Millions Left Behind in Boom: The High Cost of Germany’s Economic Success, Part 1

Published on Spiegel Online International, by SPIEGEL Staff, May 4, 2012.

Countries around the world envy Germany’s economic success and look up to it as a role model. But a closer look reveals a much bleaker picture. Only a few are benefiting from the boom, while stagnant wages and precarious employment conditions are making it difficult for millions to make ends meet.

What a year it’s been for carmaker Audi and its employees, a year marked by the biggest profits in company history, a bonus in the millions for its chairman and handsome bonuses for many employees — though little to nothing for those at the very bottom of the pay scale … //  

… Unions in a Pinch:

The ongoing collective bargaining round won’t fundamentally alter any of this. Ver.di, the services sector trade union, achieved its best outcome in a long time in labor negotiations for municipal and federal public-sector workers. Nevertheless, Ver.di Chairman Frank Bsirske was unable to push through the desired “social component,” a minimum monthly increase of €200 in the lower salary groups.

The powerful IG Metall is currently fighting to secure its members a 6.5 percent wage increase. In recent weeks, the third round of negotiations failed, and now warning strikes and possibly a tough labor dispute could follow.

While skilled workers in unions can expect to see increases, the prospects are grim for those at the lower end of the pay scale. Employer representatives have made it clear that they will resist IG Metall’s demand to be given more of a say in the use of contract workers and employees hired through special-order contracts.

The unions face a dilemma. They are poorly represented among the employees in precarious circumstances, who would actually need their help the most. With their higher-earning core clientele, however, they face competition from new types of niche unions, which are promising special conditions to privileged professional groups, such as train drivers or air traffic controllers. It is one of the “dark sides of the boom,” says labor sociologist Bosch, that most low-wage earners are not getting “a fair share” of Germany’s economic success.

A Fracturing Society:

It’s a paradox: At a time when the economic elites in the United States and Great Britain are turning to Germany’s recipes for industrial success as role models, the social structure in Germany is increasingly moving in the direction of a three-class society. This is a fundamental shift for a social market economy whose policies have long been aimed at ensuring that the country’s prosperity is fairly distributed to all echelons of society. That system now appears to be eroding fast.

These days, it is executives, with their compensation skyrocketing into the millions, who are at the top. The second tier consists of the well-trained and reasonably well-paid legions of white-collar and skilled workers in modern information and industrial societies. Bringing up the rear are professional groups that were once considered part of the core of the traditional working world: salespeople, cooks, waiters and teachers, for example, who often earn less now than they did a decade ago.

In his inaugural speech, Germany’s new president, Joachim Gauck, praised his country for “bringing together social justice, participation and opportunities for advancement.” But Germans, the president warned, should not accept “people having the impression that advancement is out of their reach despite their every endeavor.”
But this is precisely the case now, and, as a result, the old questions of wealth distribution are being asked once again. How can we overcome the gap between rich and poor? How can all employees share in the growing prosperity? And, most of all, what roles should politicians and the parties to collective bargaining agreements play in the process?

It isn’t just the long-term unemployed who feel marginalized, but increasingly people who work in industries with narrow profit margins, or in which wages are a determining factor in competition. There are also those who work in the public sector, where there are often few opportunities for career advancement. (full text).


Greece’s Dilemma: When the Only Real Choice Is Protest, on Spiegel Online International, by Julia Amalia Heyer in Athens, May 4, 2012;

Jobs in the European Union, 2005-2011 (two graphs), on RWER Blog, May 4, 2012;

Institutional Corruption Is Killing the Economy, by Washington’s Blog, May 4, 2012;

Alberta Election: Party of Big Oil Defeats Party of Big Oil, by Paul Kellogg, May 4, 2012;

The Size And Strength of Banks Is Detrimental, on International Forecaster, by Bob Chapman, May 2, 2012;

Photo Gallery on Spiegel Online International: Germany’s Broken Promise of Prosperity for All, May 4, 2012.

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