January 25th, 2012
10:30 AM ET

Germany's jobs miracle

Editor's Note: The following text is from GlobalPost, which provides excellent coverage of world news – importantmoving and just odd.

By Siobhan Dowling, GlobalPost

BERLIN, Germany – Unemployment is rising in most European Union countries, as the effects of crippling sovereign debt crisis, and the austerity measures prescribed to tackle it, take their toll.

Yet the bloc's biggest and richest member has seemed almost immune to the effects of the crisis, particularly when it comes to its labor market. While dole queues lengthen in Spain, France and Greece, in Germany they are rapidly dwindling.

In fact Germany has seen the number out of work decrease to its lowest level since 1991. It's a remarkable turnaround.

While many other countries were booming before the crisis hit, Germany was dubbed the "Sick Man of Europe," as it struggled to cope with the ongoing economic effects of reunification. In 2005 unemployment reached a peak of 12.5 percent, crucially exceeding the 5 million mark. Since then it has been almost halved, with a rate of just 6.6 percent in December 2011.

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So how have German workers been left relatively unscathed by the crisis?

Experts point out that one of the most important factors is that Germany deployed a number of instruments to keep people in their jobs even during the most trying days of the financial crisis.

One was the government program known as "Kurzarbeit," which allowed employers to significantly reduce workers' hours, with the state stepping in to make up most of the shortfall in pay. Another was the so-called work-time accounts, whereby unions and companies agreed to let workers build up a bank of overtime that they could then use to take paid leave when there was a downturn in business.

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The upshot was that companies held onto their skilled staff, allowing them to react quickly when demand picked up again. "As Germany's competitiveness had already been relatively strong in the industrial sector before, it could very quickly react during the recovery phase," explained Alexander Herzog-Stein, an economist with the Macroeconomic Policy Institute (IMK), a think tank with links to Germany's trade unions.

Another element in protecting the German labor market from the vagaries of the crisis was that there was no real estate crash like that experienced in other European countries, such as Spain or Ireland. "We didn't have this kind of property bubble on the domestic market that burst," explained Karl Brenke of the German Institute for Economic Research (DIW), "so the consequences of the financial crisis were limited to exports."

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While these elements curbed unemployment, the picture is not uniformly rosy on the German jobs market. In fact, a host of measures adopted in the early part of the last decade to make the labor market more flexible and to tackle unemployment have contributed to a shift away from the steady, well paid unionized jobs of old towards more precarious and low-paid income employment. "The image of Germany as a country where everyone is paid well is a thing of the past," Herzog-Stein said.

There is no general minimum wage in Germany. The temporary work sector has mushroomed. And many people, particularly women, have to resort to so-called "mini jobs" or "one-euro jobs," which allow people to earn up to €400 (US $520) without losing their welfare benefits. In 2010, a total of 7.3 million Germans worked in these kinds of positions.

And while unemployment may be just over 6 percent, it is unevenly spread across the country. There is still, on average, almost double the number of people out of work in the former East Germany as in the West. Even within western Germany, the prosperous south far outshines the north.

"You have to look at the regions," Brenke of the DIW argues. "You have relatively weak regions in West Germany and relatively strong ones in Eastern Germany, for example Saxony and parts of Thuringia. These regions could recover because they always had a strong industrial tradition."

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Furthermore, the German economy has been marked by wage restraint over the past 15 or so years, meaning wages have risen far slower than in many other EU countries. The German Federal Statistics Office revealed in 2010 that private sector wages had increased by 21.8 percent in the decade between 2000 and 2010, compared to 35.5 percent for the EU as a whole. And if one looks at real earnings, then they hardly rose at all over the past two decades, seeing an actual decline between 2004 and 2008.

This has lead to sluggish domestic demand, which Germany has tended to neglect in favor of relying on exports to drive its economy. And a perversity of the current crisis is that with every bad piece of news about the euro zone that drives down the valued of the single currency, Germany's exports become cheaper.

"In the current crisis the weaker the euro, the more attractive our products become," Herzog-Stein says. At the same time, the euro crisis poses other dangers, he argues. "The big threat for the German economy is the lack of foreign demand from the other euro-zone countries."

In fact the slump in that demand, due in part to austerity measures pushed by Berlin, is already starting to be felt in Germany itself. On Wednesday Berlin announced that it had slashed its forecast for growth in 2012 to just 0.7 percent.

Herzog-Stein advocates boosting domestic demand to offset the fall-off in exports. "Now, when things are going so badly in other countries, it will be really important that we get a domestic dynamic," he says. It's something that might also be of benefit beyond Germany's shores.

"We are the biggest economy in Europe and one of the biggest in the world, and if Germany could show more dynamism, then everyone, including the US, would profit."

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Topics: Germany • Jobs

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soundoff (22 Responses)
  1. George Patton

    Just think of just how much better Germany would do if it left the Eurozone and went back to using the strong Deutschmark! Unfrtuntely, that won't happen under this Washington loving Angie Merkel.

    January 25, 2012 at 4:34 pm | Reply
    • Bert

      Actually, Germany benefits greatly from the common currency. The strongest driver of Germany's economy is the high export quota which would only be half as strong would Germany still use the Mark.

      January 26, 2012 at 4:25 pm | Reply
  2. j. von hettlingen

    Germany pursues the recipe of Ludwig Erhard's "ordnungspolitik" which laid down a concept of rules, rendering discretionary government action unnecessary. Market forces are allowed to work within predetermined rules.
    Its real success lies mainly in the mentality of its people – long-term thinking, frugality and industriousness. History had taught them a dear lesson. So depite prosperity, people don't spend, they rather save for the rainy days. The Germans are known for their thoroghness and conscientiousness at work. If there's a problem, they solve it and stop it from happening again. While in America, one fixes the problem and moves on.

    January 25, 2012 at 6:13 pm | Reply
    • George Patton

      The Germans have always tended to do well almost under any circomstances with the exception of just after WW1. The reason their economy suffered so much was due to the unjust and vendictive terms of the 1919 Teaty of Versailles which among other things, stripped Germany of all of it's overseas colonies and the Rhineland. The Germans need to quit taking orders from Washington D.C., too.

      January 25, 2012 at 7:19 pm | Reply
    • j. von hettlingen

      Still many Germans go abroad if they can. To Switzerland or Luxemburg if they want to earn more. To other European coutries if they prefer a laid-back life-style. To the U.S. if they pursue scientific challenges. To countries of lower living costs when they retire. Some industrial parts of Germany, espeicially the Federal State of Nordrhein-Westfalen (North Rhine and Westfalia) are known as the factories of the country.

      January 26, 2012 at 4:00 am | Reply
  3. Quasi-neutrum

    The rosy side is seen in numbers and the other dark side is hidden somewhere behind. This structure of one-Euro Job is something people are "forced" to do, they get cuts, if they don't! Women mostly single-mums can't find jobs on the part-time area, there are none, so they work in this mini-field sector with no pay in insurance. There are many women as mothers between 35-45 who can't use their skills (years of an university-carreer, additional training, language skills, talents), because they don't give you possibilities. For ex.: If you go to job-center, they don't treat you as an academic, because you didn't work last year! Oh dear – how could you decide to do nothing? You probably explain, that you wrote a book, did translation work, internet research, care for elderly family members ff- (they don't except!) It's punishment and a waste. Education in this country is a waste! People in high wages jobs, have to work more and more and get less payment, because living costs are rising. Burn-out, depression, stress are things which makes people suffering. Germany sticks in an ideological blind alley: praising the lonely greed independent young elite! Everybody who isn't like that, is excluded!

    January 26, 2012 at 2:23 am | Reply
    • bess

      excellent comment!

      January 26, 2012 at 2:57 am | Reply
    • Malade

      I agree with you to a point and I know that a lot of people are dissatisfied with the way Germany's work force is changing. However, it is still pretty nice to live in a country where you can take off a year to write a book or take care of someone without worrying about total financial ruin. I've lived in the US for some time now and know plenty of academics who write books while having a full-time teaching job or 2 assisting jobs. I don't know anybody who could just take a year off to write a book.
      It's also pretty nice when you have a child and can take a year off or more and still get a resemblance of your former salary on top of knowing that your job will be there when you're ready to go back to work, say, one year later.

      I think the dynanism that's missing in Germany is in the people themselves. Exports may not be doing so badly, but there seems to be a lot of pessimism amongst the general population. ?

      January 28, 2012 at 11:01 pm | Reply
  4. Karl Kovarczik

    The Czech market is also in close relations with the Germans. Mainly the real estate market which is "interconnected". We are monitoring the market sentiment. Many funds which are clients of the Czech developers are from Germany. If you want read something about Czech real estate development, try this bulletin. I really like it due the infos there.

    http://www.floowie.com/en/view/development-news-c-1211

    K.K.

    January 26, 2012 at 7:17 am | Reply
  5. mimi jacques

    Go over the export figures and industries- Germany is the biggest arms exporter in the world- its Siemens-Krupp consortium, selling u-boats,, its tanks, its drones,its techlology on 'spying' by buyers from ME to Africa. Next successful iEuropean economy of Sweden- 2nd biggest arms procurer-exporter. When US was in recession in the Carter years- the Reagan adm. boosted employment/revenue by the reintroduction of arms build-up at home and abroad. Look at verifiable sources for the 5-age of German exports in 'arms'- almost half.

    January 27, 2012 at 9:31 am | Reply
  6. tim12

    it seems amazing that germany lands on its feet economically

    January 27, 2012 at 10:59 am | Reply
  7. fp121

    you must be an idiot to suggest that germany is doing great.
    in fact the Euro crisis has happened mainly because of the high imbalalnce of tade between Germany and other Euro countries.Germany has no clue how to fix it and will not fix it, knowing stubborn, headstrong people that they are.

    January 27, 2012 at 11:50 am | Reply
    • Malade

      So it's Germany's responsibility to fix the Euro crisis in your opinion? Because their exports were doing better than most of the other EU members?

      I think the members of the Union became too greedy and allowed too many other countries in before they were ready for it. Of course there was going to be a high imbalance of trade when you compare countries like Germany and France with, say, Greece.

      Also, I don't think the article suggests that Germany is doing great as it does mention Kurzarbeit and the many people on the so-called 1-Euro jobs.

      January 28, 2012 at 10:37 pm | Reply
      • Pat

        SPOT ON you will note what i had to say just below your posting

        January 29, 2012 at 2:10 pm |
  8. eman

    Strangest way to the marriage application

    http://www.bestofthebestofall.com/forums/viewtopic.php?f=38&t=1142

    January 27, 2012 at 6:08 pm | Reply
  9. Interesting

    Germans are hard working people. Strange No Minimum Wage, no obama economic stimulus (paying off the banks), work extra hours and reserve a pool of paid time in the future- to extend you employment during slower times, thereby not getting slammed with the higher tax bracket- allowing employers not to have to fork over tons of money point blank for overtime, that they may not have. We in america better wisen up, that we can't all be cry babys- wanting more more more for less- living within the confines of a sound and credibile economic and government system goes along way – on the road to long term prosperity and stabillity. Germany and China, to name 2 get it- we don't no yet.

    January 29, 2012 at 9:17 am | Reply
  10. Pat

    If you want a job less than most minimum wages please come to Germany lots of jobs for 400 euro monthly that is about $520 monthy IF you are lucky otherwise you might get a job with a temp agency who will pay around 5 euro and hour before tax ($6.50) either way it is not enough money to even pay rent this happens to be truth is in many parts of Germany I live in a city of 160k and there are 11 soup kitchen so don't believe everything you read about jobs in Germany

    January 29, 2012 at 2:07 pm | Reply
  11. desert voice (troubledgoodangel or Nathanael or Bohdan or Voiceinthedesert)

    As a Pole, I inbornly don't trust Germany and never will. That is the reality of being a Pole. They are more astute than the Chinese. They change in one instant, like chameleons. Germany was like the U.S. in the 30.s. There was democracy and there was freedom. people voted and quarrelled about nothing. Out of a sudden, a cheap second hand painter founded a movement, which "caught up." The movement lacked votes, like today Sarah palin. It was a Tea Party of sorts. Nobody noticed a "problem." Just another movement. Then in a matter of hours, the votes that the painter's party needed were produced from nowhere. A nobody's party took charge. We know the rest of the story. They took charge the big way. They were more ready than everyone imagined. Today, the same thing is happening. Germany is "dormant and non-threatening." They plead for a few more votes, as did Hitler. They bid their time, as he did. They want power! They need votes from people who need the Union, like Poland. They know that their money will convince Poland. They promise the sky as they did to Col. Joseph Beck one time. Poland trusted Beck's German policy to the hilt. After all, Col. Beck, Poland's Foreign Minister at the time, drank tea with Borman and Goebbels. Hitler was his friend. How could Germany attack Poland, most argued. They quarrelled but they "were friends." To the last second, Germans showed signs of friendship; mized signs. Schleswig -Holstein sailed to Westerplatte in Poland, and beautiful German girls lined on the deck with flowers, saluting the onlookers on dock. The cannons behind them were covered with a canvas. The Poles saluted back, mesmerized with the girls, not the canvas behind. For many that was the last salute. The girls suddenly vanished, and the cannons blew up the people still saluting on the dock. Can this happen in America? It can. Americans are the most trusting people on earth! They went to China "to get markets." They got markets all right ... but not for themselves, but for the Chinese. Talk about trust. They trusted thet the Chinese were "stupid." The Germans are cunny and never to be trusted ... like the Chinese!

    January 31, 2012 at 4:09 pm | Reply
  12. Mohamed. Rasheed

    I am from maldives for working 9 years help any job +9607621137 Adkmode@hotmail.com

    July 8, 2012 at 1:56 pm | Reply
  13. online business

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    April 23, 2013 at 7:16 am | Reply

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