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2.1 Persistent mass unemployment

(49) In Germany and the other EU members states persistent mass unemployment is the most pressing political, economic and social challenge. The disastrous situation on the labour market is acceptable for neither the persons concerned nor the constitutional welfare state. In the consultation process unemployment was one of the subject areas that was given most attention in the responses. Appeals are addressed to political parties, local authorities, collective bargaining partners, those responsible for finance policy and the funding bodies for employment policy measures; they are all asked to make their contribution to a lasting reduction of unemployment.

2.1.1 The strains of unemployment

(50) Over 20 years ago the number of people registered as unemployed in Germany topped the million mark for the first time since the early 50s. Since then unemployment has set in and the number of those who cannot find a job even during economic upswings has risen continually. In western and eastern Germany together 4.6 million women and men were registered as unemployed in January 1997; in the EU countries there were about 18.1 million at the end of 1996. This does not include those people who are undergoing retraining or further training, doing short-time work or employed on a job creation scheme, living in early retirement or who have simply retired into their shell. Youth unemployment is a particular challenge to employment policy. A growing number of young people, particularly young women, run the risk of never being integrated into the employment system.

(51) Society in western Germany is affluent and its economy is one of the most successful in the world; nevertheless it has had rising unemployment figures for decades. Ideas about gainful employment are still largely patterned on the traditional model of industrial work. Secure jobs in industry are, however, declining in number and importance in favour of the service sector. At the same time, casual labour and pseudo-self-employment are on the increase. These upheavals in employment strike at basic structures of a society in which paid work is a central factor for a regular income, social integration and the opportunity for personality development.

(52) Although unemployment is a problem affecting the whole economy there is a widespread prejudice that it is due to individual failure. Many unemployed people relate such accusations to themselves, withdraw in shame and often feel excluded. They miss the opportunity to earn their living themselves, cultivate contacts, gain further qualifications and participate responsibly in the life of society.

(53) Persistent mass unemployment is worsening the selection and shake-out process of the labour market. If particular groups are not up to certain demands made on them, they find it very hard to get another job once they have become unemployed. Hundreds of thousands of long-term unemployed people feel they are no longer wanted. People who have not found a job over a lengthy period often become incapable of seeking work and lose all hope. Bitterness and resignation destroy their trust in the democratic organisation of society. A lack of prospects and fear of losing income and social status provide fertile ground for violence and xenophobia.

(54) Since the 80s long-term unemployment has been increasingly concentrating on the older age groups. About two thirds of registered long-term unemployed people are over 45. Single mothers are in a particularly difficult situation. Frequently they have no opportunity of getting a job due to the burden imposed on them by their circumstances, and so cannot earn their own living. They become dependent on welfare benefit and are hardly in a position to make any social contacts outside the sphere connected with bringing up their children.

(55) Due to the traditional division of labour between men and women it is mainly women who have taken on home-making and voluntary work. When this is added to paid work it means that two thirds of all work done in society is done by women. Because women still do most of the work in the family they are frequently at a further disadvantage when applying for jobs. That is why they do not participate in paid work to an extent in keeping with their training and qualifications.

2.1.2 Unemployment in the eastern Laender

(56) Mass unemployment is particularly high in eastern Germany. It has risen at a rate and to figures unprecedented in the western part of the country. Whole branches of industry collapsed along with the socialist planned economy, due to the abrupt introduction of a market economy without adequate structural back-up. Other factors were the revaluation associated with the currency union and the loss of previous eastern European markets. Over two thirds of employees had to abandon their old workplaces and look for new ones.

(57) In the first four years after 1989 the number of people in employment fell from 10 million to about 6 million. At the end of 1996 the unemployment rate was over 15%. Over a third of unemployed people have been jobless for more than a year. If there are no fundamental changes the situation could get worse.

(58) A special problem of unemployment in eastern Germany is the situation of women on the labour market. While in the German Democratic Republic over 90% of women of working age were employed, they were increasingly pushed out of the market after the fall of communism. Many of them have no prospect of a job in the long term. Over 75% of long-term unemployed people in eastern Germany are women, frequently well-qualified and relatively young. They have to bear the brunt of the employment crisis.

(59) The East German contributions to the consultation process showed that many of the people living there feel abandoned, despite help from western Germany. During the times of the German Democratic Republic paid work had the function - far more than in the West - of integrating people into the social structure of a workplace; for that reason joblessness is felt more strongly to be a loss of social ties and the opportunity to share in the life of society. Even the social benefits of the West German social security system, amounting to impressive sums, have not been able to prevent many East Germans feeling greater uncertainty regarding their material resources and their social status. Unemployment has devalued vocational qualifications and work experience acquired over decades. The people living in the eastern L"nder increasingly believe that West Germans have a wrong impression of them because of their past. A large number of West Germans, they say, have no real conception of the hardships they face.

2.1.3 Causes of unemployment

(60) Many and varied are the causes of the structural unemployment has been increasing in Germany since 1973, and they are a subject of controversy among politicians and economists. Opinions expressed during the consultation process varied accordingly. One thing is certain: unemployment cannot be explained monocausally.

(61) In the last few years economic growth has clearly slowed down. The forces of economic growth apparently do not suffice for a lasting reduction in unemployment. While the number of jobs was substantially raised from the mid-80s to the early 90s this was not enough to prevent a further increase in unemployment. That is due to the fact that in the last few years there have been far more people looking for work; in addition there have been considerable job cutbacks, a trend which has recently accelerated.

(62) In addition, the structural change in industry due to technological progress went hand-in-hand with an enormous increase in labour productivity, without there being any reduction in working hours or expansion of production to compensate for the drop in employment. The increase in jobs in the services sector has not sufficed to balance out the loss of jobs in industry.

(63) According to one widespread idea, the main causes of the high unemployment in Germany lie in international political change and the globalisation of the economy and competition. This, it is thought, has led to far-reaching adjustment in international division of labour and to German companies undoubtedly having to face tougher global competition. They are substantially restricted in their competitiveness, particularly through high wage costs, short working hours, and the burden of contributions and taxes. Further problems are said to derive from a subsidised distortion of competition, high energy prices, a high degree of bureacracy and regulation, reservations about using certain new technologies, a lack of risk capital and currency fluctuations. It is also seen to be a problem that German companies are increasingly transferring their production abroad, while foreign direct investments in Germany are decreasing.

(64) Others see things differently. They point out that the labour market crisis is not specific to the German economy. In all developed industrialised countries growth has been slowing down and high unemployment has set in. At the same time, the international competitiveness of (West) Germany is extraordinarily high. No other country exports such a high share of its production. The trade balances with South East Asia's newly industrialised nations and the eastern European states is said to be in balance because these countries spend every deutschmark earned through exports to Germany on imports of industrial goods from Germany. The high direct investments abroad are also no real strain on the German economy since in the long term they will serve to open up and guarantee export markets. In this situation, then, it would be no solution for the national economy to follow what the companies see as the best business course, i.e. a strategy of national cost-cutting (wages and non-wage labour costs, social standards, company taxes, environmental standards) for the further improvement of international competitiveness. Such a strategy would aggravate the unequal distribution of incomes and make the employees bear the brunt of adaptation by shake-out competition. Purchasing power would thereby fall.

(65) The globalisation of competition is in certain areas indeed linked with a considerable reduction in jobs. Countries with low wage levels are increasingly taking on the production of labour-intensive products. Germany and other developed countries concentrate more on the production of products calling for a high level of capital investment and vocational skills. The demand for unskilled workers in Germany is falling, while the demand for skilled workers in increasing. The consequence is that people who cannot meet these requirements have trouble finding a job.

(66) High unit wage costs play an important part as a cause of unemployment in eastern Germany. During the transition from a centrally planned economy to a market economy productivity in eastern German plants was too low for them to be competitive after the 1:1 adjustment of wages and the following collective agreements aiming at a swift adaptation to the West German wage level. Also the collapse of the Comecon states, the interest of the population in western products and the purchasing practice of wholesalers led to problems of demand. Further difficulties still include the lack of clarity regarding ownership that arose due to the priority given to returning property rather than offering compensation. Nor did it help that East German companies were bought up, then closed by their West German competitors - a practice that continues to aggravate the situation.


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