Blood, Sweat, Toil and Tears

By CHARLES P. WALLACE / Berlin Monday, Aug. 13, 2001

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From a high of 12.6% in June 1997, France's jobless figure has fallen to 8.7% in May of this year, before trending upward in June, to a current 8.8%. In Germany, where unemployment has edged down only from 9.1% in June 2000 to 8.9% this year, the main problem is not job eliminations but long-term unemployment. According to the Organization for Economic Cooperation and Development in Paris, Germany's long-term jobless — out of work for more than 12 months — account for 51.5% of total unemployed compared to only 20% in Denmark and 28.4% in Austria. "This is a big structural problem," says Gert Wagner, an economist at Berlin's German Insitute for Economic Research. "The challenge is how to avoid the transition from short-term unemployment to long-term unemployed."

Heidrun Zerbster, 54, is a bookkeeper in the eastern part of Berlin who has been unemployed for much of the 1990s, the period after the fall of the Berlin Wall when most jobs in the previously socialist economy simply evaporated. More recently, she worked for a year as an executive secretary. That position, which paid $1,092 a month and ended in the spring of 1999, was created by a government subsidy. When the subsidy ended, so did the job.

In Germany unemployed workers receive 60% of their salary in benefits — if, like Zerbster, they have no children — and 67% if they have offspring, for a year. After that, there are usually other safety nets available. Zerbster, who has exhausted her unemployment benefits, is now in a social welfare program called Work Help that never expires. She takes home $590 a month in welfare payments, which after rent and utility bills leaves her only $90 a month to live on. Under the rules of the welfare system, the unemployed must go on job interviews, but they are not obliged to take a position if the salary is below their expectations. Zerbster acknowledges that she has turned down jobs because she could get more money by not working. "Sometimes the after-tax salary would be less than my Work Help," Zerbster says. But she acknowledges the situation doesn't make sense. "The government doesn't know what the goal is," she says. "We're in the middle of structural change. They should get the bosses to hire more people." That's not likely in the current economic climate.

In Germany a debate is raging about what the government owes to jobless citizens like Zerbster. Chancellor Gerhard Schröder recently became embroiled in the controversy when he warned that German society would no longer tolerate healthy people who don't work. "There is no right to laziness in our society," the Chancellor said. "Whoever rejects a reasonable job offer when they can work must reckon with sanctions." Schröder's comments drew criticism from unions, left-wing politicians and jobless workers, including his own half- brother Lothar Vosseler, who recently lost his job as a municipal sewer worker.

Still, economists criticize the Schröder government for not doing enough to remove the structural problems that keep

At 49, it's hard to find anything on the job market. I'll never find another job like this with the same salary
Yolaine Belamire

the labor market inflexible and discourage companies from hiring. One example: the recent decision to extend the law on mandatory workers' councils to companies with only 200 employees, down from 300. Critics argue the councils, composed of labor and management, make it harder for companies to lay off workers or bring other competitive measures to the workplace.

Last month, the carmaker Volkswagen, which had considered moving production of a new VW model overseas, offered to hire 5,000 unemployed factory workers at its plant in Wolfsburg at $2,300 a month. After lengthy negotiations, the IG Metall trade union torpedoed the plan because workers would have to put in more than a 35-hour week. Another structural problem: non-wage labor costs, such as pensions and health insurance, now average 40% of salary before taxes. "The rigidity of the labor market and the heavy tax burden on labor are an impediment to economic dynamism," says Hans-Werner Sinn, head of Munich's IFO Institute for Economic Research.

In Italy the jobless level reached 9.6% in April, down from 10.7% in the same period last year. At the same time, the government offers the unemployed an array of benefits that critics have long argued would discourage anyone from looking for a new job. Rita Brandetti, 52, was an executive secretary at the state-controlled construction firm Iritecna in Rome when she was told in February 1999 that she was being laid off. The government and industry have a special unemployment fund called Cassa Integrazione that pays workers who have lost their jobs through restructuring. Brandetti, who earned $1,200 a month at Iritecna, now gets about $700 monthly from the state, but the payments will end in October. "I was really destroyed," Brandetti recalls of her dismissal. "The saddest thing is that I look at the ads in the paper, and they don't want anyone over 38 or 40. Are you not useful after that?"

When Cassa Integrazione runs out, some Italians are eligible for what is called the mobility list, which can pay between $600 and $700 a month for up to 48 months, depending on one's age. "It's a strong disincentive to finding another job," says Giam-Paolo Galli, chief economist for the employers' federation, Confindustria. Indeed, Brandetti admits that she could probably get another position, if she were willing to relocate to Milan, where job prospects are better. She has no plans to move.

There lies the big dilemma facing Europe's governments: At what level do unemployment benefits cease to be a social safety net and become an incentive for not working? As job cuts spread through European industry this summer, the heat of the debate seems destined to rise — along with the unemployment figures.