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Germany protects jobs

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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.

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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.


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