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
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
*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