WASHINGTON, Jan. 3 (UPI) -- As the number of German workers laid off from the manufacturing industry continues to rise, many are concerned that the new welfare reform changes -- which went into effect on Saturday -- will only further hinder the chances of finding jobs.
The new welfare reforms, Hartz IV, part of the German government's economic reform package, "Agenda 2010," took effect Jan. 1. The new economic reforms are aimed at helping Germany boost its stagnating economy by cutting welfare benefits and loosening up labor-market regulations.
Specifically, Hartz IV will alter the country's current welfare benefit system by cutting reduced aid to long-term unemployed workers in order to force them back into the workforce.
The government is hoping that by lowering welfare benefits it will encourage more unemployed workers to accept jobs, even if it is at lower pay.
"The point of Hartz IV is to tackle ... labor supply," said Adam Posen, of the Institute for International Economics, in Washington, D.C. "In the end it will help to stimulate demand for labor, but only by reducing the willingness of people to drop out of the labor force, or reducing what they are willing to work for."
German Chancellor Gerhard Schroeder has continued to defend his economic reform policies, including Hartz IV, even after a series of protests last year.
"I firmly believe that there is no sensible alternative to these reforms for Germany," Schroeder told reporters in Germany in August 2004.
"The labor market reforms known as Hartz IV will be implemented according to plan and without any changes," he added. "I can understand that some people fear that they will be disadvantaged by Hartz IV, but for the most part, those fears are unfounded."
The decision to cut welfare benefits has been seen as an egregious move made by the government against the 4.5 million Germans who are currently unemployed.
According to Germany's Federal Labor Agency, it is also expected that the people likely to be most affected by the new law will be the 2.7 million who have already used up their benefits and are living on minimum welfare.
Although the latest employment data released Monday by Germany's Federal Statistical Office reported a much brighter picture in overall employment figures, it also reported large job losses in the manufacturing industry.
According to the German government, Germany's employment rate rose 0.3 percent across the labor market in 2004, resulting in nearly 38.4 million jobs. It has been the first increase in employment since 2001, since the Hartz I and II economic reforms were implemented.
However, the manufacturing industry has seen very little of that increase. According to the statistical office, job losses have continued in the manufacturing industry including both energy and construction sectors.
The construction industry alone has hemorrhaged jobs since 1996. The statistical office reported a 4.8 percent employment rate drop in 2003, and a 2.6 percent drop in 2004.
Wolfgang Clement, Germany's federal minister of labor, warned Monday that it would take time for the Hartz IV reforms to take place. But with full cooperation among municipal and trade unions, he said, the job market would eventually turn for the better.
In a statement released in November by the German Embassy in the United States, experts said that quantitative estimates of Hartz IV's effect on the job market were made too soon, as regulations were still being put into place.
They also speculated that "the number of registered unemployed persons might increase" during the earlier part of 2005 because of the transition period.
However, to ease public uncertainty about the latest economic reform, Klaus Brandner, spokesperson on labor issues for Germany's Social Democratic Party, told reporters that "If it turns out (the reform) isn't efficient, it will be changed as soon as possible."
While the government is hoping that a cutback in benefits will force individuals back into the workforce, unemployed workers fear a tightening of an already strained manufacturing market, especially in parts of eastern Germany.
The construction industry has also faced a series of problems which has made it nearly impossible to compete in the current global market.
Rigid market laws, high labor costs, the European Union's enlargement last year, and the rising value of the euro have left Germany less competitive against other European markets.
"German companies don't get contracts in other European Union member states because they are too expensive," Ignaz Walter, president of Germany's main construction association, the Federal Association of the German Building Industry (Hauptverband der Deutschen Bauindustrie, or HDB), told the EU Reporter.
As a result, German companies are now facing the decision whether or not to relocate or go bust; either choice in the end would cost Germany jobs.
"The ones limited to the domestic market will face major difficulties in the coming years, while firms that partly work abroad will be able to deal with the changing environment," said Walter.
