Greek Economy Needs Growth Strategy

Greece has been living beyond its means for a long time now and has accumulated foreign debt. The high level of national debt is merely a reflection of the problems; the actual cause is insufficient economic power. The top-priority political objective is to strengthen the substance of the economy-in particular, the export base-to such an extent that in future, the balance of payments is at least equalized. This means Greece needs a growth strategy to catch-up industrialization. So far, revenue in the economic exchange with other countries has been mainly generated by tourism. However, this pillar is far from sufficient; although there are growth prospects in tourism in southern Europe, these should not be overestimated. On the other hand, Greece's industrial base is only small and heavily biased towards the domestic market. Its production structure and foreign trade links for goods show that the Greek economy presents virtually no competition for developed industrialized nations. Consequently, contrary to claims, the wage restraint in Germany has not put the Greek economy under significant pressure, either. The manufacturing sector and large sections of the economy are to a large extent marked by small-scale production. Overall, in Greece, there is one self-employed worker for every two employees; the employment structure more typical of a transition economy.Greece, economic structures and problems

Income Growth in German Households: East Germany Falls Behind

Following the enormous growth in household incomes in the former East Germany during the first half of the 1990s (which was based, in particular, on meteoric wage rises, accompanying pension adjustments, and the increase in receipt of social welfare benefits), east German incomes subsequently expanded only moderately. Income growth was not as strong as in west Germany, largely because total earned income expanded only marginally. This feeble growth was due exclusively to the weak employment trend. While the income growth in households with an earned income was lower from the mid-1990s onward than it had been previously, it nonetheless kept pace with the trend for average earned income in west German working households. The adjustment of east German wages to the west German level continued, albeit at an increasingly slow pace. A growing number of east German households are dependent on social transfers, and these transfers account for an increasingly large share of household income. There is little evidence of a similar trend in west Germany, given that employment growth is somewhat more favorable in this part of the country. Moreover, the share of east German households in receipt of old-age pensions has increased at a stronger rate than in west Germany. In 2002, social security benefits and statutory pensions accounted for almost 40% of total net household income in east Germany, compared with only just over a quarter of net household income in west Germany. Not only has the share of pensioner households increased in east Germany - as it also has in the western part of the country - but the structure of households has also undergone a general transformation within a relatively short period of time. Shortly after reunification, east German households had more members than west German households, on average, whereas now they have fewer. In particular, the share of families with children has declined, while the share of single parents has remained unchanged. As a result of this decline in average household size, since the mid-1990s east Germany has fallen only slightly behind west Germany with respect to household income weighted by household composition.

Real Wages in Germany: Numerous Years of Decline

Net real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined. This is a unique development in Germany-never before has a period of rather strong economic growth been accompanied by a decline in net real wages over a period of several years. The key reason for this decline is not higher taxes and social-insurance contributions, as many would hold, but rather extremely slow wage growth, both in absolute terms and from an international perspective. This finding is all the more striking in light of the fact that average employee education levels have risen, which would on its face lead one to expect higher wage levels. In contrast to the prevailing wage trend, income from self-employment and investment assets has risen sharply in recent years, such that compensation of employees makes up an ever shrinking percentage of national income. Inflation-adjusted compensation of employees as a share of national income reached a historic low of 61% in 2007 and 2008. As in previous recessions, however, investment income has been under greater downward pressure in recent months than wages.Development of wages in Germany

Ongoing Change in the Structure of Part-Time Employment

The prominence of part-time employment has dramatically increased both in Germany and across Europe. Germany has experienced above- average growth and currently the prevalence of part-time employment there also exceeds the EU average. Evidently, this involves fundamental structural change as part-time employment has increased regardless of economic trends. Although part-time positions often still entail predominantly low-skilled work, the number of mediumskilled or highly qualified employees working shorter hours has also increased. Part-time employment has expanded into an increasing number of professions and occupations. The fact that the number of men in part-time work has increased particularly dramatically is further evidence of structural change. Nonetheless, reduced working hours remain unequivocally a woman's domain across the whole of Europe. Although the ratio of men to women in part-time employment in Germany has converged somewhat, the gender gap is still significantly larger than in most other European countries. Significant gender differences are also evident when we examine the reasons for part-time employment, both in Germany and in the EU as a whole: Women's motives are predominantly family- related, whereas men's motives are mainly linked to further vocational training and particularly the shortage of full-time positions. For many women, too, the lack of available jobs is a reason for working part-time as well. In spite of the fact that the employment situation in Germany has improved over the past few years, the number of employed people for whom a part-time job only represents a stopgap solution has leveled off at a substantial two million.part-time work, Germany, EU

Five Years after the Reform of the Social and Unemployment Benefits in Germany

Great expectations were connected with the so-called Hartz IV reform which came into effect five years ago. In fact the number of unemployed recipients of Hartz IV benefits drastically went down during the last economic rebound. In earlier economic cycles the number of unemployed recipients of social benefits had stagnated in phases of recovery. But this alone is only a weak sign for success: Firstly, unemployment on the whole decreased more than in previous economic recoveries, and secondly, reentering the labor market is a longer process for Hartz IV recipients than for other unemployed persons. This means that for Hartz IV recipients, the development of worklessness is less linked to the overall economic labor demand than for other unemployed persons. This is partly due to the fact that many of them lack professional training and have only a slim chance to get a new job. Additionally, they often live in areas with considerable labor market problems. Insofar it is indeed a success if unemployment rates drastically went down also for social benefits recipients. There were no significant changes in the willingness to take a job that was offered. The overwhelming majority of unemployed persons was willing to accept a job both before and after the reform. On the whole, Hartz IV recipients are just as willing to work as the rest of the unemployed persons.Labour market reform, Unemployment benefit

Labor Mobility in Central and Eastern Europe: The Migration of Workers to Germany Has Been Limited in Scope

The enlargement of the EU in 2004 has had numerous effects- and the German labor market has not been left untouched. Among migrant laborers coming to Germany, self-employment has been the most frequent form of labor market participation to date. Despite barriers to immigration and the need to acquire work permits, dependent employment among migrants from 2004 accession countries has also increased. On the whole, however, migrant workers from the accession countries have only added an estimated 100,000 to 150,000 workers to the German labor force since 2004. Germany's attractiveness to migrant workers from the EU-8 countries has apparently declined in recent years. Since 2006, E-8 labor immigration and work permit issuance rates have been on the decline. While many migrants have been and remain willing to perform unskilled jobs despite having a vocational degree or university education, expectations seem to have risen. Data indicate that new laborers from Bulgaria and Romania have been increasingly pursuing the types of employment that migrants from the 2004 accession countries are now less willing to accept. The consequences for the German labor market, now that restrictions to freedom of movement have been abolished, are difficult to forecast. There are almost no indications that a massive wave of workers from the EU-8 countries will arrive in Germany. Past experience with labor migration suggests that workers will move first and foremost to economically strong regions that are able to absorb new workers and hold out the promise of relatively high incomes.Migration, EU Enlargement

The Soccer World Cup in Germany: A Major Sporting and Cultural Event - But Without Notable Business Cycle Effects

The upcoming World Cup has raised high expectations in Germany, not just for the national team, but for the economy as well. As the cyclical upswing has mainly been supported by exports so far, hopes have been growing recently that this sporting event will have a positive and stimulating effect on domestic demand - partly by increasing consumer confidence - and so enable the upswing to gain breadth.1 The analysis of the macroeconomic effects of the Soccer World Cup presented here shows that this could only happen if the event brought a clear change in consumer and investment behavior, together with a change in future expectations. However, that is not to be expected. Nevertheless, the World Cup is of high socio-political significance due its importance as a sporting and cultural event. It is (yet another) piece in the mosaic of Germany's transition from an industrial to a service society.

Demographic Change Necessitates Educational Reform and Lifelong Learning

Even though the share of workers retiring prematurely is growing, the average age of the labor force is rising because the younger age groups are contracting and the length of time they spend in education is increasing. And yet the German higher education system is relatively unproductive. While the propensity to study at the college level has increased, for demographic reasons the number of German students studying in Germany is no higher than it was ten years ago. By contrast, the share of foreign students studying in Germany has doubled over the last decade, and more German students are studying abroad. The labor force potential of young people must be better exploited in the future in the sense that they should leave the education system earlier and with improved qualifications. In addition, the process of globalization demands that German universities open their doors even wider to foreign students: first, in the interests of exporting education and, second, as a means to attract highly qualified graduates to Germany. The speed with which knowledge changes, together with the need - and the possibility - to increasingly extend the working life of older workers, necessitates a broader provision of advanced training, within universities as well. There is certainly some degree of willingness to participate in ongoing training among the members of Germany's labor force, but there is also considerable scope for expansion in this regard. However, willingness to engage in continuing education is more prevalent among the younger than the older labor force. Only when the vocational prospects of older workers change will the members of this group show a greater interest in pursuing advanced training and continuing education.

Ostdeutsche Industrie: weitgehende Abkehr von der kollektiven Lohnfindung

Die kollektive Lohnfindung in der Industrie der neuen Bundesländer ist vor allem wegen der überzogenen Tariflohnsteigerungen Anfang der 90er Jahre weitgehend erodiert. Nur noch 10 % der Unternehmen sind Mitglied in einem tariffähigen Arbeitgeberverband. Bei den Mitgliedsbetrieben handelt es sich vor allem um größere Unternehmen, in denen insgesamt 30 % aller Arbeitnehmer beschäftigt sind - ein weit geringerer Anteil als noch vor zehn Jahren, als in den organisierten Betrieben noch drei Viertel der Industriebeschäftigten angestellt waren. Entsprechend wenig wird nach einem Flächentarifvertrag entlohnt; der allergrößte Teil der Unternehmen zahlt Löhne ohne eine formale Vereinbarung. Vergleichsweise stark ist die Tarifbindung in der chemischen Industrie, schwach ist sie in der kleinbetrieblich strukturierten Metallindustrie. Unternehmen, die Löhne ohne vertragliche Bindung zahlen, sind im Wettbewerb nicht besser, aber auch nicht schlechter positioniert als tarifvertraglich gebundene Unternehmen. Im Übrigen geben die Untersuchungsergebnisse keinen Hinweis darauf, dass die ostdeutsche Industrie wegen des Lohnniveaus Probleme hat, sich gegen die osteuropäische Konkurrenz zu behaupten. Die Abkehr von der kollektiven Lohnfindung hat allerdings auch zur Folge, dass es nicht tarifgebundene Unternehmen häufig schwer haben, Fachkräfte zu finden.