In Europe, social safety net softens the slump

EPPELHEIM, Germany — With its tidy villages, orderly cities and atmospheric scenery, there are few outward signs that the German state of Baden-Wuerttemberg, home to historic Heidelberg and the famed Black Forest, is a victim of the current economic crisis.

But with the auto industry here hit especially hard — this is the home of Mercedes-Benz — things are tougher than they have been in decades. Unemployment is up 70 percent in the past year (albeit to a relatively low 5 percent total) and many employees have been forced to cut down their hours.

Misery below the surface, perhaps? Not at the bustling Fuerstenberger home just outside Heidelberg, where little has changed for the family's four children despite neither parent currently working.

“If we were in Detroit, we could worry every minute,” said Sarah Fuerstenberger, 37. “But here, we’re safe because of the system."

While economic forecasts are just as dire on this continent as in the United States, Germany’s citizens — and, indeed, most across western Europe — can count on a broad government safety net that includes generous unemployment checks, universal healthcare and inexpensive university education to tide them over.

“The German government is really good about taking care of people; we know we won’t be starving one way or another," she added.

With "Jobs Bloodbaths" in the headlines, tax money being used to bail out private banks and iconic car companies such as Britain’s Mini, France’s Renault and Italy’s Fiat laying off thousands, news here is similar to that across the Atlantic. Unemployment is also the same — around 8.5 percent across Western Europe and the United States.

However, Europe fiercely resisted President Obama's calls for it to increase its stimulus programs last month at the Group of 20 industrial and developing nations summit in London. That’s because leaders here argue that their existing social welfare initiatives are already keeping people afloat as well as stimulating demand.

Of course, these ongoing European programs come with a cost — higher taxes, which critics say can sap economic vitality.

Fewer hours, same pay
At the Fuerstenberger home, where each of the four children has their own bedroom and Wii Fit and Mario-Kart are in near-constant play, the safety net certainly appears intact.

“I hadn’t even thought of the word ‘recession,’” said Sarah, a Detroit native who has lived in Germany on and off since college.

Sarah, a technical writer and translator, met her German husband, Jan, while working at Volkswagen’s North American headquarters in her home city six years ago.  She and her two children from a previous marriage soon left the United States for his hometown of Eppelheim, where the couple added two more kids to their brood.

Ute Schmidt / Getty Images Jan Fuerstenberger has taken advantage of closing days at his former company and now paternity leave to spend more time with his children. Here he's seen putting 8-month-old Noah down for a nap at his home in Eppelheim, Germany.

Jan, a 32-year-old a mechanical engineer who is on paternity leave before taking up a new job offer, and Sarah, who is on maternity leave from her career at software giant SAP, support all four children without help from her ex-husband.

Short-time option
Beyond the usual unemployment and health benefits, the German government has employed some creative measures to combat the recession.

At the end of last year, for instance, Jan’s former employer, Borg Warner, which makes friction plates for automatic transmission systems, initiated kurzarbeit or short-time work.

“Different departments worked eight or nine hours less than the usual 40-hour week,” Jan said.

Fortunately for the family, "closing days" and even "closing weeks" did not carry the same monetary losses as they would in Michigan.

“The company pays the hours you worked and the gap that’s between the actual hours and the usual hours is paid by the government,” he said, as the couple enjoyed a quiet evening in after putting the kids to bed.

“For us this year, it was good,” Sarah added. “We had more time and it wasn’t a cut in pay.”

'All are happy' with kurzarbeit
The policy of kurzarbeit, which allows the government and companies to devise 18-month plans to cover most or all pay lost to reduced hours, has kept some unemployment at bay. In particular, it has allowed manufacturing giants like Siemens, Volkswagen and BASF to cut their production levels to match lower demand without having to initiate mass layoffs like those carried out across America’s Rust Belt.

European social models Countries' employment rates and probability of their citizens escaping poverty The Mediterranean model (Italy, Spain, Greece): Social spending concentrated on old-age pensions and a focus on employment protection and early retirement schemes — inefficient both in creating employment and in combating poverty. The Continental model (France, Germany, Luxembourg): insurance-based, non-employment benefits and old-age pensions and a high degree of employment protection — good at combating poverty but bad at creating jobs.  The Anglo-Saxon model (Ireland, the UK and Portugal): Many low-paid jobs, payments linked to regular employment, activating measures and a low degree of job security — relatively efficient at creating employment but bad at preventing poverty.  The Nordic model (Denmark, Finland and Sweden, plus the Netherlands and Austria): High spending on social security and high taxes, little job protection but high employment security — successful at both creating jobs and preventing poverty.   Report by Andre Sapir for the European Commission

“It’s a good instrument to use to react to the recession and still keep our good, qualified workers,” said Georg Haux, a spokesman for Siemens, which had 7,000 employees in kurzarbeit in March. Haux said that with the government subsidy, the company guaranteed workers 85 percent of their normal pay no matter how drastically their hours were cut.

Across the country, more than one million people will be in kurzarbeit by summer, up from 50,000 people a year ago, according to Karl Brenke, an economic adviser at the German Institute for Economic Research.

“Nobody is against it  — not the trade unions, not the [workers' councils], no political party. All are happy,” he said, adding that employees were relieved to keep their jobs and that the measure allowed companies to react quickly if production levels rose again.

Even with the policy, jobless numbers have gone up. But, despite the 70 percent rise in unemployment over the last year, only one in twenty people in this relatively prosperous state is currently out of work.

“In the case of unemployment, people have a higher income than the same group of people in the United States,” said analyst Brenke.

Paternity leave
Worried that kurzarbeit was a sign of worse things to come, Jan decided to go back to a former employer, KST-MotorenVersuch, that had been eager to rehire him. To widen his employment opportunities, he decided to leave the role of test engineer and go into sales — but not before taking more than two months of elterngeld, government-paid parental leave.

Ute Schmidt / Getty Images Jan Fuerstenberger slices apples for an apple pie as 9-year-old Emma looks on.

These days Jan can often be found in the kitchen, keenly following recipes from celebrity chefs, making chocolate chess sets with 9-year-old Emma and baking apple pies. He changes diapers, runs after speedy toddler Olivia, and appreciates his one-on-one time with each of his children.

In Germany, couples can divide 14 months of paid parental leave between them. Beyond that, a mother’s job is secure for three years per child.

“Because we had two (in quick succession), I could take six years off and have a safe job,” said Sarah, who will probably stay home until 8-month-old Noah is three.

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