Labour pains

15 October 2004 By Edward Hadas

The pain of job cuts at the likes of GM and Karstadt is all too sharp. But the gains from flexible labour markets are not yet visible. Add in unemployment benefits cuts, and the political backlash could derail the whole plan. That would just store up trouble.

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General Motors intends to reduce its German workforce of 32,000 by one third. The German economy minister cancelled a meeting with his French counterpart in order to supervise crisis talks between workers and management.

Karstadt, a large German retailer, intends to reduce its workforce by 5,500. The company has agreed with the unions that compulsory redundancies should be avoided.

The German unemployment rate is 10.3%. It has been above 10% since 2000.

German consumer confidence has fallen steadily over the past 12 months.

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