INTERNATIONAL

Changes in the Labor Market

By Hartmut Seifert, Germany

The German government is facing a number of difficult problems on the employment front. It must not only reduce chronic unemployment to an acceptable level but also prepare the labor market for the challenges that it will have to face in the future-challenges caused by the structural transition from an industrial to a service and knowledge society. However, mastering the first of these problems is scarcely possible without mastering the second one. High unemployment has been a permanent feature of economic development for the past quarters century, climbing to higher and higher levels with each trade cycle. But positive economic developments of recent years have improved the situation on the labor market-some 1.34 million new jobs have been created since 1997. However, an average of 3.89 million people was unemployed in 2000: every tenth German of employable age was without work. The average unemployment rate for the year was 9.6% or 7.8% if one applies the standard international method. This is somewhat better than the European Union average of 8.2%.

Unemployment affects individual groups in Germany very differently. Foreigners are especially hard hit, with an unemployment rate of 17.5%. However, there is little difference between the unemployment rates of men and women. Thanks to Germany's dual education system, as well as special supportive measures and a policy of allowing early retirement, young people under 25 do not suffer over-proportionally from unemployment, as they do in other European countries. On the other hand, the rate of long-term unemployment is alarmingly high: every third unemployed person has been looking for a job for more than a year. People with health problems and those over 45 are especially hard hit.

The service sector as job market catalyst: It is above all the expanding service sector that is creating more jobs. Whereas over the past decade 1.3% of all jobs were lost to rationalization in the economy as a whole, the financial, leasing and company sector witnessed a massive 42.1% increase in the job, and the private services sector a 21.2% increase. The trade catering and transportation sector also saw an increase, even if only of 2.4%. But these increases were not sufficient to offset the sharp decline in jobs in the manufacturing sector and in the public sector. Even though the latest improvements in export figures, caused principally by the strong dollar, have temporarily halted the decline in the manufacturing sector, developments in other national economies indicate that the present trend towards a service economy will continue.

National statistics also gloss over the differences between the labor markets in the east and west Germany: the two halves of the country are presently drifting apart as far as employment is concerned, rather than growing together. To take the most recent example: whereas the employment grew by 1.9% in the west in 2000, it declined by a further 0.5% in the east. At 17.4% the unemployment rate was more than twice as high in the east than it was in the west, where it was 7.8%. With the exception of isolated growth sectors, despite massive support measures, investment incentives, and measures to improve infrastructure, the labor market has not yet started to expand on a broad front.

The structural transformation of the world of labor has brought with it fundamental changes in patterns of employment. Traditional employer-employees relationships, characterized by long-term, full time, covered employment is increasingly yielding place to a typical forms of employment. Between 1993 and 1995 alone, the proportion of jobs subject to social insurance contributions fell from 85% to 80.5%. Until the reform initiated in 2000, so-called side-line employment involving no more than 15 hours of work per week as not subject to such contributions. This form of part-time employment has become especially widespread in the service sector, where some 25% of all workers are employed on a part-time basis. The growth of such forms of employment is causing two major problems. First of all it is eroding the foundation of social security system, and secondly part-time workers often get a raw deal as far as industrial training programs are concerned. In the long term, the labor market is threatening to split into two groups, one of which is the burgeoning numbers of workers with low qualification. The solution proposed to this problem is "flexicurity" -combining atypical employment patterns with social security. Central to this idea are a minimal basic pension for all workers, following the Swiss model, a life long-learning system, and assistance in transitioning from one form of employment to another.

Deregulation-the solution to unemployment?: The causes of the continuing high level of unemployment are often seen to lie in antiquated structures. Taking the successful US model as their example, many experts recommend a thorough deregulation of the job market and a strengthening of market mechanisms. Legislators, as well as employers and employees are already reacting to these recommendations and initiating appropriate measures. A number of legislative measures have made it easier to conclude limited employment contracts and to subcontract labor, as well as allowing the operation of private employment agencies and Sunday work in the producing sector. In addition, employers and employees have signed so-called "exemption clauses" which permit companies to undercut standard wage levels within clearly defined margins and to conclude company-specific wage and working hour agreements. Although the wage agreements concluded in the nineties were not extravagant, they had no correspondingly favorable effect on the labor market. The developments in the exchange rates have been far more decisive in triggering off the recent export boom and the concomitant growth in employment. Yet demands for further deregulation continue to be made. Such demands focus on current laws governing collective agreements, criticizing their lack of flexibility with respect to company-specific wage and working hour contracts. Apart from the fact that the positive effect of these measures on the labor market remains to be proved, a reconstruction of the wage negotiations system would have no effect on an increasingly large sector of the economy. For more and more employers in the expanding service sector-in the New economy as well as in eastern Germany-are in any case dispensing with wage agreements altogether: 25% of all workers in western Germany and no less than 40% in eastern Germany do not have wage agreements with their employers.

Alliance for jobs: The federal government that was elected in the autumn of 1998 has made the fight against unemployment one of its top priorities. To this end it has created a national Alliance for jobs, including representatives from the government, employers' associations and the trade unions, whose aim is to create a tri partisan consensus on employment policy and practices. In the seven summit meetings of the Alliance to date, its members have agreed on a number of actions including a program to combat unemployment-oriented long term wage policy, the reduction of overtime, the establishment of working time accounts, and a special program to promote employment among people with low qualifications and the long-term employed. The government's emergency program to reduce unemployment among young people is designed to provide competitively weak groups-such as young women, disadvantaged, physically challenged and foreign young people-with funding to get them started in the training and employment markets. After two years, the program is showing a very positive balance: three quarters of those participating found either an apprenticeship place or a job immediately after participating in the program. And the numerous regional, sectoral and company Alliances for jobs are no less successful in increasing employment: management and works councils in many companies have taken advantage of the opportunities offered by flexible agreements on wages and working hours to conclude a wide range of measures for securing and creating jobs and increasing productivity. Of prime importance here is the introduction of flexible working hours, although the measures also include restructuring work processes and introducing professional qualification programs, and in some cases agreeing on wage reductions. In return for compromises made by employees in wages and working hours, management have for the first time offered guarantees with respect to job security, investments and company location, and in some cases to creating extra jobs.

The challenges of the future: Although demographic developments will ease the situation on the labor market over the next few years, there are other developments that will further complicate the situation. For instance, Germany's working population will shrink by 2 million by the year 2020, and by nearly 11 million by 2040: in addition it will on average become older. At the same time, the flow of young people bringing fresh knowledge into the economic sector will gradually die down. Continued immigration will be necessary to stabilize the labor situation.

These challenges in supply of labor are taking place in parallel with Germany's rapid transformation to a service and knowledge society. Long-term scenarios indicate that the proportion of unskilled workers, which was about 20% in the mid 90s, will fall below 10% by 2010. Yet although qualifications will be increasingly necessary to get a job in the future, they are becoming obsolete at an ever more rapid rate, making up-to-date know-how and skills prime resources in highly developed economies. Unless we invest more on education and training, despite forecasts of high unemployment we will be faced with increasingly serious bottlenecks as far as qualified personnel is concerned. Plans to introduce job rotation as a tool of labor market regulation, following the Danish model, are a first step in extending professional training opportunities for employees. Further measures are least being considered and have in principle agreed to. Thus at the latest summit meeting of the Alliance for jobs, government, employers and trade unions pledged to place professional training on their agenda for the future, and to work towards an agreement allowing employees to take more time off for professional training.

The author is head of the Institute for Economics and Socio-Economics in the Hans Boeckler Foundation, Germany. Text courtesy: Embassy of Germany, Kathmandu, Nepal.

Hope for street girls

-Omana Nair, External Relations Officer, ADB

In the wake of financial crisis, street children have become a common sight at most major intersections in Indonesia's large cities. They sing and dance or strums on a battered guitar-and then make beelines for taxis or expensive cars to beg for a bit of change.

On 1 November 2000, the Asian Development Bank, ADB, launched its Japan Fund for Poverty Reduction with a US$ 1 million project in Indonesia to help young female street children, who are often victims of sexual abuse and child prostitution. The fund, which has resources of US$90 million and is financed by the Japanese Government, was established in May 2000 to provide grants for poverty reduction activities that add substantive value to projects financed by ADB.

A 1999 ADB survey of 12 Indonesian cities found that the girls make up 20% of Indonesia's estimated 170,000 street children-and that programs for street children have concentrated on boys.

"We hope to help street female children in Yogyakarta with counseling services and health and medical care in collaboration with NGOs," says Kus Hardjanti, ADBs task manager of the project. "We will provide parental and postnatal care for pregnant girls and young mothers. We will also treat girls with sexually transmitted infections, train social workers to deal with female street children, and organize public information campaigns against child prostitution".

Shelters giving hope:; Visit with a group of journalists to a few shelters for female street children in Yogyakarta provided insights of how these young women are starting to lead normal lives.

Mariam, one of the occupants in the Ghifari shelter for female street children in Yogyakarta, had been living on the streets of Sumatra and Java for six years. She ended up in Yogyakarta. "' Someone poisoned my father, and the shock caused my mother to have a heart attack," says Mariam. She was eight years old. Left in the care of her Uncle, she was raped at the age of 10. Mariam left her home in Padang, West Sumatra and took to the streets, where she was subjected to more sexual abuse. A police officer took her to the shelter in 1999.

"'I'm now happy here. I have people I can call parents, who take care of me and educate me," she says.

Ulun Nuha, a social worker at Ghifari, says that economic problems are not the only reason children that go to the streets. "Yogyakarta is heaven for street kids because they consider it more friendly than other cities. Seventy percent of the street kids here are from other areas in Indonesia," he says. "Once on the streets, they are forever marked as bad girls who are easily preyed upon by local hoods," says Kirik Erwanto, an NGO volunteer.

In July 2000 in Yogyakarta, street children numbered 1,600, of whom about 500 were girls, says Kirik. "Within these last three years, there has been quite a dramatic increase in female street children in Yogyakarta," he says. "Many left their homes because they have conflicts with their families, like one of the girls under our care. She refused to marry a man whom her parents had chosen for her."

Luckier than others: Eighteen-year-old Aminah knows what living on the streets is like. She spent most of her teenage years selling newspapers in Yogyakarta. She says street life gave her freedom-and more than a few problems. Like many street kids, she started taking flu medicine, drinking vodka, and sniffing glue. "Glue sniffing is cheap, and I used to enjoy it," she says.

Looking pale, but proudly clutching her one-month old baby, she says she now is trying to turn herback on that life. She has married her boyfriend-who works as a bus conductor-and has been accepted back home by her parents.

Aminah is one of the luckier ones. Many of the other former steet kids say it would be impossible for them to return to their villages and settle back into normal life. Instead, the kids have found proper jobs through Ghifari shelter.

Mr. Kirik says that the girls are stigmatized because they have a reputation of being wild and sexually promiscuous. "Almost all female street children have been sexually abused by other street kids as part of an initiation process, and then later by local boys or men who take advantage of their vulnerability," he says.

Ani, another girl staying at the Ghifari shelter spent two years working and living on Yogyakarta's street. Ani fled to the streets to escape her stepfather, who was beating and abusing her. "My mother was helpless and could not protect me,' she says.

Scheme to be replicated:; If successful, the Yogyakarta pilot scheme will be replicated iin other urban centers. The scheme will establish counseling programs for female street children who are either at risk of, or who have experienced, sexual abuse; evaluate different approaches to prevention and rehabilitation; and develop culturally acceptable, cost effective, and sustainable programs to help the Government, NGOs, and social workers address the needs of 34,000 female street children.

The executing agency will be the National Welfare Agency of the Ministry of Health and Social Welfare. NGOs will implement the Project, which is scheduled to be completed in December 2002.

Text courtesy: ADB, Kathmandu.