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Germany — The harvest of the labour market reforms

29 June 2010

New research published by business weekly Wirtschaftswoche reveals that 24% of German companies intend to increase their staff levels in the second half of 2010 compared to 11% of companies which intend to reduce their staff levels during the same period. In the services sector, 28% of companies intend to increase staff levels in H2 2010.

Reduced working hours schemes are being turned into full-time work again. In Q1 2010 there were 933,000 individuals on reduced working hours schemes, -40% less than during the peak time of Q1 2009.

Eugen Spitznagel, from the Institute for Labour Market Research (IAB), told Wirtschaftswoche "a further -200,000 workers should come off reduced working hours schemes this year."

The car industry, in particular, has picked up again due to worldwide demand. Mercedes (Daimler), Audi and BMW have extended working hours. Many of their factories have cancelled the traditional 'Summer close down' and have decided to continue working instead. BMW has hired an extra +5,000 temporary employees, Mercedes has hired an extra +1,800.

Hilmar Schneider, Director of the Institute for the Future of the Labour Market (IZA), explains why the German labour market is doing this well at a time when unemployment in France has climbed to over 10% and Spain has reached the 20% mark.

Schneider told Wirtschaftswoche "Germany is now harvesting the results of the social [labour market] reforms introduced by the previous government of Gerhard Schröder, which have reduced unemployment noticeably."

The restraint of the unions in terms of pay demands is regarded as the other major factor, which has stimulated the labour market. Manufacturing unit costs in Germany have not risen since the mid-1990s whilst they have gone up in many other industrial nations. "This has created breathing space for [German] companies to get through the recession" Schneider concludes.

The latest official labour market statistics will be published tomorrow by the government's Agency for Labour (BA).



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