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Labor Market Voodoo

by Rainer Balcerowiak Friday, Jan. 13, 2006 at 1:40 PM
mbatko@lycos.com

Possible counter-measures against structural mass unemployment and an army of marginalized working poor are well-known: public investment programs, a legal minimum wage and redistribution of labor through reduced working hours.

LABOR MARKET VOODOO

From One Euro Jobs to the Combined Wage

By Rainer Balcerowiak

[This article published in: Junge Welt, 1/04/2006 is translated from the German on the World Wide Web, http://www.jungewelt.de/2006/01-04/002.php.]




Wonder cures are often offered when rational solutions of serious problems are not in sight. However faith in these cures quickly disappears as the disastrous labor market reform laws of Peter Hartz demonstrate. Now the so-called combined wage should be instituted again. This catchy term allows many interpretations.

The mechanism of this instrument is relatively simple. The state helps the seller with a little subsidy since the sale of one’s labor power at a living wage is no longer possible for many people for want of demand. Apart from the domestic economic effects of the newly arising purchasing power, this was financed through reduced transfer payments to employed persons and their contributions to tax and social security revenue. So much for the theory of the combined wage prophets.

However the foreseeable side effects of this therapy are diligently hidden. Thus a state subsidized low-wage sector of several million jobs would inevitably lead to a further erosion of the wage scale and gigantic budget deficits. What businessman would pay five euros per hour for a guard when his competitor only needs to pay half since his wages are subsidized? Many service- and artisan enterprises feel the competition through one-euro jobbers and subsidized personal companies as threatening their existence.

How the domestic economy can be revived and how living wage jobs can be created by means of subsidized mini-wages remains veiled. The combined wage proponents cloud over the amount of the minimum standard. It is rightly pointed out that the combination of unemployment benefits II and one euro jobs is already a practiced combined wage.

Possible counter-measures against structural mass unemployment and an army of marginalized “working poor” are well known: public investment programs, a legal minimum wage, redistribution of labor through reduced working hours and the minimum wage scale in every branch would be effective first steps in this direction. However this is not politically tenable since lowering the price of the commodity labor is one of the core tasks of a government in a capitalist state.

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