Three Reforms Forward, Two Reforms Back | Business| Economy and finance news from a German perspective | DW | 20.12.2002
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Three Reforms Forward, Two Reforms Back

The first of the German Hartz Commission's labor market reforms were approved by parliament on Friday. Two of them see the government backtracking on previous labor policies a long way.


Economics and Labor minister Minister Wolfgang Clement called the reforms "a breakthough"

The first three provisions of the German government’s far-reaching labor market reforms were approved by the German parliament, the Bundestag on Friday.

After the Bundesrat, the country’s upper house, rejected one of the proposals on Friday, it was returned to the Bundestag. Here, the government adopted the so-called "Chancellor's majority" - a method seen as a last resort to push through laws which have not been approved by the Bundesrat - where it was finally voted through.

The approval comes as a relief to the German government, after a turbulent week which saw various central elements of the Hartz reform proposals up for implementation under severe criticism from the opposition.

Earlier this week, a proposal relating to the employment of temporary staff was rejected by the Bundesrat, where the conservatives have a majority, and had to undergo the joint mediation committee representing both chambers of parliament before it was passed back to the Bundesrat and Bundestag at the end of this week.

New "mini-jobs" regulation makes it worth working

All three proposals are drawn from recommendations by the government-sponsored employment commission headed by former Volkswagen manager Peter Hartz. The one that has generated most enthusiasm is one which should make low-paid part-time jobs - so-called "mini-jobs" - more attractive. It will exempt people earning less than 400 euros a month from making social welfare insurance contributions – until now, the cut-off point has been 325 euros.

In addition, reduced contributions will be introduced for jobs paying less than 800 euros a month. Employers will also pay reduced contributions up to that limit. The Minister for Economy and Labor, Wolfgang Clement, estimates this will create at least 300,000 new jobs.

The plans will still cost money

However, the plan does have its critics. According to the unions the new regulations will undermine sector wage settlements, while health insurers complain that the new jobs will lead to cuts in revenues. Munich’s Süddeutsche Zeitung this week quoted unnamed sources within the governing coalition as saying the mini-jobs could cost as much as a billion marks in lost tax revenues and contributions.

The second provision is the withdrawal of the regulations defining the conditions under which a person can be counted as self-employed. They were originally introduced to increase job security and force companies to offer contractually-regulated permanent employment.

The relaxation of regulations governing mini-jobs and the conditions of self-employment represent an about-face for the government, which originally pushed them through against the protests of a business community which said they would lead to less, not more, employment.

Temp jobs a sticking point

The third provision, relating to temporary employment, was the contentious one. Its main aim is to regulate the way private short-term employment agencies work, but the way temporary workers should be treated by companies is still a major cause of disagreement.

Both the Christian Democrats and the liberal Free Democrats want temporary jobs to be free of contractual constraint, but the government insists that temporary workers must be paid the same as permanent workers after six weeks at most. The government said it was not prepared to make any changes to this provision and would force it through in spite of the Bundesrat’s opposition.

Getting these employment provisions into law marks the government’s first major reform in this legislative period, one that it had made an integral part of its election campaign.

“We wanted to send out a call to positive action,” said the Social Democrats’ employment spokesman Klaus Brandner. So-called “Super-Minister” Clement was less reserved in his assessment. “It’s a breakthrough,” he said after the vote on Friday. “It’s a first big step towards employment, and more will follow.”

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