Business, Finance & Economics

Learning from Germany's job strategy

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(image by Flickr user anaulin (CC: by-sa))

Story by Gerry Hadden, "The World"

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The US unemployment rate climbed to 9.8 percent last month. Unemployment has been a big concern during the economic crisis, not least because job losses signal trouble throughout the economy. In Germany, where Chancellor Angela Merkel just won re-election, unemployment is also a big worry. 

Merkel promised in her victory speech to make jobs a top priority. Germany’s unemployment rate is running about 8 percent. That number might have been higher, if not for some private and public schemes to keep people working.

When you’re floating among some of the world’s largest cargo ships, watching towering cranes load them up with thousands upon thousands of containers, you might be tempted to say, “What crisis?”  The port of Hamburg, the second largest in Europe, appears busy.  170,000 people work here.  Seagoing vessels unload, load and set sail around the clock.  But business here is actually down…way down.

"We are hit through economic and financial crisis very hard in Hamburg because we are very much dependent on trade with China and Russia," says Bengt Van Beunigen, who heads up marketing for the Hamburg port. On this afternoon he's touring its many terminals and canals on a small boat.

"So, on one side, we are the biggest port for China trade in Europe. So every third container we handle here in our port is China cargo. And China went down last year dramatically to around 25 percent in cargo trade."

Container shipments to Russia are off by 50 percent compared to last year. Still, Van Beunigen says virtually no port jobs have been lost. That's because the private port companies keep a huge pool of workers on a collective payroll, whether they’re working or not. Van Beunigen says workers keep their income, and shipping companies get the flexibility they need.

Such private initiatives have helped keep Hamburg's -- and the country's -- jobless rate down. Back in town, the ripple effect is obvious. 

Hamburg is not a city in crisis, says a pizzeria owner named Angel, it’s just in a slump. "The economic crisis is affecting us but only a little bit. We’re more or less satisfied with business."

The jobs scheme at the Hamburg port isn’t the only program keeping Angel’s pizza ovens on. The German government has put up hundreds of millions of dollars -- for workers who are working less, or not at all. The largest plan is called "Short Work." Short Work lets struggling businesses reduce their workers’ hours, and pay. The state then steps in and makes up the workers’ wage shortfall. The government says it’s preserved more than a million jobs this way. And there’s more.

At an unemployment office in downtown Hamburg, an out-of-work salesman named Osar says he has a wife and baby to take care of. They can’t afford child care, so his wife took a leave from her job. But they’re only surviving, he says, because of what’s called "parent pay." Beginning last winter, the government began subsidizing maternity or paternity leave at 70 percent of salary, for up to a year. 

Also this year, Germany swung a 500 million dollar financial bailout for banks and businesses. All of this spending has helped Germany pull out of recession.

But the strategy is risky. A year ago, Germany was running a surplus; today the budget deficit is at 1.5 percent of GDP. Analysts and government officials warn it will likely surpass the European Union limit of 3 percent. Germany, and Germans, generally shy away from over-borrowing. 

Bremen-based economist Rudolf Hickel says if the current recovery is to continue, Germany must ignore its growing deficit. He asks, "What's the alternative? If we try to save now so as not to go into debt, we’re just going to weigh down the economy. And that means we’ll take in less taxes, making it harder to pay back our debts. So we must keep up the support."

But just when can the government spending stop? Hickel and others say only when the world economy gets fully back on its feet. For example, when orders for German machine parts pick up again.  Germany exports 70 percent of the machinery it makes. A rise in orders would reactivate German factories and get more of its container ships sailing, helping Chancellor Merkel keep her victory speech promise to save jobs.

PRI's "The World" is a one-hour, weekday radio news magazine offering a mix of news, features, interviews, and music from around the globe. "The World" is a co-production of the BBC World Service, PRI and WGBH Boston.

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