Wednesday, August 01, 2007

Germany Part and Full Time Work

Source Bundesbank

According to the Economist

Zeitarbeit, as temporary work is known, accounts for 1% of all jobs, but for perhaps more than half of all those created in the past year. One example of the new breed of employers is time & more, which specialises in health care. It has around 400 people on its books, of whom 300 are nurses; two years ago it had 250. Its founder, Bernd Sydow, who sold his firm to Adecco in April, says that it supplies almost all Berlin's hospitals as well as hospitals in other big cities. Around three-fifths of time & more's nurses are called on for stints of one to three days, often at short notice. Having reduced permanent staffing levels and carrying no reserves, hospitals turn to the agency as their requirements fluctuate. Mr Sydow reckons that eventually about 5% of his clients' nurses will come from an external pool.

Agencies such as Mr Lüngen's, in contrast, do not employ those for whom they find work, as Zeitarbeit firms do, but act as brokers. Last year such firms filled 62,000 jobs in the primary labour market, three times as many as in 2002. As well as running his own agency, Mr Lüngen runs his industry's biggest trade association (there are a handful), whose membership has risen from 23 when it was founded in November 2003 to more than 200.

Regulatory reforms explain only part of the change in the labour market. As companies have come under more pressure, workers' pay has been squeezed: as higher returns on capital have been demanded, the relative price of labour has had to fall. That managers can threaten to move work to central Europe or even farther away has strengthened capital's hand. As a consequence, while company profits have risen steeply, workers have done much less well. In the past six years, the share of wages in national income has fallen from around 60% to little more than 55%.

In part, this has come about through a loosening of Germany's system of industry-wide wage deals between employers' representatives and trade unions. This corsetry was never quite as rigid as it looked: variations on centrally struck wage deals at local level and in individual companies were already part and parcel of it.

However, agreements have become more flexible, notably since 2004. Martin Leutz, a spokesman for Gesamtmetall, the engineering employers' federation, refers to a “huge breakthrough” in that year's wage round, allowing companies to deviate from agreed terms on pay, bonuses and hours if this would secure or create employment, or keep investment in Germany that would otherwise go elsewhere—albeit with the agreement of workers' representatives. More and more companies, especially in eastern Germany, have chosen to bypass the central system altogether.

Moreover, negotiated settlements have been modest. Actual pay rises, indeed, have lagged behind inflation for several years. This year it looked as if labour might at last regain some of its old bargaining power, at least in the metal industries. IG Metall, the country's biggest union, demanded a 6.5% rise from the end of April. When Gesamtmetall said no, the union called short warning strikes.

The eventual settlement, reached in early May, covers 19 months, promising 3.9% in the first year and a further 2.1% in 2008, which can be postponed for up to four months. The average annual cost for the duration, according to Gesamtmetall, is 3.3%. That was the unions' best result for several years. With inflation at 1.9% it amounts to a real increase. But not a big one; and the metal industry has been doing particularly well, with export demand riding high. Workers elsewhere are unlikely to see their pay rise by as much.

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