Thursday

19th Jan 2017

Analysis

Poor pay: the flipside of Germany's low unemployment

  • Low wages, easy to hire and fire - the core of the German labour market model (Photo: Wonderlane)

With its record-low unemployment (5.4%), Germany stands out among fellow eurozone countries such as France or Spain, suffering from sky-high jobless rates.

Part of Germany's success is due to a series of reforms pushed through by the Social-Green government of former chancellor Gerhard Schroeder ten years ago, overhauling the labour market and welfare system.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

He made it easier for companies to hire and fire, lowered taxes and limited social benefits. The Schroeder model is now viewed as a must-do for crisis-plagued EU countries in the south.

But the flipside of Germany's high employment rate is low-paid and unstable jobs.

A debate in the German Bundestag on Thursday (25 April) focused on the widening income gap and social inequality, as Social-Democrats and Greens unsuccessfully tried to introduce a German minimum wage.

Social-Democrat leader Peer Steinbrueck, who is challenging Angela Merkel for the chancellorship in September elections, said the minimum wage is needed for a "socially just economy."

Labour minister Ursula von der Leyen noted there is a "widening income gap." But she put the blame on the old Red-Green government which crafted the "lousy" model.

She said that no across-the-board minimum wage is needed because the most vulnerable sectors - like construction or healthcare - already have "minimum wage thresholds."

According to government statistics published by the Sueddeutsche Zeitung, hundreds of companies do not respect the thresholds, however.

The firms have been fined, but with too few inspectors, the risk of being caught is small enough to encourage evasion.

For his part, Enzo Weber, a macroeconomics and labour market professor at the Regensburg University, says that even if Germany introduced a minimum wage, it would not solve the social injustice problem.

"The reason why problems are big in the low-income area is because there are too many low qualified workers for too few adequate jobs," he told this website also on Thursday.

He said German labour market policies still focus on unemployment per se - to get people into any kind of job, whether it is temporary or low-paid, or to get them into self-employment.

"There is virtually nothing for the people with low qualifications to get a job in a middle-qualified area. That's where there are a lot of jobs available, but not that many to take them, because it requires extra training. And that's where we should focus the labour market policies on," Weber noted.

He said the German model might not be so easy to export to Italy or Spain because the crisis has created special conditions.

"Germany was lucky with the timing, the reforms were introduced when the economy was not as bad as it is now for the crisis countries, with recession and massive unemployment. It may be easy for us Germans to say:'Let them do it, we've done it as well.' But we were not in a crisis like they are," he explained.

"The model also has disadvantages - it has drifted more in the direction of precarious employment," he added.

Focus

Anti-HIV measures failing in EU, says WHO

Rates of infection have stayed constant for a decade in the EU, though there has been a massive surge in Russia apparently caused by drug users sharing needles.

News in Brief

  1. Italy to hold 70% of Monte dei Paschi bank
  2. Nato hit by 500 cyberattacks every month
  3. Hundreds of migrants face German security review
  4. Outgoing US vice-president warns Europe on Russia
  5. German far-right party calls for end to WWII guilt
  6. First Chinese freight train arrives in Europe
  7. Europe has no vision, says Italian minister
  8. Juncker has 'slight doubts' on his group's convention idea

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey

Latest News

  1. Brexit backers launch anti-EU website
  2. Germany details its 'Marshall Plan' for Africa
  3. IMF predicts 'pain' for UK, as banks prepare London exit
  4. EP deal could help Tusk keep Council job
  5. UN struggles to monitor fate of readmitted Syrians in Turkey
  6. European space chief: Moon village is 'more or less a fact'
  7. May's speech was not a war declaration, Malta says
  8. EU must find backbone to survive in Trump's world