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February 04, 2005
Unemployment in Germany
In the middle of the Economist's article there is an interesting statement I had forgotten from a Berkeley economist:
Economist.com: More than 5m Germans were unemployed last month, the agency revealed.... On January 1st, after parliamentary tussles and street protests, the government’s controversial reform of unemployment benefits came into effect. This reform, driven forward by Gerhard Schröder, the chancellor, is supposed to prod the jobless back into work. But its first effect was to prod many who had dropped out of the labour market back on to the unemployment rolls. Under the “Hartz IV” reform, named after Peter Hartz, the man who proposed it, those who have been unemployed for over a year receive a flat-rate benefit, means-tested and paid only to those who seek work seriously. Previously, not everyone on long-term aid had to sign on at job agencies. Now they do. The labour office reckons that at least 222,000 people not counted as unemployed under the previous system are now registered as such....
The longer they remain out of work, the less the unemployed make their presence felt in the labour market. Writing about the Great Depression, Brad DeLong, an economic historian at the University of California, noted that the long-term unemployed become “discouraged and distraught”. After a year without work, “a job must arrive at his or her door, grab him or her by the scruff of the neck, and throw him or her back into the nine-to-five routine if he or she is to be employed again.”...
Opponents of these reforms argue that there is simply not enough work to go round.... [But t]he demand for labour is not a fixed lump. Employers will keep hiring until it ceases to be profitable to do so. The ultimate limits on an economy are on the supply-side: eventually, the labour market will tighten and inflationary pressures will emerge.... Unfortunately, the German economy is still far from testing those limits. Inflation is low, leaving plenty of room for the economy to expand. But the animal spirits of households and firms are falling short. Indeed, some economists worry that efforts to resolve Germany’s supply-side problems may be worsening the economy’s demand-side difficulties....
Posted by DeLong at February 4, 2005 12:05 PM
Comments
Germany's productivity is similar to the US's. But they take a 1 hour lunch break and have seven weeks holiday per year.
They also choose to have a very generous employment insurance scheme, which they may not be able to keep funding.
Comments from Brad about living in a dumpster?
Posted by: Barry Murphy at February 4, 2005 03:05 PM
To better understand the dynamics of unemployment; imagine yourself getting up every morning and giving it your best shot for several months before you realize that your wanting a job doesn't create a job and that there is little or nothing you can do about your situation. After several months, many more unemployed join you. Now, if a job becomes available there many applicants, some more qualified, more aggressive, younger, willing to work for less, etc. One recent poster, qualified professional, said he had been unemployed for 54 months. Aha, there is your missing labor force.
Oh, does this writer for the 'Economists' really proceed with such a simple assed concept of how economies work?
Posted by: ken melvin at February 4, 2005 03:31 PM
U.S. PRISON POPULATION HITS ALL-TIME HIGH
The U.S. prison population reached a staggering two million people in 2002, according to a report released by the U.S. Department of Justice.
Add those 2 miilion to our 5.4% unemployment rate and we probavly don't look a whole lot better than Germany.
Posted by: Don Quijote at February 4, 2005 03:53 PM
see this URL to get source of 2 million prisoner:
http://www.pbs.org/newshour/extra/teachers/lessonplans/math/incarceration_story_9-05.html
Posted by: Don Quijote at February 4, 2005 03:58 PM
"After a year without work, “a job must arrive at his or her door, grab him or her by the scruff of the neck, and throw him or her back into the nine-to-five routine if he or she is to be employed again.”"
It should be noted explicitly that, to a large degree, this is due to employers, not due to the behavior of people unemployed longer than a year.
Many employers and headhunters consider the longterm unemployed as lepers.
Posted by: Jon H at February 4, 2005 07:32 PM
Yes, German unemployment is over 11% now.
But they're tackling their problem -- they've revised their labor laws to make unemployed women take jobs in brothels.
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/01/30/wgerm30.xml&sSheet=/news/2005/01/30/ixworld.html
Posted by: Jim Glass at February 4, 2005 11:34 PM
Well, in the Netherlands, prostitution is legal but that also means the prostitutes have to charge their clients 19% VAT and they have to file quarterly VAT returns. At least the state is making money off sex. It should make up (just a little) for the big budget deficits this year and in the years to come. Germany is probably only broadening its tax base.
Posted by: Esme Vos at February 5, 2005 12:04 AM
Is Jim right? Sadly, no: http://www.snopes.com/media/notnews/brothel.asp
Posted by: Ginger Yellow at February 5, 2005 08:57 AM
"they've revised their labor laws to make unemployed women take jobs in brothels."
What's worse, the law probably requires them to take jobs with Amway.
Posted by: Jon H at February 5, 2005 06:45 PM
[comment spam]
Posted by: at February 16, 2005 06:09 PM