If Germany’s economic model is the future of Europe, we should all be quite troubled. But that is where we seem to be going.(...). Since 2003 a falling unemployment rate has been the consequence of the creation of a large number of low-wage and part-time or flexitime jobs, without the benefits and protections afforded earlier postwar generations. Germany now has the highest proportion of low-wage workers relative to the national median income in western Europe. (...). Ideally, a wealthy country should stay competitive through research and development, and capital investment. Instead, total gross fixed investment has fallen steadily in Germany, from 24 per cent to less than 18 per cent of gross domestic product, since 1991. (...)Even the employment mini-miracle and export boom since 2003 were not enough to induce German businesses to increase investment – and public infrastructure investment has been even more lacking.(...). The other way for a rich country to stay at the top of the value-added chain, and thus compete on productivity, is to invest in human capital – that is, to educate its workforce. (...) Germany has failed to invest in its public university system while the private sector has maintained but not expanded the supply of its famous apprenticeships. The result is that Germany’s productivity growth has been low compared with its peers. Growth in gross domestic product per hour worked is 25 per cent below the OECD average, whether one goes back to mid-1990s or looks at just the past decade – and whether or not one excludes the bubble years for the US and UK. With these productivity numbers, it is no wonder German business is competing only by reducing relative wages and moving production east. Dependence on external demand has deprived Germany’s workers of what they have earned, and should be able to save and spend. (...) Wage compression will not be a successful growth strategy for Germany’s or Europe’s future.
Posted on: Wed, 04 Sep 2013 13:42:56 +0000
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