Germany protects jobs

Economic Snapshot for June 24, 2009

Germany protects jobs

by Tony Avirgan and Anna Turner

Germany’s active labor market policy has enabled it to keep unemployment at a relatively stable rate while unemployment in other countries, including the United States, has risen sharply during the global economic crisis (see chart). Germany, which usually has a higher unemployment rate than the United States, now has lower unemployment.

Germany has a “short work” program that encourages employers not to lay off workers. If an employer’s production falls by 10% or more, the government will pay the employer 67% of a worker’s salary (60% for workers without children) if the employer keeps the worker on payroll. This policy, along with a “cash-for-clunkers” program, has meant that, as of June 1, Germany had not lost a single full-time job in auto manufacturing.¹ By comparison, 92,500 American auto manufacturing workers have lost jobs in the last 24 months.² The Big Three U.S. automakers and their suppliers have closed plants and dramatically reduced production, resulting in a loss of 354,000 jobs in U.S. auto and auto parts manufacturing over the past two years alone.³

Notes
1. Author’s conversation with German Labor Minister Olaf Scholz.
2. EPI analysis of BLS data includes preliminary numbers for April 2009.
3. EPI calculation of BLS data.