TCS Daily

Hi Ho, Hi Ho, It's Off to Work We Go

By Jeremy Slater - July 19, 2004 12:00 AM

The sluggish heart of Europe is suddenly beating a little bit faster. In what amounts to a small revolution for a continent that has enjoyed the benefits of long holidays and shorter working weeks for nearly 30 years, people are being asked to put in longer hours on the job, often for no increase in pay. But instead of union representatives threatening strikes or other forms of industrial action, they are actually agreeing to the demands.

Strangely, the reasons given for this acceptance of longer work hours are the same as before: that is, it will help improve productivity and therefore job prospects. This sudden attitude shift cannot be linked directly to the European Union's recent enlargement and the fact that some jobs will emigrate to central Europe or the Far East; this threat has loomed for years. So why has the penny has finally dropped?

Perhaps it has to do with the effect of four long years of economic slowdown and recession in the three countries where this semi-revolution is occurring: Germany, France and Belgium. For these states unemployment has remained stubbornly high with rates in France and Germany sitting around 10 percent for nearly 20 years. The flipside of this economic coin, productivity, which used to outstrip that of the US, has fallen behind since the middle of the 1990s. Such high rates of productivity allowed people to enjoy lives of relative leisure and luxury, despite the fact that those who could not get jobs were having a miserable time and because of strict labor laws were unlikely to get them.

With falling growth and productivity rates that misery has now spread. A recent survey revealed that nearly a quarter of Belgians have difficulty paying their bills on time and one of the reasons suggested the effects of high unemployment. A report by the Belgian government's employment council has discovered that only 60 Belgians out of every possible 100 who can work actually have job. The EU average is 64, with high employment countries such as the Netherlands and the UK at around 70.

In France, President Jacques Chirac has announced that the former Socialist government's experiment with a compulsory 35-hour week had not created the extra jobs it was supposed to and there is evidence that parts of society are worse off because they cannot work overtime. In Germany a majority of the population may still believe that working fewer hours will create more jobs, but in the ministries in Berlin political thinking has swung away from this belief. Gerhard Schröder's Agenda 2010, a plan which is meant to reinvigorate the German economy, argues that a longer working week would be beneficial for the country's performance.

Telecommunications workers at electrical giant Siemens seem to have agreed with this assessment. Through their union they have acquiesced to a proposal that workers should increase their average hours from 35 to 40 a week and forego the usual Christmas and summer bonuses. The reason for this was the threat that 2,000 jobs in the mobile phone division would have shifted eastwards to Hungary. Maybe if they were living in more confident times this wouldn't have happened, but the average person in France, Germany and Belgium is not in a confident mood at the moment. (And not everybody gets the message: Mercedes employees went on strike this week, unwilling to give up five-minute breaks every hour even if it means losing their jobs to Hungary.)

Which just goes to show there is a long lag time between economic statistics improving and people feeling more confident about their prospects. Latest figures show that the above economies are starting to expand and should record rates of growth of around 2 percent this year, much better than the performance of recent years, and that things will get better next year as the world economy is driven by growth in the US, Japan and China.

However, the expected rates are not strong enough by most economists' definitions to have a serious impact on unemployment levels. Which means that the French and German governments will have to continue to reform their economies if they want to improve growth and employment rates. The newly appointed finance minister in Paris, Nicolas Sarkozy, is keen to push through changes if for no more of a reason than to build himself a political support base so that he can attempt to win the presidential election in 2007. Schröder also wants to speed up the reform process so that by the next federal election in 2006 he can show German electors that the economy is improving. In Belgium, Prime Minister Guy Verhofstadt is currently hamstrung after his party's poor showing in regional elections, but he originally came to power promising economic reforms. If the economy keeps improving he may have a chance to push these through.

So it seems a sudden change in mood may have a chance to become more permanent. But Europe's leaders will have to work overtime.


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