Rigid Unions Help Paralyze Economy

Last week, workers in several European countries took to the streets demanding socially just reforms and warning against any potential government cutbacks. On the surface, these protests would suggest that Europe's unions have many shared interests. Not so, says this op-ed in Germany's F.A.Z. Weekly. In reality, unions' criticism always focuses on national concerns. German union leaders, according to the author, frequently talk about maintaining the dignity of the worker, "but what does a Latvian construction worker gain if German minimum wage regulations prevent him from making use of his cost advantage?" Instead, "unions that think in European terms should also praise Siemens if it relocates 5,000 jobs to economically weaker regions within the European Union - because this would create new markets and trading opportunities, which would secure wealth on both sides." But many of the unions seem to be against new EU members. By pushing such anti-competitive solutions, Göbel argues, German unions are holding the country back. Even as Europe becomes more integrated, national interests still remain a force to be reckoned with. – YaleGlobal

Rigid Unions Help Paralyze Economy

Heike Göbel
Friday, April 9, 2004

It was an act of self-assurance in times of economic and social uncertainty. Last Saturday, unions, supported by globalization opponents, took to the streets in several European countries to clamor for socially just reforms. They wanted to show their governments what the latter have long learned from surveys or bitter election results: that social cutbacks are always unpopular, even if the social security systems of Europe's aging societies are in dire financial straits and, in this light, planned cutbacks are actually too weak.

Judging by the parallel demonstrations and similar protests, Europe's unions seem to have a lot in common. But there is no real cross-border union movement. The unions' criticism always focuses on national concerns. The German union member who fights the relocation of German jobs to cheaper foreign locations in the soon-to-be expanded European Union has little in common - for now - with the union member in Poland or Slovakia. For the latter, the relocation of precisely these jobs offers hope of economic growth and increasing wealth in their own country.

Such contradictions hardly bother the organizers of the demonstrations. And that is also why the protests failed to gain any additional impetus from the parallel marches in several European cities. This would occur only if the unions were able to explain to their members how they plan to square the interests of the German worker with the interests of his poorer foreign colleague. The core message of the union action day promised nothing less than that: “We want everyone to have a job in which he or she can live in dignity.“

Taken seriously, this message is highly contentious: How can the unions talk about dignity and work for all if the collective bargaining system that they uphold deprives 6 million Germans of any chance of a job? The German Union Federation would be eager to install this collective bargaining system, including Germany's generous protections against layoffs, across Europe in order to prevent Germany's neighbors from - supposedly - exploiting their competitive advantages at the cost of German jobs. But what does a Latvian construction worker gain if German minimum wage regulations prevent him from making use of his cost advantage? If there was a European union movement, it would have to clamor for the free movement of workers from the accession countries. Unions that think in European terms should also praise Siemens if it relocates 5,000 jobs to economically weaker regions within the European Union - because this would create new markets and trading opportunities, which would secure wealth on both sides.

But the unions still have a hard time coming to terms with a world of open borders and free markets. They refuse to realize that profits from competition and trade are not equally distributed, that differences do in fact exist and that the losers have to be caught in a social net. The German unions still consider themselves to be the great equalizers who want to guarantee a uniform level of wages and salaries across Germany.

By doing so, though, they drive up costs and prevent the sort of flexibility that is needed to allow companies and their employees to adapt quickly to new markets and competitors. Wherever jobs can be cut back only slowly and in the face of fierce opposition, new ones will not be created. While companies need flexible working hours and the ability to react fast, the unions continue to push anti-competitive uniform solutions.

Many of these unions seem to want to slam the door in the face of the new EU members. The German Union Federation will not sing the praises of the benefits of increasing international division of labor. And, shaken by a steady loss of membership, it is now relying on Attac's globalization critics to fill the streets with impressive masses.

This choice of partner also highlights the fact that the unions are not looking for new answers. Until now, their only answer to the reform debate has been stubbornness. As though there were no unemployment, no choking social withholdings and no state deficits, they continue to look for salvation in wage increases that far exceed productivity growth, shorter working hours and even more public sector spending. The unions remain one of the causes of Germany's misery. It would be a good sign if their loss of membership indicated that this awareness is spreading. A solution to Germany's problems cannot be expected to come from this side.

© Frankfurter Allgemeine Zeitung 2004

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