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Business

Sweeping Labor-Market Reforms Win Approval of Government, Opposition

A government commission has proposed the most radical reform of Germany's rigid labor market in decades, and the response from economists, the government and opposition has been highly enthusiastic.

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No more standing in line at the unemployment office?

A government commission has proposed a program that, if implemented, will bring about the most radical reform of Germany's rigid labor market in decades, and the response from economists, the government and the opposition has been highly enthusiastic.

On Monday, Labor Minister Walter Riester, a Social Democrat, gave a positive assessment of the proposals. The commission's leader, Volkswagen AG director Peter Hartz, had already said if his plan was given a chance to work, it could cut unemployment in half, to about two million jobless, within three years.

That view was echoed by Riester on Monday. And Economics Minister Werner Müller, an independent, argued that the proposals were "well balanced in social-policy terms". Chancellor Gerhard Schröder had already expressed approval of the program over the weekend.

The Hartz commission's program includes proposals to ease restrictions on temporary and part-time work, encourage labor mobility and speed up the process of getting the jobless working again. It also provides for a reduction of the tax burden on entrepreneurs, and cuts in unemployment payments.

Among the specific measures proposed are: a staggering of unemployment-benefits payments in the first six months of unemployment; a simplification and shortening of the job-placement process; an increase in the use of private-sector temporary-work agencies; a requirement that those whose personal circumstances allow for some mobility, e.g. the unmarried, should accept jobs anywhere in the nation; a reduction in payments should an unemployed person reject a job offer, even if it offers a lower salary than that person is used to; and a cut in taxes and bureaucracy for start-up firms that earn less than about 20,000 euro annually.

Lothar Späth, who will be the chief economics cabinet member if the opposition conservative parties win the general elections in September, described the proposals as offering a "new approach with deep-reaching effects".

The proposals also won support from economists such as Klaus Zimmermann of Berlin-based DIW, one of Germany's six big economic think-tanks.

According to reports over the weekend, some members of the governing Social Democratic Party had expressed disapproval of the plans. But the party's general secretary, Franz Müntefering, said that among the party executive there had been approval of the methods set out in the Hartz commission's proposals, and there had also, in part, been approval of some of the content.

The trade unions were less convinced still. Michael Sommer, president of the DGB confederation of trade unions, warned of the social risks inherent in the Hartz program, specifically a worsening of the financial position of the unemployed. But the moderate Hubertus Schmoldt, leader of chemicals and mining union IG BCE, warned that the trade unions must take care to avoid giving the impression that they reject the proposals out of hand.

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