Following Germany's Lead to Economic Disaster
Chancellor Gerhard Schroeder's explicit goal was to create a low-pay sector in which the long-term unemployed would find jobs. The lack of minimum wages and the higher pressure on the unemployed caused a severe downward wage trend. The share of the low-pay sector (less than 9 € per hour) in overall employment strongly increased from 15 % in 1998 to 22 % in 2005 and hasn't fallen since. It is now close to the size of the British low-pay sector but with one difference: without minimum wages, there is no bottom for German wages. Tax cuts and pressure on the poor had their natural consequence: nowhere in the OECD did inequality increase as much over the last ten years as it did in Germany.
That's not a reason to give up, but it's not a happy thought - we're arguing for the creation of a kind of state that no longer really exists.
But of course, Korea has an actual industrial policy. Funny how that works.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
That is important because as far as I know nobody in Germany claims that the german model or whatever was successfull until 2006 or so.
I will start with the employment report of January 2005: (actually the oldest available):
In november 2004:
overall employed: 38.96 million employment in jobs subject to full social security payments: 26.75 million self-employed: 4.32 million marginally employed: 4.86 million
in November 2011:
overall employed: 41.47 million (+ 2,51) employment in jobs subject to full social security payments: 29.00 million (+ 2,25) self-employed: 4.56 million (+ 0,24) marginally employed: 4.89 million (+ 0,02 )
So the growth in employment is not a marginal employment growth anymore and self-employment and employment in social security jobs grow at the same rate.
Now on to part-time and full time employment: according to eurostat LFS, it is:
Fulltime: 24.231,5 Q3 2005 25.758,9 Q3 2011 part-time: 7.560,8 Q3 2005 9.203,0 Q3 2011
So 1.5 million full-time and 1.7 million part-time jobs gained.
As you can see, the numbers do support the current opinion in Germany, that there is a "employment miracle".
Higher economic growth in 2006 and 2007 - 3,9% and 3,4% according to the OECD influences the opinion in Germany on having found the right model again too.
if ou just look at the last five or sic years the laboue market and up tp point growth loks different. (Not the development of wages) That is important because as far as I know nobody in Germany claims that the german model or whatever was successfull until 2006 or so.
There's a term in applied statistics for selecting arbitrary subsets of your data ex post and attempting to make inferences based on them. It's called a fishing expedition. If that epithet sounds derogatory, then that's because it is.
The figure below illustrates why you should not go on fishing expeditions:
(h/t: Greg Laden)
And why is using 1999 or 2000 as starting point any less arbitrary?
Economic cycle? Now problem: I will compare the third quarter of 2009 and the third quarter of 2011? Won#t make you happier, I guess.
You are calling me a climate change denier?
No, I'm saying that you're using shit statistics. That .gif was just the most handy one to illustrate your particular brand of statistics mistake. I could have made the same point by stripping it of axis labels and header, but that would have required a .gif-editor.
It's not, but it's more likely to be meaningful, for the simple reason that you have a bigger data set. If the longer timeline gives you one trend, and a shorter subset of that timeline gives you the opposite trend, it's the shorter one that's more suspicious.
Economic cycle? Now problem: I will compare the third quarter of 2009 and the third quarter of 2011? Won't make you happier, I guess.
No, it doesn't, because you're still picking out an arbitrary subset after the fact and doing a statistical analysis on that and only that subset. To justify that, you need to argue that (a) something interesting happened to the fundamentals in 2006 (or 2009 if you want to do that) that justifies running a test for breaks in the trend. "It started working in 2006" is not a change that justifies testing for breaks in the data. "The new minimum wage came into force in 2006" is a change that justifies testing for breaks in the data. And (b) your statistical estimator is sound.
You haven't and it isn't.
There are ways to detect breaks in time series. There are ways to take cyclical components out of time series. Just picking a perceived break point or two arbitrary dates out of your time series is not one of them.
As it happens, at least my start point isn't arbitrary at all: growth in Q1 2005: -0.1%, growth in Q2 2005: +0.7. Start of crisis Q2 2008. So I could compare Q1 2005 and Q1 2008 or Q2 2008 and Q2 2008.But you won't like the results either.
And:
>. To justify that, you need to argue that (a) something interesting happened to the fundamentals in 2006 (or 2009 if you want to do that) that justifies running a test for breaks in the trend. "It started working in 2006" is not a change that justifies testing for breaks in the data. "The new minimum wage came into force in 2006" is a change that justifies testing for breaks in the data.>
No problem: Hartz IV started January first 2005. correlation, if you ask me, but you wanted that sort of argument.
So you admit 1999 is as arbitrary? And look, you should admit to yourself that the labour market is not the climate and labour market data not a temperature record. The thirty or forty years you need in climate science don't make much sense in a view at the trends of the labour market. I could start in november 1971, but would that really gave us any useful trend? Or in 1948 or 1919 or 1871 or 1815. Would you really do this?
Depends on what question I wanted answered. If I want to answer the question "what was the impact of German reunification on West German manufacturing?" I would look at the twenty years since and the twenty years preceding reunification. If I want to answer the question "what is the impact of Hartz IV?" I would look at all data since the reunification. Why the reunification? Because that's such a major confounder that disentangling the confounding effects of the reunification will be a bigger project than analysing Hartz IV.
Is this arbitrary? Yes, to some extent. All statistics involves arbitrary judgment calls in specifying your model. But notice that I give reasons for my picking those particular dates. If you can give other reasons for picking other dates, we can have a discussion about which dates are more reasonable. If you just pull a set of dates out of your ass, then we can't have a meaningful conversation about their relevance.
Alternatively, one could go the other way: Use one of the several statistical methods that finds breaks in the data itself, and use the location of those break points to sanity-check one's model of the economy.
I also wanted a properly specified model.
But I can actually well believe that the German "success" since 2006 is due to Hartz IV, because it dovetails nicely with what one would expect from a mercantilist wage suppression strategy. So it's intuitively reasonable.
That is idiotic. I used the same sources of data as the diary under discussion. And as you admitted my end nd start points were as arbitrary or non-arbitrary as in the diary.
>I also wanted a properly specified model.>
A model of what? And why should I care what you wanted?
>But I can actually well believe that the German "success" since 2006 is due to Hartz IV, because it dovetails nicely with what one would expect from a mercantilist wage suppression strategy. So it's intuitively reasonable.>
Your intuition, if you look at the developments of wages since 1990, is wrong. These certainly was no statistical break in 2006.
And, when you compare 2005 to now, don't forget that for years before that, the German economy was losing fulltime jobs and replacing them with part-time.
>And, when you compare 2005 to now, don't forget that for years before that, the German economy was losing fulltime jobs and replacing them with part-time.>
True, but and that is my point, in 1999 - 2011, the 1999-2005 period and the 2006-2011 period look quite different.
IM:
a) 41.7 mn total employed - 29 mn with social security = 12.7 mn
b) 4.56 mn self-employed + 4.89 mn marginal = 9.45 mn
c) a - b = 3.25 mn unaccounted for
What kind of non-social security jobs do these 3.25 mn have?
Q3 2011: fulltime 25.8 mn + part-time 9.2 mn = 35 mn (as against a total of 41.7 mn)
Where are the 6.7 mn others?
I should have added this: about 2 million civil servants should be in there. Don't know about the remaining million.
>Where are the 6.7 mn others?>
I used the LFS numbers to get numbers on full-time and part-time employed. This are the numbers for employed, excluding the 4 million self-employed.
>The numbers you cite are not easy to understand.>
But I did use the same sources you did.
10,069.8 Q3 2011 part time
29,154.6 Q3 2011 full time
There is gap of about 2.25 mill. Now the LFS data is Q3, but of course there wasn't employment growth of 2.25 mill between Q3 and Q4. It isn't self-employed either, that would be 4.2 mill. probably they excluded soldiers, but there aren't 2.25 mill. professional soldiers in Germany. civil servants would (barely) fit, but that would be unusual.
Eurostat explains:
>Employed persons are persons aged 15 and over who performed work, even for just one hour per week, for pay, profit or family gain during the reference week or were not at work but had a job or business from which they were temporarily absent because of, for instance, illness, holidays, industrial dispute, and education or training.>
>Employees are defined as persons who work for a public or private employer and who receive compensation in the form of wages, salaries, payment by results or payment in kind; non-conscript members of the armed forces are also included.>
So they do include soldiers; mysterious.
The Netherlands are the champions, as always. Germany has, all the same over 1 in 4 jobs part-time.
German exports fell four times more than economists forecast in December as the sovereign debt crisis damped growth across the euro region. Exports slumped 4.3 percent from November, when they rose 2.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists predicted a decline of 1 percent, according to the median of 17 estimates in a Bloomberg News survey. French business confidence held near its lowest level in more than two years in January on recession concerns, the Bank of France said in another report. While the German economy, Europe's largest, probably shrank 0.25 percent in the final three months of 2011, data this year suggest it may avoid recession, which is commonly defined as two consecutive quarterly contractions. Business sentiment jumped to a five-month high in January and factory orders gained 1.7 percent in December, driven by demand from outside the 17-nation euro area.
German exports fell four times more than economists forecast in December as the sovereign debt crisis damped growth across the euro region.
Exports slumped 4.3 percent from November, when they rose 2.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists predicted a decline of 1 percent, according to the median of 17 estimates in a Bloomberg News survey. French business confidence held near its lowest level in more than two years in January on recession concerns, the Bank of France said in another report.
While the German economy, Europe's largest, probably shrank 0.25 percent in the final three months of 2011, data this year suggest it may avoid recession, which is commonly defined as two consecutive quarterly contractions. Business sentiment jumped to a five-month high in January and factory orders gained 1.7 percent in December, driven by demand from outside the 17-nation euro area.
(Reuters) - Anja has been scrubbing floors and washing dishes for two euros an hour over the past six years. She is bewildered when she sees newspapers hailing Germany's "job miracle." "My company exploited me," says the 50-year-old, sitting in the kitchen of her small flat in the eastern German town of Stralsund. "If I could find something else, I'd be long gone."Stralsund is an attractive seaside town but Anja, who preferred not to use her full name for fear of being fired, cannot afford the quaint cafes.Wage restraint and labor market reforms have pushed the jobless rate down to a 20-year low, and the German model is often cited as an example for European nations seeking to cut unemployment and become more competitive.But critics say the reforms that helped create jobs also broadened and entrenched the low-paid and temporary work sector, boosting wage inequality.
(Reuters) - Anja has been scrubbing floors and washing dishes for two euros an hour over the past six years. She is bewildered when she sees newspapers hailing Germany's "job miracle."
"My company exploited me," says the 50-year-old, sitting in the kitchen of her small flat in the eastern German town of Stralsund. "If I could find something else, I'd be long gone."
Stralsund is an attractive seaside town but Anja, who preferred not to use her full name for fear of being fired, cannot afford the quaint cafes.
Wage restraint and labor market reforms have pushed the jobless rate down to a 20-year low, and the German model is often cited as an example for European nations seeking to cut unemployment and become more competitive.
But critics say the reforms that helped create jobs also broadened and entrenched the low-paid and temporary work sector, boosting wage inequality.
After seeing people in Athens burning the german flag I must stress that it is not Germany or a germanic model failing, but the austerian, blind monetarist model that is failing. Perhaps a theme for a another diary, austerianism starts to feel as the greatest enemy of Federalism. Vencit omnia veritas.
Germany, that was the major member state that supported federalism most, has unfortunately long since taken a different tack.
