Maybe the Krauts are onto something

As Europe struggle with their debt laden economies and things become tighter and tighter, perhaps it is time to look at some real solutions.

Gerhard Schröder is an unlikely poster boy for the British Conservatives, but the story of how he transformed the German economy 10 years ago is being studied with much interest in the Treasury. Gordon Brown spent most of the past decade mocking the Germans, contrasting their economic performance with our own growth, which we now know to have been a debt-fuelled illusion. As Warren Buffett observed, when the tide goes out you learn who’s been swimming naked. Britain stands exposed as the Prince Harry of the global economy, while Germany celebrates unemployment near record lows.

So George Osborne is studying what Germany got right. There is special focus on “mini-jobs”, contracts that allow a worker to earn 400 euros a month tax-free on the condition that they can be sacked at any moment. Germans can have as many such jobs as they like, but only one with the same employer. The official figures show that, within a year of their introduction, there were 500,000 more part-time jobs, with a good record of leading to full-time employment. Youth unemployment was indeed halved. None of this was pain-free – protesters lined the streets, complaining about deregulation and denouncing “devil jobs”. It was, for Schröder, a battle worth fighting and winning.

I can imagine the howls of outrage from Labour and their assorted union paymasters if “devil jobs” were introduced here. But given the state of our economy and the numbers of unemployed shouldn’t we give it a crack?

When Schröder faced the same choice he hired a director of Volkswagen, Peter Hartz, to design the biggest shake-up of German employment law in a generation. The report, when delivered, was carefully thought through – but the genius lay in its presentation. It was not a bloodless, wonkish work but a cri de coeur, presented as if it were Germany’s version of the Beveridge Report. The aim was to vanquish the giant evil of idleness through supply‑side reform. The report was launched to great fanfare: Hartz handed it on a computer disc to Schröder and declared that the future of two million unemployed Germans was at stake.

The most powerful insight of the Hartz reforms was that Germany’s real problem wasn’t the supply of jobs but producing a supply of willing workers. The federal government could borrow all it wanted, but resurfacing the autobahns wouldn’t have much effect if it couldn’t find enough Germans to do the work. Better to cut taxes on low-paid work and create a proper incentive for people to take the jobs that were actually going. Asking if this applies in Britain is like asking if Newton’s Laws apply here. The world over, the more work pays, the more people will want to work.

Labour and the Greens will claim this means raising the minimum wage…it does not. It is about removing barriers to employment through tax incentives. Many of these people currently are net tax takers, we need to transition them, through work to net tax payers.

  • maninblack

    I think that is fantastic idea!!
    Unfortunatly it would bring howls of outrage from the left about the ‘poor unfortunate workers’.

  • Johnboy

    So it’s true then.
    “Zey are, zey are, zey are ze master race!”

  • le sphincter

    You would have though the free enterprise Nationals would have seen the Christchurch earthquakes as such an oppotunity, more choice , more markets, less regulation……

    but what have we seen, a new government department, forcing of people from their homes, and a bigger bailout of an insurance company than was General Motors ( per capita).

    We got crony – state capitalism on a grand scale…more nanny state not less……

    And you know what …we have got German efficiency in demolition….its tuesday so its your turn…. and greek efficiency on the rebuilding…. nothing , nada , zilich

  • Balanced View

    Very interesting.
    Targeting large corporates for a fairer share of tax and wealth distribution could be another way to improve our overall economy.

  • 2ndAmendment

    Labour and the Greens will claim this means raising the minimum wage…it does not

    But why the fuck not? The “so-called” minimum wage is clearly just yet another piece of government bureaucracy & nanny-statism that we can no longer afford. It’s not even a minim – that’s set by the dole/DPB/super/wff/ etc etc etc. NZ needs to abolish the lot

    But you missed the real problem with this- tax-free money for bludgers. For fucks sake not only does this mad proposal let losers, takers, wffers & bludgers earn more they don’t have to pay tax. Hell most bludgers are doing currently illegal “cash jobs” under the counter anyway. This just legitimates a leftist rort

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