring about the vision of full employment in Germany is therefore worthwhile. The problem children of German employment agencies are still the long-term unemployed. For them to see opportunity, too, the labor market must become even more flexible. The romantics of the social welfare state prefer to resist this eventuality with all their strength."

The left-wing Berliner Zeitung writes:

"The remarkable jobs number was announced just in time for the first anniversary of the current coalition between Merkel's Christian Democrats and the Free Democrats. But the current coalition had the least to do with these results. Tax cuts for hotel owners and other interest groups have not lowered German unemployment. ... Gerhard Schröder, if anyone, deserves to enjoy some late recognition. His labor-market reforms were unpopular and cost him his job. But the most important measures ... have shown long-term value. The grand coalition (during Merkel's first term) can pat itself on the back for expanding the short-time work program; this policy spared many thousands of jobs during the most recent crisis. And the unions can reclaim their reputation: Restraint in wage talks and agreements to allow flexible working hours both contributed to the fact that Germany, now, has a more dynamic economy than France, Great Britain or Spain. This is not self-evident."

"Yes, the good news has many parents. But the main reason for the trend is demographic: Germany is growing older. This fact will burden the pension and health-care systems, but it eases labor markets ... A shortage of contributions to these systems -- and of experienced workers -- will be Germany's problems of the future. Problems? Yes, but problems of luxury. Problems, above all, which can be solved -- through better education, training and immigration policy. No government with such prospects should have to stumble."



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