'Hire and fire' has destroyed Britain's jobs economy

[CHIMO]

These days we tend to talk about the divisions in Europe as one between net creditors and debtors. In reality this is just a sideshow. There is a much more fundamental gulf, hinted at by Angela Merkel in her Davos speech yesterday: between countries with organised industrial training systems such as Germany, the Netherlands, Belgium, Scandinavia, Austria and Switzerland – all currently with jobless rates of between 3% and 7% – and those with much higher rates of unemployment, often in double digits, in peripheral Europe.

The issue pits Anglo-Saxon precepts of free market regulation against the Germanic "Rhineland" system of managed capitalism, with modern apprenticeship systems built on a long-term compact between labour and employers. In the years before and immediately after the euro's birth in 1999, the peripheral countries of the European monetary union (Emu) often followed Anglo-Saxon principles by liberalising parts of notoriously inflexible labour markets. "Hire and fire" became the motto.

Initially this seemed to work. But as debt market conditions worsened and growth stalled after the 2007-08 financial crisis, Emu's periphery has been left seriously exposed by the failure to replace unproductive regulations with new mechanisms to generate jobs.

In the battle between rival systems, "Rhineland capitalism" appears to be winning hands down. In the two years since the global economic downturn in 2009, Germany has expanded employment by 1.8m, while the UK, US, France, Italy and Spain have shed 7m jobs. In 2007, when most other countries were nearing the end of a boom driven by excess credit, Germany had the highest unemployment rate (8.7% of the workforce on a harmonised basis) of the group of seven leading industrialised countries. Yet in late 2011, according to OECD figures, German unemployment, at 5.2%, was the lowest in the G7 apart from Japan.

http://www.guardian.co.uk/commentisfree/2012/jan/26/hire-and-fire-destroyed-uk-jobs

[pscot]

1. K&R

[JDPriestly]

2. K&R

Last edited Tue Jan 31, 2012, 02:58 PM - Edit history (1)

Finally someone is recognizing this. I spent a bit of time studying German labor law and lived in various parts of Europe. This is absolutely true. Excellent analysis.

Businesses talk all the time about how they need to stable tax laws, etc. in order to run their businesses. Stability is the keyword. Dependability.

If businesses want a well trained workforce that can do the job that needs to be done, they must provide a reasonable amount of stability with regard to the demand for labor and in particular with the demand for skills.

No one can afford to invest several years of their life and a good portion of their expected income during the very years that they might like to start a family unless they can expect a steady income from a good job after they make that investment.

Nothing is certain in life, but what goes for the business goose goes for the worker gander.

These paragraphs of the article are key:

Funded by an employment insurance levy, it pays for firms to keep workers for six to 12 months, provided employers can show their businesses are in a cyclical and not a structural downturn. Imagine a small engineering firm that ran into financial trouble in 2008: rather than letting go of the 17-year-old apprentice who had recently joined the firm, it would have been able to keep employees on board and then benefit from their experience when the economy was back on its feet. Even if the company had gone bust, the apprentice would by law have been sent to another company.

Sir Anthony Bamford, chairman of UK excavator maker JCB, points out that his company was forced to shed more than 20% of staff in Britain when production halved in 2009. By contrast, the Kurzarbeit system enabled him to keep all his labour force in Germany.

http://www.guardian.co.uk/commentisfree/2012/jan/26/hire-and-fire-destroyed-uk-jobs

As it turns out, and against even my beliefs about how capitalism should work, it seems that the German, et al. system works better than ours.