In Germany, Labor Traditions Hard to Change

Article excerpt

It seems like a tiny issue. Sick-pay benefits account for about 1.5 percent of a typical company's labor costs in Germany. Yet even on small issues like this, the battle to make German industry more competitive in world markets has hit speed bumps.

Facing 10 percent unemployment that many experts blame on high labor costs, Chancellor Helmut Kohl fought successfully this year for a 20 percent cut in the pay workers get when they miss work for health reasons. But when labor unions balked at the move, companies sided with tradition, not change.

The all-but-complete failure in recent weeks of the sick-pay change suggests how gradual the reform of German labor and social-welfare policies will be. The experience also shows how much contention and division lie beneath the surface in this historically consensus-oriented society. But reform surely is coming. Among the reasons: *German manufacturers have been, in effect, fleeing the country. By one count, 2,000 mid-size companies have invested in the Czech Republic in recent years, for example. Investment within Germany has been flat. *The country faces requirements to lower its federal budget deficit to 3 percent of total economic output, to comply with the European Union's single-currency plan. That puts a priority on stimulating noninflationary economic growth and cutting social-welfare spending. *An aging population is projected to require more of worker income to go into pension programs in future years. Pensions will eat up 19 percent of German output by 2035, up from 11 percent today, predicts the Organization for Economic Cooperation and Development, the Paris -based group of rich nations. Many workers, however, remain unconvinced that the economic problems are as severe as corporations make out "I often have the feeling that, in the discussion about Germany as a place to do business, the employers, for whatever reason, intentionally represent the situation as worse than it is," says Willi Welteroth, a worker at Fichte and Sachs, a manufacturing firm in Eitorf, near Bonn. The collapse of the sick-pay change indicates the clout unions retain. At the urging of business, Mr. Kohl pushed through a change cutting sick-pay requirements from 100 percent of base pay to 80 percent. Most workers' sick pay, however, is governed by labor agreement, not statute. Many manufacturers decided that they too would cut sick pay to 80 percent, on the legally questionable grounds that the statutory framework for current contracts had changed. …


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