Employment: Spain warms to German model
19 June 2009
Since the beginning of the global economic slowdown, unemployment in Spain has shot up to 17%. The Spanish government could do well to look to Germany, argues El País, where the jobless total is less dramatic.
This is the latest miracle: Germany’s economic downslide has been steeper than any other big country in the EU – and yet Germany is not shedding any jobs. As a matter of fact, in the first quarter of 2009, German GDP plunged 6.9% on the same period last year, more than double the drop in Spain (-3%) (according to Eurostat). But from April 2008 to April 2009, German unemployment only inched up from 7.4% of the active population to 7.7%, while nearly doubling in Spain from 10% to 18.1%.
This German miracle admits of various explanations, two of which are the most compelling. One is flexibility: the ability to scale back working hours at companies with shortfalls in incoming orders. 1.5 million workers have now opted for State-supported Kurzarbeit, cutting their workday by a third on average, which has presumably saved almost half a million equivalent full-time jobs. The other is the temporary suspension of employment, putting jobs “on ice”, as it were: whilst the company pays 10% of their wages, the State foots by and large the rest of the bill, and employees remain on the payroll – with no other duties than to make the most of their leisure time to retrain and recuperate. It is a sort of Spanish ERE (expediente de regulación de empleo) downsizing plan, but suppler and with far less red tape than in Spain, where it’s hard to get the plans approved. The layoffs here in Spain are hardly affecting permanent staff at all: two thirds of the jobs shed last year were temporary positions.
Germany’s success in safeguarding jobs does not seem a mere statistical sleight-of-hand that involves counting workers who are “on ice” as gainfully employed. It is based on a reliable calculation. Germany is the world’s leading exporter (48% of its GDP) and most competitive economy: when world commerce re-emerges from the current doldrums, German companies’ exports and real employment will pick up again – because they are viable. That prediction is also based on a corporate culture of long-term planning, that of Rhenish capitalism as described by Michel Albert in his classic Capitalisme contre capitalisme (1991), as opposed to the asocial, myopic brand of Anglo-American capitalism. At the turn of the millennium, Germany’s procrustean system underwent a meltdown at the hands of Gerhard Schröder’s coalition of Social Democrats and Greens and their Agenda 2010, which was subsequently taken up by Angela Merkel: economic policy continuity is clearly the name of the game!
It was a reform of the labour market (among others) on several fronts, involving inevitable sacrifices that were amply negotiated by the Hartz Commission, and without getting hung up on the costs of redundancies: flexible working hours, self-employment, odd jobs, time limits on unemployment benefits, pay restraint, raising the retirement age, third-party payment of medical expenses etc. The Hartz Reforms recouped the competitiveness Germany had lost (10 points as against the euro zone, 17 against the US, 24 against Spain) and regain its rank as the world’s top exporter. And that gave a big boost to a decisive labour market tool: Germany’s ultra-effective network of federal and state-based public- and private-sector employment agencies.
Job market reform certainly is not a cure-all for the current crisis (which was caused by other ills) or a magic wand for creating jobs. But the German experience goes to show it helps produce, or at least maintain, jobs. Or at least create a congenial setting for job creation. Especially if we avoid isolated, one-off measures. If we implement a whole package of “active policies, labour legislation, training and social safeguards”, as prescribed by Xavier Prats, Employment Policy Director for the European Commission.
In Spain, aside from entrepreneurial recommendations, economists’ debates and government messages, public policy is beginning to budge. Spain still has a lot to learn from Germany.