The German employment situation is complicated by the fact of political reunification after 1989, which, in economic terms, was a hostile takeover of one economy (GDR) by another (FRG). Within about three years of the opening of the Berlin wall, about 40% of the workers in East Germany were laid off. (The unemployment statistics were doctored with retraining, short-term work, and similar tricks.) That was more radical than in any other “transition” country. To-date, the East German labour market has not recovered from that, while the West German labour market (former FRG) is doing better.
Your friend’s statement can be criticized in two ways: (a)His/her assertion is false, because Germany has high unemployment *and* **low** GDP growth. (Not high GDP growth as implied by your friend.) (b) In East Germany (former GDR) exactly the opposite of your friend’s statement is true, namely, there it was extremely easy to fire 40% of the labour force and, as a result, East Germany is in bad shape, also in terms of GDP growth. Some observers have called the East German situation a German “mezzogiorno”.
How was it easy to fire 40% of the labour force of the former GDR? International and West German firms bought East German firms at low price, also with public investment subsidies. Then, they closed or rationalized the East German firms. Example: The chemical industry of Leuna employed 27,000 workers before 1989. It was sold to the French MNC Aquitaine. Within two or so years after the takeover, 21,000 workers were fired and about 6,000 remained.
Gernot
In reply to: xxxxxxxxxxxxxxxxxxxxxxxxxxxxx Worker rights versus growth Bill Lear Thu, 10 Mar 2005
At dinner this evening a friend of mine made the claim that the easier it is to fire workers, the better the growth rate of the economy --- "That's Germany's problem right now", he said, perhaps with good reason.
Is there any empirical support or refutation of this?
Bill
