As Germany rose from the ashes of World War II, many called it an economic miracle. These days, it could use one.
A pay strike last week, the first in seven years by the biggest German industrial union, is just the latest cloud over Europe's largest economy. Many economists fear the wage settlement that results could worsen symptoms of economic distress that have been building for years.
The walkouts by the 2.7-million member IG Metall union, which broke for the weekend Friday, are exposing tensions in Germany's "social-market economy."
The term means a market economy with a human face: strong unions, few layoffs, generous social benefits and an aversion to what Germans consider the excesses of US-style capitalism.
But many economists -- though few politicians -- say the system contributes to high unemployment and slow growth, making labor so costly it's destroying the very jobs the government wants to protect. Growing competition from lower-cost countries, often just across the border in eastern Europe, and the ease of comparing prices in the euro currency have added to the pressure.
Germany "is going around carrying a 50-pound weight," said Stephen Silvia, an economist and German labor market expert at American University in Washington.
"You could do that in the cozy old Europe before the euro and globalization," he said. ``But it's getting harder and harder to carry that weight around.''
In the pay dispute, IG Metall is holding out for a four percent raise; employers have offered 3.3 percent.
Some economists even say that anything over 3 percent begins to worsen the double whammy of slow growth -- 0.9 percent is forecast this year after a mild recession last year -- and a jobless rate hovering back around 10 percent after declining in the late 1990s.
Chancellor Gerhard Schroeder is one of those feeling the pinch this election year. He once boldly promised to cut the number of jobless to 3.5 million. With 4 million registered out of work, he's had to eat his words.
While Germany remains one of the world's wealthiest countries, its economic performance has lagged some of its nearest neighbors. Great Britain has 5 percent unemployment compared with Germany's 8.1 percent as measured by the European Union's gauge. France's economy grew 2 percent last year.
Many economists point the finger at Germany's labor relations system, in which powerful unions bargain over wages with associations representing all companies in a region, big and small.
The one-size-fits-all contracts are so rigid and widely applied that when workers at struggling construction firm Philipp Holzmann wanted to make concessions, they found it was illegal. The company filed for bankruptcy in March.
Industrial firms compensate for expensive labor with factory automation. But high minimum pay dries up lower-wage service jobs, the kind that could get many people started in the labor market.
For insiders, the system works wonderfully: high pay, six weeks of paid vacation regardless of seniority and a 35-hour week for IG Metall members. For outsiders who can't break into such jobs, the outlook is bleak.
Piled on top of the union system are payroll taxes to fund jobless, retirement and other benefits -- around 40 percent of wages, compared to about 17 percent for the US. One result: German factory labor is the most expensive in the industrial world, according to the Institute of the German Economy, a research organization close to German industry.
Big companies can react by shifting production to cheaper places. Volkswagen builds cars in the Czech Republic and Brazil; BMW makes sport utility vehicles in Spartanburg, South Carolina. Smaller firms don't have the deep pockets or large-scale operations to allow such a move.
Accordingly, German companies last year invested 12 billion euros (US$10 billion) more into production plants abroad than foreign companies did in Germany.
"The investment outflows over the past decade have been huge," said economist Silvia. "And what does underinvestment produce? Unemployment."
Companies are increasingly dropping out of the centralized bargaining system and cutting their own deals with workers. Less than half are covered in Germany's poorer, formerly communist east.
But it's hard to find politicians who question the social market economy or the labor laws supporting it. It's an article of faith for Social Democrat Schroeder, and his conservative challenger Edmund Stoiber has proposed tax cuts but nothing touching the basics of the system.
The European Central Bank has raised concern about wage inflation -- seen by many as a warning to German negotiators to hold down raises.
Malaysian authorities have advised women to wear makeup, not to nag their husbands and speak with a cartoon character’s soothing voice during the virus lockdown, sparking a flood of mockery online. Like many countries, Malaysia has ordered all citizens to stay at home to stem the spread of COVID-19, which, as of yesterday, had killed at least 39,070 people globally. In a series of online posters with the hashtag #WomenPreventCOVID19, the Malaysian Ministry of Women and Family Development issued advice on how to avoid domestic conflicts during the partial lockdown, which began on March 18. One of the campaign posters depicted
Taiwan will negotiate with the WHO about its participation without Beijing’s help and intervention as more countries, including Australia and Japan, are partnering with Taiwan to curb the COVID-19 pandemic, the Ministry of Foreign Affairs said yesterday. US Secretary of State Mike Pompeo in a telephonic roundtable with reporters on Monday also supported Taiwan’s role in the WHO, saying the US Department of State would do its best to assist Taiwan’s “appropriate role” in the world’s highest health policy setting body, Voice of America reported. In a Japan Business Press report published on Sunday, Chinese Ambassador to Japan Kong Xuanyou (孔鉉佑) said
KEEP AWAY: People should wear a mask in places where they cannot follow social distancing rules, the CECC said, adding that it would publish detailed guidelines today The Central Epidemic Command Center (CECC) yesterday announced 16 new cases of COVID-19, including two domestic cases, as it urged people to practice social distancing in public spaces by keeping a distance of at least 1m when outdoors and 1.5m indoors. Minister of Health and Welfare Chen Shih-chung (陳時中), who heads the center, said that seven of the new cases tested positive upon their arrival at the airport, four were under home quarantine, one was under home isolation and two were under self-health management, while the two domestic cases sought treatment on their own. The domestic cases are a man in his
HELPING HAND: Taiwan is ready to help other nations and will not sit idly by while the global fight against the coronavirus continues, President Tsai Ing-wen said Taiwan, as a responsible member of the international community, is to offer humanitarian assistance to nations hardest hit by the COVID-19 pandemic by sending them masks and medicine, as well as sharing with them an electronic system that the government has been using to track down people that need to be quarantined, President Tsai Ing-wen (蔡英文) said yesterday. With the nation’s daily production having reached 13 million masks and soon to reach 15 million, the government is to donate 10 million masks to medical personnel in nations most severely affected by the coronavirus, Tsai said at the Presidential Office in Taipei. The