Workers From the East?

The latest unemployment figures for Germany, released this week, showed over 3.7 million jobless in July. Yet companies have been saying for months that they cannot find enough qualified personnel, for example in the engineering sector and other technical professions.

The shortage of skilled labor is expected to continue in the coming years, leading the German Labor Ministry to suggest easing restrictions on workers from the new EU member states as a way of filling the gap.

Volker Kauder, head of the parliamentary group of the Christian Democratic Party (CDU), is not in favor of the change, though. He said this week that the labor pool had to be better exhausted domestically first. It should be given priority over an inflow of labor from abroad.

"This would send the wrong signal," Kauder told the mass circulation daily Bild. "You can't on the one hand complain about wage dumping and, at the same time, on a grand scale bring workers to Germany from Romania and Bulgaria, who are willing to work for low wages."

The free movement of labor is one of the fundamental rights guaranteed to EU citizens. A German wanting to work in France does not face any major bureaucratic hurdles. But this is not the case for workers from the new EU member states.

The accession treaty allowed for transitional measures to protect national labor markets, and Germany is one of the few EU nations which forces citizens from the new member states to apply for work permits. It justifies the restrictions by pointing to its problems with unemployment and the fact that Germany's geographic proximity to the bloc's new members means it could face more incoming workers than other countries.

Unions oppose easing restrictions

At present, Germany's labor market constraints are in effect until 2009. Kauder has said they should continue for a further two years, to 2011. No further extension is possible after that time, according to EU regulations.

Kauder has received support from the German labor unions, which don't traditionally side with the conservative CDU. Axel Brower-Rabinowitsch, spokesman for the Confederation of German Trade Unions DGB, said opening the labor market would not help alleviate unemployment.

"Our major concern is that the labor market is not in order right now," Brower-Rabinowitsch said. The unemployment figures showed that there were currently "a considerable number" of people who could be employed following further qualification or training.

"This situation does not justify Germany getting specialized personnel from abroad," Brower-Rabinowitsch said, adding that over 200,000 young people have been waiting for apprenticeship training positions for over a year.

"We cannot take away the industry's responsibility to train workers," he said. "It is their duty to do so." Brower-Rabinowitsch said every time there was economic improvement in Germany, the private sector complained of a lack of skilled personnel.

"But they neglected to train people in time," he said.

The CDU's coalition partner, the Social Democratic Party (SPD), agreed that the private sector had to first do its utmost to accommodate Germany's unemployed.

"Only when the industry can prove that it is giving long-term unemployed a fair chance with the help of labor market policies can it hope for understanding from political powers," said Ludwig Stiegler, deputy head of the SPD parliamentary group.

Immigration is economically necessary

German industry has welcomed the idea of opening the labor market earlier than planned to eastern Europeans. Analyst Holger Schäfer from the Institute for Business Research (IW) in Cologne said a strategy to further train German workers was necessary, but not the sole solution.

"We don't need qualification instead of immigration," Schäfer said. "We need both."

According to Schäfer, immigration was beneficial to the economy. The majority of immigrant workers wanted to work and generated income. This resulted in secondary effects for the overall economy.

"Of course, there are losers, namely those competing for these jobs," he said. "But the rest of society wins."

So why is there such opposition to easing restrictions?

"I think the fear of being steamrolled, and possibly a bit of xenophobia, leads to the rejection by German society," Schäfer said. Yet these fears are unfounded. Studies showed that some 200,000 workers per year would come to Germany in the first stages. Over a 20-year period, the figure would total two to four million people, he said.

"We really have to take leave of this notion that people are going to be lining up to get in," he said.

The think-tank IW is an association whose members include leading employer and economic federations. It serves the interests of the private sector.

Benefit of minimum wage disputed

There are also fears on the part of the unions that immigrant labor from eastern Europe would lead to wage dumping on the German labor market or put pressure on existing wage agreements. For this reason Brower-Rabinowitsch said the government needed to introduce a minimum wage before lifting restrictions on foreign workers.

However, Schäfer said that wage dumping did not occur when the German labor market opened to southern European workers in the 1980s and that a minimum wage would not help the economy.

"A minimum wage would prevent foreign workers from coming to Germany," Schäfer said. "Then, there can't be any economic benefits from immigration."

Poland worried about lack of skilled labor

Germany is getting support for its concerns from its eastern neighbor. Since EU expansion, Polish workers in particular have left their home country to find work in Britain and Ireland, which have no labor restrictions for new EU states. A recent study by the Warsaw-based market research company ARC Ryneki i Opinia showed that mostly well-educated Poles are leaving -- and aren't coming back.

"This is a threat to Polish employers," Jeremi Mordasewicz, a labor market expert from the Polish employers' association Lewiatan, told the paper Financial Times Deutschland.

Many companies, especially in the construction sector, were desperately seeking qualified personnel in Poland, he said.

German government deputy spokesman Thomas Steg said a decision would most likely be made at the beginning of 2009 if the labor market restrictions would be extended to 2011.

The issue will be discussed at the next cabinet meeting in late August, after the summer break.