Kurzarbeit helps Germany save jobs

Amy Scott Dec 1, 2009
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Kurzarbeit helps Germany save jobs

Amy Scott Dec 1, 2009
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Kai Ryssdal: President Obama is hosting a big jobs summit at the White House Thursday. Nobody really expects the meeting to come up with an actual plan to fix the labor market. But just in case, one of the president’s top economic advisers is doing his bit to lower expectations. Larry Summers said this week bringing the unemployment rate down from 10.2 percent is going to take some time.

In Germany the recession has been almost as bad as it has been here. And the jobless rate is almost as high — about 8 percent. But overall workers in Europe’s biggest economy have largely dodged the bullet. Marketplace’s Amy Scott explains how.


AMY SCOTT: At the MAN truck assembly plant in Munich, workers attach wheels onto an axle. An electronic sign overhead tells them how many trucks they have to build that day. Union official Klaus Brinnig says that number has changed in the last year.

KLAUS BRINNIG: In normal time, we have 160 trucks. And now, 47.

Workers are building fewer trucks because demand has dropped in half this year. But MAN says it hasn’t had to lay off any of its permanent staff. That’s because it’s signed up for a government program called kurzarbeit, or short work. Workers take a cut in their hours and their pay. But the German government reimburses them for a chunk of their lost wages.

MAN spokesman Dominique Nadelhofer says employees may work as little as half time. But they still make 90 percent of their salary.

DOMINIQUE NADELHOFER: For us it’s a good tool to keep them on the payroll to have them on board, and if the demand picks up again, then we don’t have to hire new people.

He says workers get to hold onto their jobs and have some free time for training or hobbies.

NADELHOFER: I’ve had the quite fun example of one guy who is raising parrots. And he told me that he has more than 50 parrots, and now he has more time to spend with his parrots.

Kurzarbeit has given an estimated one-and-a-half million German workers more time for their hobbies. Economists say it’s also saved hundreds of thousands of jobs.

It hasn’t been cheap. The government will pay out an estimated $16 billion this year. Some might see it as crazy to keep paying a part of so many people’s salaries. But economist Stefan Schneider with Deutsche Bank says it makes sense.

STEFAN SCHNEIDER: The argument is, and I think that’s the correct one, that if these people were unemployed, it would be even more expensive for the government.

Analysts say kurzarbeit is one reason consumer spending in Germany has held up. But it’s not clear how long the government can prop up the labor market. Right now companies can tap the program for up two years, though there’s some talk of extending it if the economy doesn’t bounce back quickly.

Some economists worry kurzarbeit may just postpone the inevitable, by keeping manufacturers from making some hard choices.

Eckart Tuchtfeld is with Commerzbank.

ECKART TUCHTFELD: If production is scaled down so sharply, as we have recently experienced, there must be some restructuring in the economy.

Restructuring means layoffs. As economic reality sets in, analysts expect unemployment to rise in Germany to 9 or 10 percent next year.

The MAN factory is in full swing on the day I visit. But worker Klaus Brinnig says a few days a week it’s a ghost town. He says he’s enjoyed the four or five days a month he’s had off. But he says he and others are starting to worry.

BRINNIG: In the beginning the people say OK, it’s fine. We have time for family, time for the mountains, time for the beer garden. But now, it’s a long time. And the people think was passiert in future?

What happens in the future?

After this fall’s elections, Germany has a new government.

Brinnig worries the more conservative coalition now in power isn’t as friendly to labor, and there may be some pressure to end programs like kurzarbeit.

In Munich, I’m Amy Scott for Marketplace.

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