Germany's Jobless Rate Jumps to Five-year High

Germany's unemployment rate shot to a five-year high in January, officials announced on Wednesday.

In all, more than 4.6 million people were out of work during the month -- roughly 300,000 more people than live in the eastern German state of Saxony. The total was 398,000 more than December and 333,200 from January 2002. The rate climbed from 10.1 percent in December to 11.1 percent in January.

Florian Gerster, the head of the German Labor Office in Nürnberg, offered little hope that the situation would change soon. Instead, Gerster said an improving economy would not help the economy until year's end.

Examining the reasons for joblessness

To Holger Schäfer of the Cologne Institute for Business Research, the growing numbers are nothing new. For years, economists like him have been analyzing the problems of the German job market and been coming to similar conclusions. Part of the current problem, these economists know, lies beyond the control of the government. When the economy falls into a slump, employment suffers, Schäfer said. And the German economy has been in in the doldrums for two years. It grew 0.6 percent in 2001 and about 0.2 percent last year, according to the German Statistics Office in Wiesbaden.

The second set of problems, however, has little to do with the ups and downs of a country's economy. Instead, they are caused by Germany's highly regulated job market, Schäfer said. In this environment, job creation is sometimes "the course of last resort," he said. One reason that employers are reluctant to hire people is the non-labor costs associated with their employment, he said. "These costs know only one direction -- upward," Schäfer said. The costs, generally shared on a 50-50 basis between employer and employee, cover such things as health insurance and payments into the country's pension system. This January, the pension payments climbed from 19.1 percent of gross pay to 19.5 percent. Some officials expect that they will climb once again next year. Many people also are paying higher health insurance premiums as well as the deficit of the public health funds climbs.

A change in rules is urged

Beyond these money issues, other regulations make employers reluctant to hire workers, Schäfer said. One such regulation defines procedures that employers must follow when they decide to lay off someone. Among other things, these rules regulate the notification period for layoffs and the payment of severance pay. In larger companies, employers also must consult the workers' council, which represents employee interests in a company, before they can lay off workers.

A change in these regulations would allow employers to dismiss employees more easily during bad times, he said. But "they could hire people more quickly during good times," Schäfer said.

Germany's economics minister, Wolfgang Clement, has suggested relaxing this law to make it easier to dismiss and hire workers. But he encountered immediate opposition from many of Germany's unions, which are heavily represented in Clement's Social Democratic Party.