Auf Wiedersehen, Gewerkschaften

By June 2, 2007Labor Unions

Earlier this week we noted the new and serious discussions in Germany about reforming “The German Model,” the labor-management relationship that gives unions an equal say in corporate board of director decisions (the so-called Mitbestimmung).

Recent union scandals and 10 percent unemployment (ah, good news, just dropped to 9.1 percent) have led the Germans to become more serious about putting the model to rest, an issue they’ve admittedly been debating for a long time…for good reason. As Reginald Dale observed in this International Herald Tribune column in 1996:

It should by now be painfully obvious that Germany’s cushy, consensus-based welfare state is ill-suited to meeting the challenges of the global economy.

The country’s rigid, high-cost labor market is crushing job creation and entrepreneurial flair, and the fabled social consensus that was once the envy of other industrial countries has become an obstacle to change.

OK, it’s hung on longer than expected, but what was true then is even more true, now. Here’s the latest evidence that should finish off the model.

Figures released by Germany’s Federal Statistics Office showed that the number of Germans emigrating rose to 155,290 last year – the highest number since the country’s reunification in 1990 – which equalled levels last experienced in the 1940s during the chaotic aftermath of the Second World War…[snip]

Leading economists and employers say the trend is alarming. They note that many among Germany’s new breed of home-grown “guest workers” are highly-educated management consultants, doctors, dentists, scientists and lawyers.

OECD figures show that Germany is near the top of a league of industrial nations experiencing a brain drain which for the first time since the 1950s now exceeds the number of immigrants.

These are serious demographic developments for Germany and Europe, but we’ll skip the Spenglerian/Steynian warnings and make just two observations:

  • Any U.S. immigration reform bill should embrace these kind of highly skilled, highly motivated European emigrants, who would contribute not just to the economy but to U.S. society as well.
  • By and large, labor unions are interested in preserving the privileges of the already ensconced. A dynamic economy that includes jobs creation (and jobs destruction) is the enemy. And as Germany proves, a rigid labor market — the kind the Employee Free Choice Act will encourage — drives the best and brightest out of you country in search of other opportunities.
  • P.S. And 9.1 percent unemployment. Rigid labor markets (and high taxes and absurdly generous social welfare programs and the decline of the work ethic) produce 9.1 percent unemployment.

    Join the discussion One Comment

    • Acousticalis says:

      Well, I can’t really confirm or deny the details of this particular article, but if my job in engineering is any indication, things seem to be moving in the opposite direction these days– i.e., well-trained, professional American engineers, nurses and computer specialists studying e.g. German and moving *to* Germany and other Euro countries like Austria. (BTW, be careful about that 9.1% unemployment figure– European countries calculate that in a radically different way from the USA, i.e. they cast a much wider net and consider *all* people of working age w/o a job, including people who’ve stopped looking, as unemployed. In the States, you’re only “unemployed” if you’ve filed an unemployment claim.)

      I guess there are a lot of reasons why so many of my old friends are crossing the Atlantic, but from what people tell me the biggie is the Euro these days. The truth is, in the States, we work about 70-80 hours a week (or more), our benefits and salary are stagnant or decreasing, plus our *real wages* are declining due to the dollar fall.

      Whereas in Germany, they’re working maybe 50-60 hours a week, earning their pay in Euros and so getting higher real wages in the process. Yeah, the taxes are higher (which is why I haven’t made the move) but apparently not *that* much higher. And “the decline of the work ethic”? Uh, no. I’ve made some site visits to German engineering firms before and why they don’t put in the same total # of hours as US engineers, I swear they get much more done in a given day– they’re just more efficient, why I don’t know but they are.

      Does this mean Germany has it figured out? Hell no, their labor market really is too damn rigid and their taxes really are too high. They can make some sensible adjustments here.

      But then again, 5 years ago, I couldn’t have imagined any of my US-trained colleagues moving anywhere else. And the truth is, these days Europe (at least big industrial places like Germany) are massive draws to people here. Austria and Switzerland even more so. (In fact, this is where most of that German “brain drain” is going– and a goodly number if not most of them move back home in a couple years anyway.) So seems like we’ve both got our own houses to clean.

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