3 ms·

Wage suppression. Seen most obviously by simple comparison to other Eurozone states: http://fortune.com/2014/10/22/why-germany-is-the-eurozones-biggest-free-r

Wage suppression. Seen most obviously by simple comparison to other Eurozone states: http://fortune.com/2014/10/22/why-germany-is-the-eurozones-biggest-free-rider/ http://fortune.com/2014/10/22/why-germany-is-the-eurozones-b... This is not something Germans -- such as apparently the author of OP -- like to talk about.

binarray2000 10y ago
To add to less talked about downsides of the "German boom": Wage suppression has caused the fact that Germany has the largest low-wage sector in Europe. An article in English: http://www.nachdenkseiten.de/?p=18499 http://www.nachdenkseiten.de/?p=18499 > The share of low-wage workers (less than 2/3 of the median hourly wage) rose from 17.7% in 1995 to 23.1% of all workers in 2010. The number of low-wage workers increased from 5.6 million in 1995 to 7.9 million in 2010. Another article, from Süddeutscher Zeitung, in German: http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtschaft-schattenseiten-des-deutschen-erfolgs-1.1737409-3 http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtsc...
- lispm 10y ago
  > has the largest low-wage sector in Europe . That's easy, since Germany is also the largest country in Europe (not counting Russia), has the largest number of employees, has a lot of people from East Europe coming for work, ... The alternative would be to move many of these jobs outside of Germany, which sits right next to a lot low-wage countries. The low-wage sector was also expanded, because politics wanted to reduce long-term unemployment and thought that a low-wage job with some social security is better than not working. We should also remember that Germany with now 80+ million people has taken in 20 million people from East Germany (with its economy mostly collapsing) and many of them have still a harder time to find jobs, which has a lot of reasons. One of the reasons is exactly that this eastern part of Germany now lacks this large based of mid-sized companies who are competitive.
  - binarray2000 10y ago
    (1) My comment was an addendum to the post which (partly) explained to another post(er) why German companies aren't moving their production to cheaper markets. I remind you of this because the author of the article and many people here have a rosy view of the economic situation in Germany. Seeing only the "positives" and blending out the "negatives" because they don't fit the official narrative isn't helpful for our discussion. (2) Germany is the biggest country in EU (EU != Europe), has the largest workforce and, thus, the largest low-wage sector. Yes, that is correct. But it is not "easy", as this Eurostat graph shows: http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Low-wage_earners_%E2%80%94_employees_(excluding_apprentices)_earning_less_than_two_thirds_of_the_median_gross_hourly_earnings,_2014_(%25_of_employees)_YB17.png http://ec.europa.eu/eurostat/statistics-explained/index.php/... You see Germany in the company with such economic powerhouses as Estonia, Poland, Lithuania, Romania, Latvia - all of them having a bit worse PERCENTAGE of low-wage workers than Germany. This is not someone's perception, or some narrative, these are hard numbers. (3) You obviously didn't read the articles I've posted. Especially that from Nachdenkseiten as it lists many other issues not widely spoken about in the mainstream media - neither in Germany nor in other countries. It is an analysis from Prof. Dr. Gerhard Bosch (Geschäftsführender Direktor Institut Arbeit und Qualifikation Universität Duisburg-Essen). While we discuss the article published oh hbr.org, which talks about the causes for the success of the German economy, Mr. Bosch mentions the elephant in the room: > German economic policy continues to be characterised by its excessive focus on exports. As a way of dealing with the euro crisis, the German federal government advises other countries to introduce their own labour market reforms on the model of the Hartz Acts. This policy, however, cannot be applied at will to other countries, since only by abolishing the laws of mathematics would be it possible for all countries to have export surpluses. Meaning: German model doesn't work for others. And, it only works for Germany because others take a hit while Germany "takes" a surplus. Yes, German economy/society has it's qualities. But would it be such a "success" without major influence in EU institutions, in ECB, without Euro, with other countries having their currencies (which they can devalue to make their good cheaper and imported - German - goods more expensive), with customs on its goods, with fairer wages in Germany? I highly doubt it.
    - 10y ago
claudius 10y ago
The main point of the article appears to be that peripheral EU countries did not benefit as much from the internal open market as Germany due to weak ‘civil service’ and oligarchic structures which predated the EU and caused a misappropriation of EU funds intended to improve competitiveness. It then somehow seems to conclude that this was all Germany’s fault instead of being the fault of the people in those peripheral countries with ‘economic implosion, rising inequality and widespread corruption’. The article does mention wage suppression in the beginning but does not give a good argument why the wage suppression as observed in Germany since the early 2000's is a bad thing -- if wages are inflated and you need to compete with China for manufacturing, then you can either scrap your manufacturing or suppress wages, there’s not that much of an alternative there. My sibling comment arguing that the largest low-wage sector in the EU is somehow inherently bad is also misguided: if the alternative is much higher unemployment, low-wage jobs are still preferable to no jobs, especially if they come with the usual social security mechanism, as is increasingly the case again.
- cowl 10y ago
  exactly. This is something i'll never understand how people fail to consider. It seems they think that the wages can be magically high and the economy can go with it 'if we just were willing to want better things'. The fact is if you ask those workers what do they prefer: a good enough pay for a secure job or a Better pay for a job that might move tomorrow to a cheaper country? What will they choose? It seems people of different countries have answered this differently and we see different results. No, the magic Better pay and still secure job does no exist outside of naive communist Ideas.
lispm 10y ago
Now you have to show that the 'hidden champions' the author talks about are using 'wage suppression'. Actually the midsize manufacturing companies offer long-term employment, fair wages, jobs in rural areas, jobs which require high-qualifications, ... These people who are working in these midsize manufacturing companies are in high demand and that they have low wages or participate in low-wage jobs is completely wrong. We are talking about companies like the manufacturing company bought by Tesla. https://www.theverge.com/2016/11/8/13561146/tesla-acquisition-grohmann-automation-production https://www.theverge.com/2016/11/8/13561146/tesla-acquisitio...

binarray2000 10y ago

To add to less talked about downsides of the "German boom": Wage suppression has caused the fact that Germany has the largest low-wage sector in Europe. An article in English: http://www.nachdenkseiten.de/?p=18499 http://www.nachdenkseiten.de/?p=18499 > The share of low-wage workers (less than 2/3 of the median hourly wage) rose from 17.7% in 1995 to 23.1% of all workers in 2010. The number of low-wage workers increased from 5.6 million in 1995 to 7.9 million in 2010. Another article, from Süddeutscher Zeitung, in German: http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtschaft-schattenseiten-des-deutschen-erfolgs-1.1737409-3 http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtsc...

lispm 10y ago
> has the largest low-wage sector in Europe . That's easy, since Germany is also the largest country in Europe (not counting Russia), has the largest number of employees, has a lot of people from East Europe coming for work, ... The alternative would be to move many of these jobs outside of Germany, which sits right next to a lot low-wage countries. The low-wage sector was also expanded, because politics wanted to reduce long-term unemployment and thought that a low-wage job with some social security is better than not working. We should also remember that Germany with now 80+ million people has taken in 20 million people from East Germany (with its economy mostly collapsing) and many of them have still a harder time to find jobs, which has a lot of reasons. One of the reasons is exactly that this eastern part of Germany now lacks this large based of mid-sized companies who are competitive.
- binarray2000 10y ago
  (1) My comment was an addendum to the post which (partly) explained to another post(er) why German companies aren't moving their production to cheaper markets. I remind you of this because the author of the article and many people here have a rosy view of the economic situation in Germany. Seeing only the "positives" and blending out the "negatives" because they don't fit the official narrative isn't helpful for our discussion. (2) Germany is the biggest country in EU (EU != Europe), has the largest workforce and, thus, the largest low-wage sector. Yes, that is correct. But it is not "easy", as this Eurostat graph shows: http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Low-wage_earners_%E2%80%94_employees_(excluding_apprentices)_earning_less_than_two_thirds_of_the_median_gross_hourly_earnings,_2014_(%25_of_employees)_YB17.png http://ec.europa.eu/eurostat/statistics-explained/index.php/... You see Germany in the company with such economic powerhouses as Estonia, Poland, Lithuania, Romania, Latvia - all of them having a bit worse PERCENTAGE of low-wage workers than Germany. This is not someone's perception, or some narrative, these are hard numbers. (3) You obviously didn't read the articles I've posted. Especially that from Nachdenkseiten as it lists many other issues not widely spoken about in the mainstream media - neither in Germany nor in other countries. It is an analysis from Prof. Dr. Gerhard Bosch (Geschäftsführender Direktor Institut Arbeit und Qualifikation Universität Duisburg-Essen). While we discuss the article published oh hbr.org, which talks about the causes for the success of the German economy, Mr. Bosch mentions the elephant in the room: > German economic policy continues to be characterised by its excessive focus on exports. As a way of dealing with the euro crisis, the German federal government advises other countries to introduce their own labour market reforms on the model of the Hartz Acts. This policy, however, cannot be applied at will to other countries, since only by abolishing the laws of mathematics would be it possible for all countries to have export surpluses. Meaning: German model doesn't work for others. And, it only works for Germany because others take a hit while Germany "takes" a surplus. Yes, German economy/society has it's qualities. But would it be such a "success" without major influence in EU institutions, in ECB, without Euro, with other countries having their currencies (which they can devalue to make their good cheaper and imported - German - goods more expensive), with customs on its goods, with fairer wages in Germany? I highly doubt it.
  - 10y ago

claudius 10y ago

The main point of the article appears to be that peripheral EU countries did not benefit as much from the internal open market as Germany due to weak ‘civil service’ and oligarchic structures which predated the EU and caused a misappropriation of EU funds intended to improve competitiveness. It then somehow seems to conclude that this was all Germany’s fault instead of being the fault of the people in those peripheral countries with ‘economic implosion, rising inequality and widespread corruption’. The article does mention wage suppression in the beginning but does not give a good argument why the wage suppression as observed in Germany since the early 2000's is a bad thing -- if wages are inflated and you need to compete with China for manufacturing, then you can either scrap your manufacturing or suppress wages, there’s not that much of an alternative there. My sibling comment arguing that the largest low-wage sector in the EU is somehow inherently bad is also misguided: if the alternative is much higher unemployment, low-wage jobs are still preferable to no jobs, especially if they come with the usual social security mechanism, as is increasingly the case again.

cowl 10y ago
exactly. This is something i'll never understand how people fail to consider. It seems they think that the wages can be magically high and the economy can go with it 'if we just were willing to want better things'. The fact is if you ask those workers what do they prefer: a good enough pay for a secure job or a Better pay for a job that might move tomorrow to a cheaper country? What will they choose? It seems people of different countries have answered this differently and we see different results. No, the magic Better pay and still secure job does no exist outside of naive communist Ideas.

lispm 10y ago

Now you have to show that the 'hidden champions' the author talks about are using 'wage suppression'. Actually the midsize manufacturing companies offer long-term employment, fair wages, jobs in rural areas, jobs which require high-qualifications, ... These people who are working in these midsize manufacturing companies are in high demand and that they have low wages or participate in low-wage jobs is completely wrong. We are talking about companies like the manufacturing company bought by Tesla. https://www.theverge.com/2016/11/8/13561146/tesla-acquisition-grohmann-automation-production https://www.theverge.com/2016/11/8/13561146/tesla-acquisitio...