UK Vs Germany Unemployment Essay

Unemployment – France vs. Germany

Unemployment is defined by the Bureau of Labour Statistics as people aged 16 or more who are available for work, have made specific efforts to find work for the past four weeks but cannot secure a job (1).
This essay will be looking at unemployment; however it will be covering a particular element about this subject. Why two similar performing economies can have different unemployment rates will be the main body of this essay. The two examples I will be using to demonstrate this questioned phenomenon is France and Germany. With this in mind I will be using multiple sources to discuss and compare the two countries’ economic conditions and unemployment rates. I will then use this information to analyse why one country (Germany) can experience a lower unemployment rate than the other (France) and find the hidden answer to this issue.
Starting with France, according to the trading economics website, it has a high jobless rate of 10.4% (2). Because of this it is now at its “highest since 1997” (3) and kept on rising meaning that as of February 2014, the unemployed population (currently at 3.35million) will continue to rise. Despite these alarming figures, France currently has the 5th largest GDP in the world and is “the second-biggest economic engine in the euro zone” (4) behind Germany. These are confusing and also impressive stats considering its depressing unemployment rates. On the other end of the spectrum however, Germany has witnessed the opposite, “with unemployment figures at record lows since the 90’s” (5). Latest figures show that Germany has a jobless rate of 5.1%, giving it the 4th smallest unemployment rate in Europe behind its Scandinavian associates. Even with unemployment rates of less than half that of Frances; still it only sits one above them on the table in terms of GDP on a global scale at 4th. Nonetheless, what is strange is Germany is not the only country who is experiencing low unemployment rates at the top of the global GDP table, unsurprisingly. With the likes of similar performing economies all in the top 10 (such as the UK, Russia and Japan) all having unemployment levels averaging the 5% mark, it becomes suspect that France is the anomaly. But why is France, a strong economic power, experiencing high and rising unemployment levels compared to similar operating economies like Germany who are experiencing increasingly lower unemployment rates? There are many hidden reasons which have caused this issue to arise due to effect of both parties.
With regards to France, the core reason why it has been experiencing high unemployment stems from the states involvement in the economy, proving to be one of its main weaknesses. For example, in recent years the development of state favours and major infrastructure programs have led to huge increases in the government’s budget. For example, “through research and projects, Réseau Ferré de France is committed to make all networks as efficient and available as possible” (6). At this point these economic aids may seem as strength for French industries and businesses, due to bringing cities closer by slashing train journeys and thus connecting businesses together. But instead these projects have turned on their head. With these programs finance has been required to fund them and like any government, the French government has resorted to increased taxation. In France however, a large proportion of this increased tax has fallen on French businesses rather than on its individuals. This method caused Frances largest businesses such as Renault and Air France to “be burdened with the largest payroll tax the world has seen at an enormous 43%” (7). To emphasize the enormity of this percentage, the UK pays a payroll tax (National insurance) of only 11%. The high level of corporation tax in France is the prime reason why French industries have lacked competition on the global market. With this, brings a growing trade deficit, which drags economic growth. To summarize, the French government’s contribution to public spending has brought about a high corporation tax burden, which has been felt by French businesses; particularly small businesses. The lack of competition has caused a decline in industries, slowing of economic growth and an increase in cyclical unemployment.
This idea can be backed up with evidence of “Peugeot Citroen announcing a €1billion savings program” (8), which will see over 8,000 jobs being cut and multiple factories closing down. They announced this program because Peugeot Citroen “had been faced with a first time loss of €700million in 2012” (9). But why did Peugeot face such a large loss? Some of this can be blamed on a slump in sales in the recession-hit south of Europe. However, the core reason is because Frances manufacturing industries are declining in competitiveness. John Madslien, business reporter describes how “traditional carmakers such as Peugeot are stuck with traditional factories and well-paid workers”. He also stated “companies that make high-profit margins are those who sell luxury cars, such as Mercedes (in Germany)” (10). This creates France to be unable to compete on price, due to higher labour costs and unable to attract profitable luxury buyers. On top of that, with the Socialist government imposing higher payroll taxes than anywhere else in Europe, it’s no surprise to see why Peugeot Citroen and even Renault are seeing losses in their income statements. Furthermore, Nicolas Bouzou, founder and director of economic analysis company Asterès says “such a problem (declining competitiveness) won’t be fixed unless the government takes an entirely new approach to help businesses strive by cutting public spending and labour costs” (11).
Having exposed the hidden reasons explaining why France have high unemployment levels, it’s also important to see how other countries, such as Germany for example, have managed to sustain low unemployment despite its similar GDP levels with France.
Germany, “Europe’s industrial powerhouse and the world’s second largest exporter” (12), has core reasons why it has one of the lowest jobless rates in Europe and has “Europe’s highest youth employment rate” (13). Europe faces a crisis of escalating youth unemployment, despite the world financial system stabilizing. With over 10 EU countries (including France, Belgium, Spain, UK etc) having “youth unemployment rates soaring above 20%” (14), it is no surprise to witness “5.6 million under 24s out of work” (September 2013) (15). However, In the midst of all the doom and gloom within Europe lies a striking exception. That omission from the norm is Germany with a youth unemployment rate of only 7.5%! (16). But how have they managed to achieve a below average youth unemployment rate despite all other members creating the opposite? This boils down to Germany’s success with its apprenticeship system. Professor Hagen Kramer, economics professor states that “the German economy is quite export-orientated and its strengths are high-quality/tech products” (like Mercedes Benz) (17). Therefore, what he is suggesting is that with this comes a need for a plentiful supply of qualified labour to produce these goods. Due to this demand, over two thirds of young Germans are seeking apprenticeships after leaving education. In comparison to that, only one in ten take up apprenticeships in Britain.
Germany’s apprenticeship system has emphasized the importance of plugging young workers right into the labour system and having them train and assess the ability of an Auszubildener, meaning trainee, rather than leaving them to flounder jobless. Neil Carberry, head of employment policy for the confederation of British Industry, backs up the effectiveness and importance of having an apprenticeship plan for young workers by suggesting “The longer they are out of work, the harder it becomes (to get work)” (18).
To summarize how Germany have tackled low unemployment rates, it is purely because of how efficiently they have targeted young workers, by creating a unique market for their labour and giving them a wide choice (over 350 different kinds of apprenticeships) in what path they want to take. The successfulness of this apprenticeship system has its roots from the strength of their exports, which account for “€1,094bn Euros in exports” (19).”Strong exports of luxury German cars are helping drive employment figures” (20). This argument can be backed up by evidence of Mercedes Benz Partner Company Daimler taking on 2,000 young apprentices every year. And with German companies growing sales in developing markets such as China, they will be creating more demand for young labourers to increase output, thus lowering youth unemployment levels in Germany.
Word count: 1,398

References:
1. (n.d). Bureau of Labour Statistics Glossary. Retrieved from the Bureau of Labour Statistics website: http://www.bls.gov/bls/glossary.htm#U
2. (n.d). World jobless rate table. Retrieved from the Trading Economics website: http://www.tradingeconomics.com/
3. (27/02/2013). France unemployment highest since 1997. Retrieved from the Before its news website: http://beforeitsnews.com/financial-markets/2013/02/france-unemployment-highest-since-1997-2513314.html
4. (27/03/2014). Unemployment rises 0.9% in February, France says. Retrieved from the France24 website: http://www.france24.com/en/20140326-french-unemployment-february-labour-ministry-hollande/
5. (03/01/2013). Germany’s unemployment rate at record low in December. BBC news. Retrieved from: http://www.bbc.co.uk/news/business-16390429
6. (n.d). Modernising the network > railway infrastructure. Retrieved from the Reseau Ferre De France website: http://www.rff.fr/en/the-network/the-network-in-projects/modernising-the-network/railway-infrastructure
7. (n.d). Overview of the French economy. Retrieved from the About-France website: http://about-france.com/geo/french-economy.htm
8. (12/07/2012). Peugeot Citroen plans 8,000 job cuts. BBC news. Retrieved from: http://www.bbc.co.uk/news/business-18808662
9. Kim Willsher. (12/07/2012).Peugeot Citroen to cut 8,000 jobs and close factory in France. The Guardian. Retrieved from: http://www.theguardian.com/business/2012/jul/12/peugeot-citroen-cuts-jobs-close-factory-france
10. John Madslien. (12/07/2012). Peugeot Citroen plans 8,000 job cut. BBC news. Retrieved from: http://www.bbc.co.uk/news/business-18808662
11. Nicholas Bouzou. (01/03/2013). Can France’s “so-called workers” still compete on the world stage? Retrieved from the Christian Science Monitor website: http://www.csmonitor.com/World/Europe/2013/0301/Can-France-s-so-called-workers-still-compete-on-the-world-stage
12. Richard Anderson. (16/08/2012). German economic strength: The secrets of success. BBC news. Retrieved from: http://www.bbc.co.uk/news/business-18868704
13. Eric Westervelt. (04/04/2012). The secrets to Germanys low youth unemployment. Retrieved from the NPR website: http://www.npr.org/2012/04/04/149927290/the-secret-to-germanys-low-youth-unemployment
14. Jack Ewing. (07/10/2009). The apprenticeship: Germanys answer to jobless youth. Retrieved from the BloombergBusinessWeek website: http://www.businessweek.com/magazine/content/09_42/b4151033735128.htm
15. (08/11/2013). EU measures to tackle youth unemployment. Retrieved from the EU press release database website: http://europa.eu/rapid/press-release_MEMO-13-968_en.htm
16. Andrew Adonis. (01/07/2013). Youth unemployment: it’s not age that matters but lack of skills. The Guardian. Retrieved from: http://www.theguardian.com/commentisfree/2013/jul/01/youth-unemployment-not-age-lack-of-skills
17. Nigel Cassidy. (14/12/2011). German apprenticeships: A model for Europe? BBC news. Retrieved from: http://www.bbc.co.uk/news/business-16159943
18. (Same article as no.14) Retrieved from the BloombergBusinessWeek website: http://www.businessweek.com/magazine/content/09_42/b4151033735128.htm
19. (n.d). Germanys most important trading partners. Retrieved from the Destatis website: https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/ForeignTrade/TradingPartners/Current.html
20. (Same article as no.5) Retrieved from: http://www.bbc.co.uk/news/business-16390429

References: 3. (27/02/2013). France unemployment highest since 1997. Retrieved from the Before its news website: http://beforeitsnews.com/financial-markets/2013/02/france-unemployment-highest-since-1997-2513314.html 4 5. (03/01/2013). Germany’s unemployment rate at record low in December. BBC news. Retrieved from: http://www.bbc.co.uk/news/business-16390429 6 9. Kim Willsher. (12/07/2012).Peugeot Citroen to cut 8,000 jobs and close factory in France. The Guardian. Retrieved from: http://www.theguardian.com/business/2012/jul/12/peugeot-citroen-cuts-jobs-close-factory-france 10 13. Eric Westervelt. (04/04/2012). The secrets to Germanys low youth unemployment. Retrieved from the NPR website: http://www.npr.org/2012/04/04/149927290/the-secret-to-germanys-low-youth-unemployment 14 15. (08/11/2013). EU measures to tackle youth unemployment. Retrieved from the EU press release database website: http://europa.eu/rapid/press-release_MEMO-13-968_en.htm 16 17. Nigel Cassidy. (14/12/2011). German apprenticeships: A model for Europe? BBC news. Retrieved from: http://www.bbc.co.uk/news/business-16159943 18