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Unequal pay

January 12, 2010

Temporary employment agencies do not enjoy a good reputation in Germany. Allegations that drugstore Schlecker has been forcing employees to quit and then take on contracts as lower-paid temps only make things worse.

Schlecker shop front
Schlecker has come under fire in the past for other questionable labor practicesImage: AP

Temporary employment agency work has grown in Germany in recent years - thanks to a 2003 law allowing temps to stay in a job for more than one year. A coalition of Social Democrats and Greens first devised the legislation as part of the Agenda 2010 package of social reforms .

But the sector, which is still tiny in relative terms, is commonly associated with low wages and exploitative employment practices. This week's reports about Schlecker looks set to cast the sector in an even poorer light.

The trade union Verdi has accused Schlecker of forcing its employees to take new contracts through a temporary employment agency called Meniar, which pays only half of the usual hourly wage, about 6.70 euros ($9.73) instead of 12.50 euros ($18.17). It also said it believed Meniar was entirely controled by Schlecker.

Schlecker is not alone

picture of Verdi members on strike with banner
Trade union Verdi is calling for a minimum wage in the temp agency sectorImage: AP

What's more this is not an isolated case, according to the service sector union. German journalists, print workers and autoindustry workers have suffered a similar fate, according to Verdi press spokeswoman Cornelia Haß.

While there are temping agencies that adhere to collective wage agreements, this is not compulsory. The trade union is calling for a minimum wage to protect workers in this sector.

"More and more regular employment is being transformed into temporary work for the purposes of wage dumping," she said.

"We have seen this in the printing division of the Sueddeutsche Zeitung newspaper and the entire staff of the Nordwestzeitung in Oldenburg were fired and then taken on for lower wages and poor conditions," she added.

Most vulnerable at risk?

Some workers are particularly open to this kind of pressure from their employers, according to Haß. Are laws intended to open up the labor market in fact hurting the weakest of the weak?

"Ninety percent of Schlecker workers are women. Many of them are single mothers and desperately dependent on the money. They work part-time and are relatively inflexible when it comes to finding another job," she said.

Part of the reason why temping agencies are seen in such a negative light in Germany is that they have primarily been viewed as a way to achieve marketplace flexibility, in essence to get around Germany's employee-friendly dismissal laws and collective wage agreements.

Currently, German companies that have more than ten workers face a considerable number of hurdles if they want to dismiss employees who are on permanent contracts. Short-term contracts cannot, in theory at least, be issued on a rolling basis.

Two-tier system

Ursula van der Leyen
Labor minister Ursula van der Leyen has promised to review current legislationImage: picture-alliance/dpa

But while many labor representatives might regard existing dismissal laws as sacrosanct and regard temp agencies with skepticism, the German employment market is, in practice, becoming a two-class system, which favors the old over the young, the settled over the flexible and, in some cases, men over women.

"We still assume that you work your whole life long for the same company. This has changed in recent years," said labor market expert Holger Bonin, of the ZEW Center for Economic Research.

He believes that existing dismissal legislation should be replaced by laws establishing redundancy pay for workers according to their length of service.

"There is a problem when you have one segment of the labor market that is very protected and another that is not. This leads to tensions, a divided labor market," said Bonin.

"There is no sense of having a hire and fire system. But these problems would not arise if the rigid German labor market was more flexible. And if there are changes these should apply if possible right across the entire market to stop parallel labor relations arising," he added.

The labor expert believes that there is still a role for classic temping firms in Germany - for example, for companies with significant fluctuations in production levels.

Storm in a teacup?

Queue of unemployed people in labor agency
Some argue temp agencies have helped get long-term unemployed back to workImage: picture-alliance/ dpa/dpaweb

Others believe the entire problem is being blown out of proportion. Some 600,000 workers are employed by temporary employment agencies in Germany - down from a pre-crisis high of 800,000. That equates to a mere one-and-a-half percent of the working population.

Labor market expert Holger Schaefer accuses Germany's powerful trade unions of instrumentalizing the issue for their own ends. "When temp workers are employed in a company, then the influence of the union also wanes," said Schaefer, of the Institut der deutschen Wirtschaft Koeln (IW), a private free-market orientated economic research institute.

He argues that the temporary employment sector has benefited people who would not have otherwise gained unemployment - those with few qualifications.

Author: Julie Gregson
Editor: Michael Lawton