The dark side of Germany's jobs "miracle".

[Impartial_Eclipse]

This article below is a long one. Here are some salient points.

1. Pay in Germany, which has no nationwide minimum wage, can go well below one euro an hour, especially in the former communist east German states. "I've had some people earning as little as 55 cents per hour," said Peter Huefken, the head of Stralsund's job agency.

2. While wage inequality used to be as low in Germany as in the Nordic countries, it has risen sharply over the past decade. Low wage workers earn less relative to the median in Germany than in all other OECD states except South Korea and the United States.

3. The number of full-time workers on low wages - sometimes defined as less than two thirds of middle income - rose by 13.5 percent to 4.3 million between 2005 and 2010, three times faster than other employment, according to the Labour Office.

4. Data from the Organisation for Economic Co-operation and Development shows low-wage employment accounts for 20 percent of full-time jobs in Germany compared to 8.0 percent in Italy and 13.5 percent in Greece.

5. Critics say Germany's reforms came at a high price as they firmly entrenched the low-wage sector and depressed wages, leading to a two-tier labor market. New categories of low-income, government-subsidized jobs - a concept being considered in Spain - have proven especially problematic. Some economists say they have backfired. There is little to stop employers paying "mini-jobbers" low hourly wages given they know the government will top them up and there is no legal minimum wage.

6. Employers have little incentive to create regular full-time jobs if they know they can hire workers on flexible contracts. One out of five jobs is a now a "mini-job," earning workers a maximum 400 euros a month tax-free. For nearly 5 million, this is their main job, requiring steep publicly-funded top-ups.

7. International Labour Organization's Ernst Weber [wonderful surname!] says Germany can only hope that other European countries do not emulate its own wage deflationary policies too closely, as demand will dry up: "If everyone is doing same thing, there won't be anyone left to export to."

Source:
Insight: The dark side of Germany's jobs miracle | Reuters

[hiker]

This article below is a long one. Here are some salient points.


5. Critics say Germany's reforms came at a high price as they firmly entrenched the low-wage sector and depressed wages, leading to a two-tier labor market. New categories of low-income, government-subsidized jobs - a concept being considered in Spain - have proven especially problematic. Some economists say they have backfired. There is little to stop employers paying "mini-jobbers" low hourly wages given they know the government will top them up and there is no legal minimum wage.

In Spain there is a two-tier Labor market also.
Tier one (77%) have a job.
Tier two (23%) have no job.
Its a trade off, I think, between strong workers rights and the right to work.

[ffc]

In Spain there is a two-tier Labor market also.
Tier one (77%) have a job.
Tier two (23%) have no job.
Its a trade off, I think, between strong workers rights and the right to work.

Germany has a trillion dollar export industry, higher than the United States. Where is all the money going?

[Toland]

This article below is a long one. Here are some salient points.

1. Pay in Germany, which has no nationwide minimum wage, can go well below one euro an hour, especially in the former communist east German states. "I've had some people earning as little as 55 cents per hour," said Peter Huefken, the head of Stralsund's job agency.

That's for training on top of social security payments.

2. While wage inequality used to be as low in Germany as in the Nordic countries, it has risen sharply over the past decade. Low wage workers earn less relative to the median in Germany than in all other OECD states except South Korea and the United States.

This is due to direct government policy to maintain German competitiveness

3. The number of full-time workers on low wages - sometimes defined as less than two thirds of middle income - rose by 13.5 percent to 4.3 million between 2005 and 2010, three times faster than other employment, according to the Labour Office.

In fairness average incomes are still relatively high (though nowhere near as high as in Ireland, but then Ireland is also much more expensive).

4. Data from the Organisation for Economic Co-operation and Development shows low-wage employment accounts for 20 percent of full-time jobs in Germany compared to 8.0 percent in Italy and 13.5 percent in Greece.

The philosophy (for better or worse) is that a low-paid job is better than no job.

5. Critics say Germany's reforms came at a high price as they firmly entrenched the low-wage sector and depressed wages, leading to a two-tier labor market. New categories of low-income, government-subsidized jobs - a concept being considered in Spain - have proven especially problematic. Some economists say they have backfired. There is little to stop employers paying "mini-jobbers" low hourly wages given they know the government will top them up and there is no legal minimum wage.

The criticism is very fair. The fact is, though, that the government does indeed top them up.

6. Employers have little incentive to create regular full-time jobs if they know they can hire workers on flexible contracts. One out of five jobs is a now a "mini-job," earning workers a maximum 400 euros a month tax-free. For nearly 5 million, this is their main job, requiring steep publicly-funded top-ups.

There are loads of small IT businesses that do most of their development through students doing work experience (often for practically nothing).

7. International Labour Organization's Ernst Weber [wonderful surname!] says Germany can only hope that other European countries do not emulate its own wage deflationary policies too closely, as demand will dry up: "If everyone is doing same thing, there won't be anyone left to export to."

I don't think the German government expect their labour pricing to be permanent. I hope they're right.

[hiker]

Germany has a trillion dollar export industry, higher than the United States. Where is all the money going?

Huge Welfare State.

[Toland]

In Spain there is a two-tier Labor market also.
Tier one (77%) have a job.
Tier two (23%) have no job.
Its a trade off, I think, between strong workers rights and the right to work.

In my experience, Spain is effectively an underproductive gerontocracy. Spanish youth is paying with unpaid unemployment for the underproductive and overprotected jobs of their parents and grandparents.

[Toland]

Huge Welfare State.

And excellent public services, in fairness.

[Impartial_Eclipse]

In Spain there is a two-tier Labor market also.
Tier one (77%) have a job.
Tier two (23%) have no job.
Its a trade off, I think, between strong workers rights and the right to work.

Considering the debt levels of the the five P__GS countries, state subsidizing of low wage work on a massive scale doesn't seem like an option if employers are going to keep wages low and force the state to make up the difference.

You or someone will probably refer to the huge cost of subsidizing 440,000 here who have no job. But the above scheme isn't just creating new jobs - it's depressing wages right across the board.

I'm just making the point that when we look at Germany's wonderful (and still falling) unemployment rates, it doesn't mean that massive amounts of wealth are being generated. It looks like Germany is going the route of the USA, to some extent.

Maybe that's the future for us all?

[hiker]

In my experience, Spain is effectively an underproductive gerontocracy. Spanish youth is paying with unpaid unemployment for the underproductive and overprotected jobs of their parents and grandparents.

I disagree. Spain is no more that a State that embraced socialism after years of military dictatorship.
The socialist government did huge work in upgrading the rights of ordinary workers.

They probably went a little too much over board and institutionalised workers rights to the extent that they have become too rigid.

An adjustment is required now and will take place over the next decade.

[Impartial_Eclipse]

That's for training on top of social security payments.

So their income amounts to much more than 55c/1 euro/whatever per hour? Fair enough.

I just don't see it working here. Irish employers would jump at the chance of paying someone buttons if the state would top up the employee's income to give them a half decent standard of living.

Job security is lower here than most European countries. Workers could be fired and then rehired on the lower wages with state subsidies.