The Cable

Clinton: U.S. Should Consider German Model for Saving Jobs

Hillary Clinton said a German policy to save jobs could work here in America. But an expert warns it could have unintended consequences for the American economy.

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When times are tough in Germany, Berlin staves off unemployment by paying for private jobs with government subsidies. Hillary Rodham Clinton, a presumed Democratic 2016 presidential candidate, suggested Monday that a similar program could work in the United States.

Speaking about job creation at the Center for American Progress in Washington, Clinton said the United States should look to comparable foreign economies for examples of how to create and keep jobs. She said Berlin’s model for dealing with job retention during downturns is one Washington should explore.

“The other thing that Germany does is, instead of an unemployment system, they have a wage subsidy system so you don’t let people go in the first place,” Clinton said.

She was referring to Germany’s “Kurzarbeit,” or short-work, policy, one that Germans are enthusiastically proud of. It allows companies to reduce workers’ hours with the government picking up the tab for the lost time.

Of course, getting such a wholesale change to how the United States deals with job losses during economic downswings would require Congress to act, no sure thing given current partisanship. And U.S. officials have run into trouble in the past by suggesting European solutions to America’s problems.

Moreover, Germany’s policies would be difficult to replicate in the United States, said American Enterprise Institute scholar Desmond Lachman. The German workforce is highly unionized, he said, making it easier for workers to get concessions from the central government when times are tough.

Lachman also said the German policy does little to create new jobs, and widens the gap between top earners and those at the bottom who don’t get salary increases when Berlin steps in with subsidies. During her speech, Clinton said job creation and lessening income inequality were priorities.

“Then what you’re doing is basically just sharing the work,” Lachman told Foreign Policy. You’re not creating jobs, you’re just keeping unemployment down … while increasing the number of people at the bottom.”

During the Great Recession, the German labor market proved especially resilient. In 2010, when the United States and the rest of the world were losing jobs, Germany actually added them because companies there took advantage of the government program.

According to a survey for the Munich-based research group Ifo Institute, in the first quarter of 2010 — the depths of the European sovereign debt crisis — 39 percent of German manufacturers were using Kurzarbeit, allowing them to hold onto skilled labor at a time when many firms around the globe were shedding jobs.

Many on the right and left, including President Barack Obama and former President Bill Clinton, have mentioned the Kurzarbeit concept as something the United States should consider. And evidence from Germany, Europe’s strongest economy, shows that it stops companies from cutting jobs.

Clinton said she was willing to try. “Maybe we’ll start not too far from here, in a beautiful domed building,” she said to laughter and applause.

Photo Credit: Bill Clark/Getty Images

David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis

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