Saturday, August 31, 2013

Germany's Job Miracle is Low Pay

In Germany there is a growing poor-rich divide as well as increasing resentment among those who see German prosperity being built on the exploitation of the downtrodden. Statistics from Germany's employment agency show that at the top end German workers' wages rose by 25% between 1999 and 2010 while salaries in the lowest fifth rose by a mere 7.5%, when inflation was 18%. That has led to what economists refer to as internal devaluation, significantly reducing their purchasing power and doing damage to the German economy.

A survey for the European Central Bank in April showed that Germany's median net household worth was much less than that of Greece. In terms of GDP per head, Germany is faring reasonably well. But, contrary perhaps to popular belief, it is only just above the eurozone average. According to the Institute for Employment Research, the research arm of the federal employment agency, 25% of all German workers earn less than €9.54 (£8.15) per hour. In Europe only Lithuania has a higher percentage of low earners – those earning less than two-thirds of the national average wage.

Sometimes referred to as McJobs, mini-jobs are a form of marginal employment that allows workers to earn up to €450 a month tax-free. Introduced in 2003 by the then Social Democratic chancellor Gerhard Schröder as part of a wide-ranging labour market reform when Germany's economic doldrums earned it the title "sick man of Europe", they keep down labour costs and offer greater flexibility to employers. But critics say they have helped to expand the disparity between rich and poor and undermined many of the values that have traditionally underpinned Germany's social-market economy. Not only do they give employers no reason to turn them into proper jobs, but mini-jobs offer workers little incentive to work more because then they would have to pay tax. As a result, many remain trapped in marginal work and detached from Germany's much-hailed jobwunder, or jobs miracle.  Employers enjoy the fact that they can get a work force for just €450 a month.

Anette Krame, labour market expert for the Social Democrats said "Mini-jobs are destroying ordinary workplaces, and for most people they do not provide a living wage. It can't be that even in the US most states have a minimum wage, while Germany, one of the world's richest countries, has none."

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