Germany has been THE European powerhouse during the credit
crisis and consequently many European leaders look at the country with hardly revealed envy:
- The quality of German goods has always been proverbial and these
are therefore in high demand all over the planet, even in these trying times of
economic crisis;
- The German manufacturing industry runs like a clockwork; not
only the famous German car industry grows through any resistance, but also the
numerous small and medium (SME) enterprises with their innovative products and
traditional German quality. These SME companies form the heart of the German
industrial tradition;
- During the stints of Chancellor Angela Merkel, the
unemployment dropped from 8.1% to 6.8%, with less than 3 million unemployed
people on a total population of 80 million people. With this low unemployment,
Germany is among the best achieving countries in Europe;
- Merkel’s predecessor Gerhard
Schröder of the SPD had put the German economy on the right track again with his
policy of dramatic economic reforms and wage restraint for a number of years;
- Due to this wage restraint
policy, the German labour costs are much lower than the labour costs in other
European countries;
- Through the invention of mini-jobs
aka €400 jobs, without social security premium and income taxes, many
unemployed people have found a job again, albeit it a small one;
- The German political situation is very stable. It is very
plausible that German chancellor Angela Merkel of the Christian-Democrat Union (CDU)
will easily win the elections for the Bundestag (German House of Commons) for a
third time and continue her policy of austerity and tight budgeting.
- And even if her opponent Peer Steinbrück of the Social-Democrat SPD wins the elections, this will hardly lead to dramatic changes in policy, as both parties largely agree about ‘the road ahead’ for Germany;
Summarizing, it seems that Germany will be in the elite
group of Europe for many years to come and its reputation of European
powerhouse is very well-deserved.
However, there are some things in Germany that should worry
the objective inquirer, as they could bring division in the country and disturb
the ideal image of Germany in the future.These things have without a doubt something
to do with Schröder’s wage restraint policy, the rigid budgettary aproach of
Angela Merkel, the invention of mini-jobs and with the downfall of the German
heavy industry and the difficult climb up-the-hill of East-Germany, formerly
known as the German Democratic Republic. Keywords: poverty and debt!
In the past, I have expressed my thoughts and feelings about
the German Wage Restraint policy of former chancellor Gerhard Schröder, based
on a wonderful article of Marcel de Boer in Het Financieele Dagblad (www.fd.nl).
Please read this
must-read article again.
De Boer’s main objections against wage restraint were:
- It has a very bad influence on the domestic consumption, as
it works like a double whammy:
- it partially kills the growth
potential of wages for many years to come; not only for the years of its
introduction;
- Besides that, it makes that the effective
purchase power of people is steadily eaten by inflation, which further
diminishes consumption;
- Within Europe, the wage restraint made that the euro for
Germany was actually undervalued, while it was overvalued for the countries in
the south of Europe.
- In other words: German products were too cheap in
comparison with products from South-Europe;
- This worked as a subsidy on
German exports and a tax measure on exports from the PIIGS countries;
- As a consequence, wage restraint caused unfair competition with countries, which didn’t introduce wage restraint;
It has been more than two years, since I printed the
aforementioned article, but it didn’t lose its value yet.
The FD wrote an article that the ‘German job miracle’ is “starting
to show some scratches”. Although the tone of voice of the article is
mostly very positive about Germany, it shows some drawbacks of the prolongued
policy of wage restraint and austerity:
- Infrastructure: In a.o. Berlin and the Ruhr-area, there are broken
streets and roads everywhere. Refurbishment of existing roads and construction
of new roads will costs hundreds of millions of euro’s;
- Poverty. More and more citizens and also children are threatened by
poverty. Also many municipalities and Bundesländer (German states) go through
financially tough times’;
- State debt. The official state debt is somewhere around 80% of GDP. However, some who looks at future obligations, concerning a.o. the pensions and social benefits, sees the debt increase to 227% of GDP
The P-word (poverty) has been used in this FD article. Another
independent party who uses the P-word again is the German central bureau of
statistics ‘Destatis’ in a press release of 29 August 2013. As the German press
release is more elaborate than Destatis’ English version, I used the German
release and translated it to English:
In 2012, the danger of
poverty has again been clearly higher in the states of the former GDR than in
the states of former West-Germany. The rate of people who are endangered for
poverty lies at 19.7% in East-Germany and at 14.0% in West-Germany.
Since 2005, the rates
of East- and West-Germany have actually approached each other, but the danger
of poverty in 2012 is still considerably higher in East-Germany. In 2005, when
this measurement started, the difference was 20.4% for East-Germany and 13.2%
for West-Germany.
When 2012 is compared
with 2005, the risk of poverty dropped most strongly in the Bundesländer
Thüringen and Sachsen-Anhalt (both formerly East-German states). The strongest
increase can be seen in Nordrhein-Westfalen and Berlin.
Especially the last paragraph is somewhat worrisome.
Nordrhein-Westfalen is host to the famous Ruhr-area, where the German heavy
industry is situated, as well as thousands of small and medium enterprises, which
produce handicraft, high-quality products and tools. Cities in this state, like
Solingen, have an unbeatable international reputation for the quality and
workmanship of the products that are produced there.
It is hardly surprising that the German heavy industry
(steel mills, the coal and ore industry) goes through tough times currently, as
this continuously has been the case since the 1960’s.
Nevertheless, Nordrhein-Westfalen is the German Bundesland,
where ten of the hundred most powerful companies in the world have been
residing: a.o. E.ON (energy), Deutsche Telekom, Deutsche Post, ThyssenKrupp
(steel) and Bayer AG (farmaceuticals). When this German state offers an
elevated and increasing risk for poverty, this is something to worry about for
the Germans.
Also surprising for me is the conclusion that city/state Berlin
is among the states with soaring poverty. Berlin, the official capital of
Germany, is a city where you would expect growth and prosperity at the end(?)
of the crisis, not looming poverty.
The main reason for this lagging prosperity (in my opinion) is
the fact that Berlin is not the natural economic centre of Germany, in contrary
to other capitals like London, Paris, Madrid, Moscow and Amsterdam:
- Frankfurt is the financial centre of Germany and Europe;
- Rüsselsheim, Wolfsburg, Ingolstadt, Zuffenhausen, Stuttgart and München are the centres of the extremely important German car industry;
- Hamburg and Bremen are the most important German ports;
- Düsseldorf has always been the heart of the heavy German industry in the Ruhr-area;
- Bonn has been the former political centre of Germany.
Nevertheless, the lagging behind of Berlin proves to me that
this crisis is far from over yet. When the German government does not want to
spur growth and prosperity in its own seat yet, but instead choses for
continued austerity, this is a tell-tale signal about the still awkward state
of the German economy.
And there is more: something that has definitely to do with
the mini jobs and with the looming poverty in Germany. No less than 6.7 million
Germans, or 8.3% of the German population have a desire for more working hours.
This has been disclosed in an investigation by Destatis, concerning the year 2012.
In the year 2012, 6.7
million people (age: 15-74) wanted either to have work or to work more hours.
This unused labour force potential exists of 2.3 million officially unemployed
people, 1.1 million unregistered unemployeds (for instance housewifes and
housekeepers, who want to have a job again or people that would like to work,
but don’t have the possibility for it at this moment) and 3.3 million part-time
workers, who either want more working hours or want to become full-time workers
again.
Underemployment with a
full-time job of at least 32 hours per week is a men’s thing: 72% of the 1.5
million full-time underemployeds is man.
From the part-time
workers, 72% of the 1.8 million underemployeds is woman, exactly the opposite.
In Germany, a large and increasing number of people work in
the so-called mini-jobs. These are jobs which are rewarded with not more than
€400 euro per month and for which employers don’t have to pay labour tax and
social security fees.
Initially, the mini jobs were either seen as a stepstone towards
a full-fledged job for the unemployed or as a chance for housewifes to earn a
few bucks with a part-time job, without much hassle with taxes. However, the
mini-jobs are more and more turning into a poverty trap, where you can step in,
but never get the chance to get out.
A few months ago, I wrote another
article upon the mini-jobs:
Mini-jobs are jobs,
which are rewarded with a maximum of €450 per month. These jobs are not liable
for income taxes and social security premiums, but consequently offer no social
security protection for the workers that have such a Mini-job. Besides that,
the maximum of €450 per month is not enough for a person or household to live
from. Consequently, people are usually forced to take another (mini-)job in
order to avoid poverty.
This morning, there
has been a discussion upon this topic on BNR business radio. Some disturbing
data were mentioned during this
discussion:
- 7.5 million workers in Germany currently have such a mini-job;
- Currently 25% of every new job is a mini-job;
- 50% of every new job in the food, beverage and hospitality industry is a mini-job;
- People with mini-jobs are often forced to take a second job to get sufficient income;
- People with a mini-job are considered to be the new poor;
- Only retirees seem to profit from the mini-jobs, as they can add a few bucks to their pension payments;
Michael Moore’s
shocking documentary ‘Bowling for Columbine’ gravely showed a.o. the negative
consequences of the American equivalent of mini-jobs: poor people in a
desperate situation, who have to work for 16 hours per day to make ends meet,
thus neglecting their families and children. Children run wild and start to
skip school, thus aiming at a future of joblessness, drug addiction and lurking
criminality and victimship.
Workers in such jobs
might get caught in a poverty trap, without having the chance of ever getting
out. They probably don’t have a right for social security, they are
out-of-scope for the labour agencies (‘not unemployed’) and when they get ill,
someone else gets their job. It seems to be one step closer to 21st century ‘virtual’
slavery in this European race-to-the-bottom and it ultimately leads to a
reduced group of ‘haves’, a small group of extremely wealthy ‘haves’ and a
large group of ‘have nots’.
I cannot prove that the success of the mini-jobs has
something to do with the increasing risk for poverty in areas like Berlin and
Nordrhein-Westfalen, or with the steady risk for poverty in East-Germany.
Therefore you could call this speculation on my behalf.
Nevertheless, I am certain that the mini-jobs phenomena adds
to poverty in Germany.
Thus the strange thing happens that Germany is one of the
European champions of employment, but still seems to have increasing poverty.
This is one of the nasty side-effects of the current crisis!
ReplyDeleteThank you!
autocad jobs Berlin Germany