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Job miracle over?

February 2, 2012

A number of big companies in Germany have recently announced substantial layoffs. But not all industries are concerned. Experts even maintain that employment will rise further in the course of 2012.

Glass facade with the word 'jobs' on it
There's no end in sight to the German job miracleImage: dapd

While many European nations currently have a two-digit jobless rate, Germany seems to be an island of bliss. The impact of the winter season on the domestic labor market has again been rather mild. The Federal Employment Agency (BA) said 3,082 million people were out of a job in Germany in January of this year - the lowest January number in 21 years.

But despite well-filled order books, some companies have already announced substantial job cuts.

Information technology giant IBM says it'll axe thousands of jobs over the next few years. It currently employs 20,000 people in Germany, but aims to reduce that number eventually by up to 10,000.

ThyssenKrupp, a major producer of steel, submarines and car parts has only just sold its stainless steel segment to a new Finnish majority owner, Outokumpu, which plans to cut 850 jobs in Germany.

Electronic equipment provider Nokia Siemens Networks has also said it will cut 2,900 jobs and close down its biggest site in Munich.

The list of companies planning to reduce their workforce in Germany is much longer. But even where no job cuts have been announced, some companies have imposed a hiring ban and halted all fresh investments. The airline Lufthansa is just one example.

View of Lufthansa planes at airport
Lufthansa has put a lid on new jobsImage: AP

In an ironic twist, the Federal Employment Agency (BA) is facing the biggest job cull in its history directly because of the favorable situation on the labor market. It will reduce its staff by a huge 17,000 to 97,000 people, down from 114,000 at present.

Does all of that mean that dark clouds are gathering over Germany, nipping the country's job miracle in the bud?

Just normal for a dynamic economy

The Cologne-based Institute for the German Economy (IW) says the forthcoming job cuts are nothing out of the ordinary and a result of structural changes in a fast-changing economy.

"It's not decisive what individual companies are doing," IW's labor market expert Holger Schäfer told DW. "What counts is the bottom line," he added.

Schäfer sees no end yet to the positive trend on the German market, but concedes that growth will not nearly be as high this year as it was in 2011.

"The drop in unemployment will certainly slow down, but it'll not be reversed," Schäfer said.

IW estimates that unemployment will fall by another 100,000 this year. The institute believes that new jobs will continue to be created despite slightly worse cyclical developments.

Service sector an employment driver

The IW says the service sector will be the job creation driver, not least because of the continuing increase in temporary employment. In the fall of last year, more than 900,000 people were employed through personnel service providers across Germany.

But core industries too have started creating new jobs again, particularly in the engineering and electrical sectors, Schäfer pointed out. Indeed, such companies often face mounting difficulties in finding skilled employees. More jobs could become available even in the manufacturing industry in the course of the year, he believes.

Employee busy at his workbench
Things are looking up in the manufacturing sectorImage: picture-alliance/dpa

But some labor market experts have been putting a negative spin on the continued German job miracle. They point out that the low-wage sector has been growing three times as fast as the rest.

In Germany, low wages are defined as less than 9.76 euros ($12.82) per hour in the states of the former West Germany, or 7.03 euros in those of the former East Germany.  In 1999 every sixth full-time worker in Germany was employed under low-wage conditions. In 2010, it was every fifth worker.

Many Germans have to pursue a second job to make ends meet. At present, more than 2.6 million people, who are subject to social insurance contributions, have a so-called mini-job that gives them 400 euros extra a month. That figure rose by 5.4 percent within just one year, the Federal Employment Agency said in a statement.

Author: Monika Lohmüller / hg
Editor: Michael Lawton