With its Green Paper on labour law the European Commission wants to redirect its employment policy towards flexicurity. The aim is to balance company demands for increased flexibility with employees' need for security - resulting in this new word 'flexicurity'. Hartmut Seifert, the labour market expert at the WSI, a union-linked research body, says Germany has some catching up to do, as the trend is towards more flexibility and less security - a completely imbalanced result. However, the positive employment developments in Germany's neighbours, Denmark and the Netherlands - each with very different approaches, show that greater balance is possible.

The Danes introduced the basic principles of flexicurity back in the 1990s. There are relatively few legal protections against dismissal, but collective agreements determine the dismissal provisions for between 60% and 70% of employees. Mobility between companies - a form of external flexibility - is exceptionally high compared with the rest of Europe, Hartmut points out. This, he believes, is because there is little risk in changing jobs, particularly in a booming economy like Denmark's. With a pretty comfortable level of unemployment benefit and support programmes, the possible risk of losing a job seems less threatening.

The Dutch model is an example of a very different kind of flexicurity. As in Germany, the rules governing part-time working, temporary employment and agency work have been eased, giving companies more flexibility. However, pay and working conditions for these forms of employment are the same as those for standard employment. Part-timers and people who are not part of the core workforce still have the right to the same hourly rate. A general basic pension provides an adequate income in old age, even for those in atypical employment. This provides security for employees.

Germany has also promoted short-term and short-hours jobs, but this has "reinforced the imbalance between flexibility and security" in Seifert's view. "Such jobs offer neither the income needed for survival nor adequate pension rights," he says. Hourly rates for temporary work, agency workers and jobs for only a few hours a week are more likely to be below the low-pay threshold (two-thirds of median earnings) than hourly rates for normal work.

These forms of flexibility are also no use as a springboard into a normal employment contract. Part-time work, whether it is for for a substantial number of hours - where social insurance payments must be made, or for a very few - so-called mini jobs - does not ease the path to normal employment. It is only in the case of temporary employees where any significant link with the employer develops: 40% of all temporary contracts become permanent.

Those who are not part of the core workforce are also disadvantaged in terms of further training at company level, which has been falling since 1997. The WSI expert attributes this fall in part "to the growth of atypical employment arrangements". These now account for a third of total employment. If this trend continues, then in Seifert's view the problem of the lack of ongoing training will worsen. "This threatens the economy's innovative capability and puts a brake on productivity and economic growth," Seifert says. Short term flexibility gains result in a loss of flexibility in the long term.
Seifert is less critical of forms of internal flexibility that allow companies the room to match labour costs and working time to the economic situation. These include clauses in collective agreements allowing employee representatives and companies at local level to vary nationally agreed terms, so-called alliances for jobs (where the employees make concessions to safeguard employment), and more flexible working time. As Seifert notes "this relative 'soft' form of adaptive flexibility has benefits for employees, but also a cost". They keep their jobs but they must accept cuts in their income or their leisure time. The danger is that lower and lower wages and longer and longer hours produce the 'working poor' - employees whose earnings are below the poverty threshold, despite working full time. Figures from the German Federal Employment Agency (Bundesagentur für Arbeit) show that in September 2005 around 900,000 people were getting state support to bring their earnings from employment to an acceptable level, and of these 280,000 had a full-time job.

Seifert believes the severe imbalance could be lessened through a reduction in mini jobs and agency working and the introduction of minimum wages. In his view, the German labour market model depends heavily on the use of skilled employees who cannot be simply swapped around at will. Increasing adaptability in this model means "a system of ongoing occupational training to which everyone has a claim". And that, he says, is "now overdue".

Sources:
Hartmut Seifert: What has the flexibility of the labour market produced? (Was hat die Flexibilisierung des Arbeitsmarktes gebracht?), in: WSI-Mitteilungen 11/2006

Berndt Keller, Hartmut Seifert: Atypical employment: flexibility security and precariousness (Atypische Beschäftigungsverhältnisse: Flexibilität, soziale Sicherheit und Prekarität), in Berndt Keller, Hartmut Seifert (Eds) Atypical employment - flexibility and social risks (Atypische Beschäftigung - Flexibilisierung und soziale Risiken), edition sigma, Berlin 2007