German jobs 'miracle' isn't all it seems

It's a miracle. Forty-one million Germans in work - the highest number ever. Unemployment down by 264,000 in January compared to a year ago, reducing the rate by 0.6 percentage points to 7.3 per cent. Last year the average jobless total in the region's most populous nation and largest economy was 2.9m, the lowest level in two decades. All while Germany's neighbours struggle with record joblessness.

Eurozone unemployment rose for the eighth successive month in January. At 10.4 per cent it is the highest rate since the single currency was created. Who could argue, then, with those that would seek to emulate that success? Those like President Nicolas Sarkozy, who correctly observes deregulatory labour "reforms" have been introduced in Germany in recent years and who, following his Teutonic neighbour, is now seeking to push bargaining in France away from the national down to company level.

But dig a little deeper into the figures and a less miraculous picture emerges. It's a picture of - often involuntary - part-time work, precarious job contracts and low pay. Out of the 41m in employment, 4.5m are self-employed, in many cases brothers, sisters, sons and daughters, working in the family firm. That leaves around 36.5m with fixed incomes - waged or salaried workers.

Of the latter, 29m have more or less regular, protected jobs, with employer and employee-financed social security contributions covering a pension in old age, health-care and benefits if they become unemployed.

And the remainder? There are 7.3m so-called "mini-jobbers," on officially backed temporary agency work, who earn up to €400 a month for a maximum 15 hours a week and who get minimum social insurance coverage paid for by the employer with their low wages topped up by state subsidies. The majority are women who upon retirement get basic welfare support.

Then there are 1.2m, excluded from the unemployed register, who are on training programmes or paid a pittance for doing "socially useful" work, or people over the age of 58 not seen as employable.
This group are working 15 hours or less a week and are officially deemed to be seeking more hours.

So in total you have about 8.5m who are "underemployed" and who want to work more. And Germany's 21st-century precariat want to work more in most cases because they need to earn more.
Wages in real terms - adjusted for cost of living rises - increased by just 4.4 per cent between 2000 and 2010, compared to a 9.7 per cent rise in GDP, meaning the lion's share of wealth produced in Germany has been grabbed by capitalists, owners of capital like bosses and shareholders.

Here are another couple of figures that should help bust the "miracle" myth.

In 2000, Germans worked 57.7 billion hours. In 2010 the figure was about the same (57.3 bn).

This shows that the work's just been shared out, with workers taking a hit on job security and pay. So is that a model to follow?

The International Labour Organisation (ILO) sought to answer that question in a section of its annual Global Employment Trends report, published last month. The ILO traces the issue back to the disastrous German unification, when inflation kicked off as a result of highly politically motivated 1:1 parity between East and West German currencies.

This led the Bundesbank to tighten monetary policy, which in turn pushed up the value of the Deutschmark versus other European countries, and this in turn hit the competitiveness - ie making exports too expensive - of German firms. In response, businesses cut investments, joblessness rose and high street spending collapsed. A vicious cycle began with the country earning the reputation of sick man of Europe.

The Social Democratic government of Gerhard Schröder reacted to this capitalist go-slow by enacting "flexible" labour reforms - these permitted the creation of new low-wage jobs in the services sector, spreading "wage deflation." Starved of investment, German industry productivity only just kept pace with other European countries and so the entire adjustment to maintain and gain a competitive edge over other European countries was borne by workers.

As the ILO says, "These wage deflation policies have not only impacted private consumption, which lagged behind that of other euro area countries by more than 1 percentage point over the period 1995 to 2001. They have also led to widening income inequalities, at a speed unseen even in the aftermath of reunification, when several million people lost their jobs in east Germany." But the costs of this policy have not only been born by German workers.

"Rising competitiveness of German exporters has increasingly been identified as the structural cause underlying the recent difficulties in the euro area. As German unit labour costs were falling relative to those of competitors over the past decade, growth came under pressure in these economies, with adverse consequences for the sustainability of public finances. At the European level it has created conditions for a prolonged economic slump as other member countries increasingly see only even harsher wage deflation policies as a solution to their lack of competitiveness."

So there you have it. The eurozone crisis isn't the fault of those southern slackers at all.

As Heiner Flassbeck, a former German government official who is currently a director at the United Nations Conference on Trade and Development (UNCTAD) put it in an interview with Reuters in November, it is all down to "wage-cutting" and a "beggar-thy-neighbour export model," pursued by the "virtuous" nation led by Chancellor Angela Merkel.

"One country got it absolutely wrong," said Flassbeck. "That country was not Greece, it was Germany."

Tom Gill blogs at www.revolting-europe.com