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Home Publications Blogs Beat the Press If Germany Is a Winner, It Is Partly Because It Has Work Sharing

If Germany Is a Winner, It Is Partly Because It Has Work Sharing

Thursday, 01 July 2010 04:58

Harold Meyerson touts Germany as one of the winners in this downturn noting that its unemployment rate remained below that of the United States. While he attributes this fact to its strong manufacturing sector, Germany has actually suffered a steeper downturn than the United States.

The reason that Germany's unemployment rate is more than 2 percentage points lower than the rate in the United States is that it has a policy of work-sharing to deal with inadequate demand. Instead of paying out benefits to unemployed workers, it pays companies to reduce workers' hours.

In a typical arrangement workers would see their hours cut by 20 percent. The government makes up 60 percent of the lost wages or 12 percent of total wages. The company makes up 20 percent of the lost wages or 4 percent of total wages. The worker then ends up with a pay cut of 4 percent while working 20 percent fewer hours. This loss of pay is likely to be largely offset by fewer work-related expenses, for example lower commuting costs as a result of working a 4-day week instead of a 5-day week.

As a result of work sharing Germans are experiencing this downturn in the form of shorter workweeks and longer vacations. By contrast, in the United States workers are experiencing the downturn as near double-digit unemployment.

Comments (4)Add Comment
written by izzatzo, July 01, 2010 6:53
In a new work sharing program proposed in the US by "Whose Your Nanny" Dean Baker, commercial bankers and other very rich fiercely independent capitalists dependent on the nanny state have agreed to hire thousands of the unemployed to be their caretaking nannies at a personal level, following them around in huge entourages, even adding on a few private jets to trail behind the lead one. A spokesperson for the rich said because each nanny works only half time, then twice as many are hired so it's win-win all around compared to hiring union nannies which used to force the hiring of offshore nannies when there was a scarcity of nannies at full employment.
written by fuller schmidt, July 01, 2010 8:14
I thought the Tea Party hated socialist-communist Europe. Why are they praising Germany?
written by diesel, July 01, 2010 10:41
This is a good column. At first I feared it would be the usual tripe about the failure of American manufacturing due to some deficiency in the our worker's characters, but Meyerson doesn't shy away from the true root of our problem--our runaway financial apparatus. And like most runaways, our financial system displays the usual constellation of problems, to wit; addiction to artificial stimulants, repetitive compulsive self-defeating behavior, lack of a sense of social responsibility, repeatedly needing to be "bailed out" of jams it creates for itself, etc.

Our current situation in which the financial sector has supplanted manufacturing as a percentage of GDP was a generation in the making. Some high ranking executives saw it coming, sounded warnings, objected, and fought to stave it off. To no avail. Nothing could stop the financial juggernaut once Reagan had unleashed their "animal spirits" with the starting gun being his famous phrase "More than anything else, I want to see the United States remain a country where someone can get rich."

Well Ron, you got your wish. You were just too simple minded to realize that if some got richer by the schemes you endorsed, many would get poorer. And like your hero, Calvin Coolidge, your presidency preceeded and catalyzed a national economic breakdown. Sleep well, old duffer.
written by Queen of Sheba, July 02, 2010 12:30
This is one of the most cogent articles to come out of the Washington Post - at least out of the business section - in a long, long time.

Workers' pay began the slow slide into stagnation around the mid-'70s, and that slide picked up steam with every successive president who neglected to define a new industrial policy for the country and every congress that relied on the campaign contributions of the rapacious and metastasizing financial industry, until finally we arrived at the circumstances we find ourselves in today.

The current president and congress exhibit no more inclination to rein in the predations of our financial sector than their predecessors, and no more foresight either, in determining an sustainable industrial policy for the future. The opportunities are there, most obviously in building a new energy sector and ensuring the availability of broadband communications to every household in the country, but the will to seize them seems to be less important to our leaders than winning the next election.

As for Germany's good fortunes being tied to their ability to export their way into profitability, I wonder how long that will continue if and when their largest markets begin seriously implementing their own austerity programs. At least whatever growth the Germans continue to enjoy won't be undercut by the demands of their financial sector.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.