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Business

Working a Miracle on Germany’s Job Market

The bureaucratic hurdles involved, the high cost of employing people and the difficulty of firing workers when they don’t perform has stifled the labour market in Germany. That may be about to change.

Little incentive to work

A lengthy struggle by the German government to get rid of the head of its own employment agency has highlighted the sort of labour market red tape that business leaders say explains why so many Germans are out of work.

Seven months before a general election, it could embarrass Chancellor Gerhard Schroeder, who stands accused of both failing to honour a promise to cut jobless lines and failing to reform bureaucratic regulations that business says are stifling growth.

Despite a scandal over statistics that appeared to flatter his agency's record on finding people new jobs, Labour Office President Bernhard Jagoda proved virtually unsackable due to rules protecting civil servants. Only on Thursday did he finally agree to retire after weeks of resisting government pressure.

Many economists argue the high costs of employing people and the difficulty of firing workers if business slackens or if they fail to perform make German companies slow to hire new staff.

With generous state benefits available, there can often be little incentive for the unemployed to accept low-wage jobs.

"It's a vicious cycle," said Peter Meister, an economist at BHF Bank in Frankfurt, to Deutsche Welle Radio.

Public versus Private

So Germany is considering going private, at least when it comes to finding a job.

There's no hanging around and waiting when you have an appointment with a private employment agency.

The screening begins with the first phone call. Only those who sound promising are invited. If they come across well in person, they move to the next stage - an interview with the client firm.

"Our emphasis is on the companies. If they're satisfied, then we're paid our commission for a successful placement. The Federal Labour Office works differently. Its emphasis is on job-seekers. That's the major difference between private and state work placement", says Arnd Schumacher, who runs a private employment company.

Schumacher set up his business in 1996 - now his firm has four branch offices.

He started out working for the Federal Labour Office - but the amount of administration that had to be done concerned him. Too little time was left for job placement.

"There, placement officers can't just focus on finding people work. They're busy with bureaucracy. Like checking that unemployed people have signed on, or looking for possible subsidies, or other bureaucratic tasks. That takes up a lot of their time", Schumacher says.

Schröder defends German model

Ploughing the political field in the wake of the Jagoda affair, chancellor Gerhard Schroeder has attacked America's "hire-and-fire" economic model as wrong for Germany. It is a signal that he will shun the reforms businesses are crying out for as the September election nears.

"Anglo-Saxon, and especially American, standards of job security are different from Germany's because of our history of war and economic upheaval," Schroeder told a conference organised by his centre-left Social Democrats party.

"We need a balance between necessary flexibility on the one hand and security for employees on the other", he said.

It is that kind of balance that election victories are made of.

Schröder has his work cut out. He has to persuade voters that he is the man to make that happen although he has already reneged on his last election promise: to significantly reduce unemployment in his first term.

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