Wednesday

23rd May 2018

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.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

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.

Feature

Resetting the gender balance through football

Many sports, like football, have been so heavily male-dominated at every level that women and girls have battled against poor odds to be treated as equals in the game. FIFA aims to change that.

Opinion

Paying a high cost: EU's role in Spain's painful health cuts

The EU should either conduct, or ask states to conduct, human rights impact assessments of country-specific recommendations to ensure that the implementation of austerity measures does not result in reduced human rights protections.

Stakeholders' Highlights

  1. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  2. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  3. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  4. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  5. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  6. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  7. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  8. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  9. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  10. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  11. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach
  12. Sustainable Energy Week 2018"Lead the Clean Energy Transition"- Register and Join Us in Brussels from 5 to 7 May

Latest News

  1. Feeble EU format deflates Zuckerberg 'hearing'
  2. Are EU data watchdogs staffed for GDPR?
  3. EU pessimistic on permanent US trade exemption
  4. US asks EU to go after Russian and African villains
  5. Facebook threatened with removal from EU-US data pact
  6. Defence firms 'reap benefits' of advice to EU
  7. Athens mayor wants direct access to EU migration fund
  8. Nordics could be first carbon-negative region in world