Can Job Creation Schemes Help Germany's Unemployed?

Rainer K. is a 38-year-old social worker in Cologne. For the past ten years, he's been in and out of jobs - mostly he's been out.

It's hard for Rainer to find work in the social sector. No one in Germany doubts that there's a great need for people with his skills. But most cities are so short-strapped for money that they're not hiring.

Whenever Rainer found work in recent years, the jobs were usually part of job creation schemes, subsidized by the state.

Will job creation schemes help the government?

Many different job creation programs have been tried and tested in Germany over time. With the current slump in the German economy and the rise in unemployment, such schemes are once again on politicians' minds.

Chancellor Schröder's government desperately needs to limit the damage the latest unemployment figures are doing to its reputation, one of the reasons why both parties of the government coalition are discussing plans to boost the labor market.

Both the Social Democrats and the Greens need success on the jobless front fast. Germans will go to the polls on September 22 of this year. If the government can't produce results by then, voters are likely to show their dissatisfaction by voting Schröder out of office.

Job creation schemes

The prime beneficiaries of the schemes would be people who have been unemployed for a long time. Under the plans that are now being discussed, low-wage earners would receive subsidies for their social security contributions.

Normally, these contributions are automatically deducted from the paychecks of employees. And since the deductions and taxes are high in Germany, these days many people are better off if they don't work than if they accept low paid jobs.

Those who are registered as jobless receive unemployment benefits and social security payments. And many even work on the side, earning extra money without declaring it to the tax authorities.

Which is why most politicians in Germany agree at least on one thing: those who work for a living need to have more than those who don't go to work.

Mainz model

The idea of subsidizing social security contributions for low-wage earners has been tested with some success in the German city of Mainz. But analysts are divided over whether this regional project would also work nationally.

According to the Mainz Model, people are eligible for subsidies if they are on their job more than 15 hours a week and if their income is between € 325 ($ 290) and € 810 ($ 724) for singles and € 1620 ($ 1447) for couples.

Success or failure?

Since the tests for the Mainz Model began in Rhineland-Palatinate in September of last year, some 720 people have found work through the program. The regional government in Mainz considers this a success and hopes more people will sign up for the program as it becomes better known.

Critics, however, say that 720 new jobs is not enough. Germany's labor unions think if the Mainz Model were introduced on a national level, the costs would be too high. The unions also fear it could lead to harsher working conditions.

The unions advocate offering more part-time jobs. They also think jobs could automatically be created if those who have jobs reduced their overtime.

How successful can job creation schemes be?

Both parties in Germany's government coalition, the Social Democrats and the Greens, are thinking about extending the Mainz Model to the whole of Germany.

Kerstin Müller, head of the parliamentary group of the Greens, says up to 100,000 jobs could be created through job creation schemes this year. In addition to subsidizing low-wage employment, she's advocating more financial aid for working parents.

The Social Democrat parliamentary floor leader Peter Struck, however, isn't quite as optimistic about such schemes. He said on Wednesday that there simply were no measures that could generate 100,000 new jobs immediately.

Though Struck does see a merit to job creation programs, he thinks the employers are the ones who hold the key to creating new jobs. Struck says employers need to cut down the amount of overtime their employees do in their companies.

Conservative ideas

Germany's conservative opposition, on the other hand, want to get rid of most job creation schemes altogether. They consider these programs badly operated and a waste of money.

CDU parliamentary floor leader Friedrich Merz has called for institutional reform to lower unemployment. Merz says Germany's social welfare and health care systems need to be reformed.

For the conservatives, legislation is the key to the job market. They say they would immediately eliminate some laws introduced by the Schröder government.

Their economic program focuses on cutting taxes and introducing new wage models. They want to make low-paid work more attractive and boost training.

Results - but fast

The German government will most likely introduce job creation schemes shortly. The Social Democrats called a three day meeting to debate the topic on Wednesday. The Greens will hammer out their ideas on the issue at a two-day meeting in Wörlitz at the end of the week.

But people like 38-year-old unemployed social worker Rainer K. from Cologne don't really care about all the frantic debating. All they're hoping for is that they'll find a job - fast.