Europe's Awkward Choice: Swap Wage Freeze for Jobs? German Metalworkers Offer Concession to Gain 300,000 Jobs

By Ruth Walker, writer of The Christian Science Monitor | The Christian Science Monitor, November 29, 1995 | Go to article overview

Europe's Awkward Choice: Swap Wage Freeze for Jobs? German Metalworkers Offer Concession to Gain 300,000 Jobs


Ruth Walker, writer of The Christian Science Monitor, The Christian Science Monitor


IF the product isn't moving, cut the price to boost sales. This is the economic logic behind the job-creation proposal made by the head of the big metalworkers' union here, Klaus Zwickel of IG Metall.

In this case, the "product" is the metalworkers' labor. Not enough employers are buying it. Unemployment remains stubbornly high - around 9 percent - despite German economic expansion.

So Mr. Zwickel has offered Gesamtmetall, the employers' group with which his union negotiates, a deal: The workers will forgo real wage increases for 1997 if, over the next three years, the industry creates 300,000 new jobs plus 30,000 slots for the long-term unemployed.

The proposal is widely hailed by employers' groups and other observers, even those who say it is unworkable in its present form, as an important acknowledgment from the union side that the high cost of labor is constraining job creation.

The German experience, though unique, is reflected across much of Europe. Highly structured, highly regulated labor markets, which raise the cost of job creation, have led to widespread drops in employment rates over the last quarter century, even as employment has risen within developed nations outside Europe, such as the United States, Canada, and Japan.

High taxes, stiff severance-pay requirements, and a ban on fixed-term employment all conspire to make it harder for European employers to "buy" new workers. After each recession, residual unemployment is a bit higher.

The trend may accelerate with the "deepening" of the European Union as labor-related rules and regulations originating in one member country are extended throughout the EU. The European Parliament is considering a community-wide ban on telemarketing, for instance, which is already illegal in Germany. Americans used to having dinner interrupted for a telephone sales pitch may be sympathetic to the desire behind such a proposal, but a ban would trim potential jobs.

European Commission's new scheme

Similarly, the European Commission is reported to be pushing to require all employers in Europe to establish German-style "works councils," which consult on all issues involving workers, such as layoffs. These councils are seen as characteristic of "responsible" German trade unionism, which gives labor more of a voice than in other countries. …

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