May 02, 2005

Germany's Labor Disaster

German unemployment is so high in the former DDR that german workers from there are poised to outnumber Turks as guest workers in neighboring Austria. It's so bad that unemployment in the territory of the former DDR is topping 25% with FRG unemployment as a whole, a nasty 12%. So, why do easterners simply drive down wages and provide cheap labor for W. Germans? Germany's inflexible labor laws and social democracy make it impossible.

Instead, you get international labor mobility and desperate germans on the move across Europe looking for work. The FRG can no longer afford to pay them to stay home and do nothing and is cutting benefits thus setting the visible crisis in motion but the problems have been gathering for decades.

Germany, if it doesn't get its act together is going to end up in a decade or two feeling weak, humiliated, and looking for alternatives. It's even money whether those alternatives will come in the form of nationalist extremism or free market policies. If we get to that point, batten down the hatches.

HT: NoonShadow

Posted by TMLutas at May 2, 2005 10:43 AM