Monday, December 21, 2015

The Temp-Worker Opera

Within the present government of Germany, is the coliation of the CDU and SPD parties.  They share an arrangement that allows the government to function as it is.

So, the Secretary of Labor is a SPD political figure (Andrea Nahles).  Recently, she's taken up this idea of reforming temporary work and modifying the interpretation of contracts that companies can offer employees.

Apparently, the first draft of this idea came around to Chancellor Merkel, and she (through the CDU sharing of power).....said no.....and there would be no support of the idea that was devised.  Nahles isn't finished.....so says Focus (the German news magazine).  Nahles has gone back and is building a second project around the concept she has in mind.

What most economic experts will say about Germany's present 'run-of-luck' in terms of jobs and business.....is that temporary workers are a core element of success right now.  A company will develop a product.....hire X number of permanent workers....then hire temp-workers which are there for a period of time and then easily let go, with no real cost involved.  If they were permanent workers....you'd have to pay them a check as they exited and their exit would represent an additional burden to the company.

People argue about how many temporary workers exist, and there are occasions when one might suspect that even the government itself may not have a good or precise idea on the number of such employees in Germany.

Why operate this way?  Well....let's say that you suddenly have a product that is selling better than anticipated.  You want a second shift at the factory and this would amount to 100 employees.  The thing is.....your business sense says that the higher sales rate is not a permanent thing.  Logic dictates that you ought to take advantage of the situation but avoid cost burdens.  So you decide out of the hundred employees to be hired for the second shift....that eighty of them will be on a temp-contract.

Your success with this second shift?  Here's the thing.....you might actually go three years....maybe even four years with success and the need for the second shift.  Then the day comes in the fifth year when sales lag and you need to trim your force.  You dismiss half of the eighty temp-contract workers and have no costs involved in their dismissal.

In Nahles concept....she wants the temp-contract workers after nine months of employment, to be paid just as much as the permanent-contract workers.  She also wants the temp-contract workers to be limited to eighteen months....then reverted or flipped to a permanent contract.  It would be a mandated situation on companies to cooperate by government law.

What happens if the Nahles concept is eventually accepted and passed into law?  Well....a company might review the situation and just say fine.....pushing their needs for temp-contract workers into Poland, Czech, or Slovakia instead.  You build a portion of the product there, and simply truck the remainder up to Germany for the full-contract workers to complete.

How many jobs would be chased out of Germany?  Unknown.  Not even the government itself can predict the reaction of business operations or the creativity of business owners.

You have two 'evils' at work here.  Business operations don't want to be hindered by cost or by government regulation.  Meanwhile, they are employing people and helping to set a healthy pace of tax revenue and high number of Germans employed.  On the second 'evil', temp-workers have a fear of being let go, and they realize they aren't being paid as much as the permanent worker.  It's not a healthy environment for a worker to be in.

My bet is that Nahles will eventually get a package drafted that will be accepted by Merkel (probably accepting the SPD to bend over on a pet project of the CDU).  Somewhere in the year after implementation.....the statistical folks will announce that a minimum of 100,000 jobs in Germany disappeared after the implementation and went east.  A year later....a second announcement of a quarter-million additional jobs lost.

The great economic balancing act that the Merkel and the CDU have enjoyed for a decade?  Quietly sinking because of regulations created.

Maybe five to ten years after implementing temp-contract controls.....the SPD will develop some repair to the law, and then realize that this won't be enough to regain the jobs lost.....then they will have to create an incentive package.....tax credits....to get the companies to bring the jobs back.  So, it'll be a cost burden for the government itself.  In the end.....nothing gained.....nothing lost.  Just a soap opera to keep you interested in some political figure fixing things.


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