Germany's Painful Unemployment Fix : Planet Money After sweeping changes to its labor laws the country's unemployment rate is now just 6.2 percent. Here's how it works.

Germany's Painful Unemployment Fix

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Caitlin Kenney, from our Planet Money team, explains how Germany did it.

CAITLIN KENNEY: To figure out how Germany got where it is today, you need to go back 10 years. In 2002, Germany looked a lot like the United States does now, they had no economic growth and their unemployment rate was 8.7 percent and climbing. The country needed help, so the top man in Germany at the time, Gerhard Schroder, the German chancellor, made in an emergency call to a trusted friend.

PETER HARTZ: (Through Translator) I was actually surprised when I got the call.

KENNEY: Schroder wanted Hartz to do the same thing for the whole country. So he created a commission and put Hartz in charge of it. Hartz's first idea was to do what he had done at Volkswagen - forget about long-term jobs with lots of worker protection and get people into flexible temporary positions.

HARTZ: (Through Translator) We saw that companies would indeed hire more people if they were able to take on additional people for temporary jobs, for smaller jobs.

KENNEY: Thomas Huch, owns a company that produces steel tanks in Neuruppin, a town about an hour outside of Berlin.


KENNEY: He's a fan of mini-jobs.

THOMAS HUCH: It is not possible to give everybody full-time jobs. Mini-job means I haven't enough to do for a full worker, but I need a worker for several hours or so.

KENNEY: And there's another benefit to the mini-job. Sometimes it can lead to a permanent position.

HUCH: You see that these people do a very good job. That is also then the possibility for him or for her to get a new job in our firm.

KENNEY: So you might think Peter Hartz is celebrated in Germany, but he's not. Why? Because of his second big idea for fixing Germany's job market - he wanted to make life harder for the unemployed.

HARTZ: (Through Translator) It is reasonable to ask people to accept a low level of benefits, very little money - relatively little money, for a short period of time.

KENNEY: I met Monica Cariben in Nuremberg. She's about to lose her job at an insurance agency. And like a lot of people, she prefers the old system.

MONICA CARIBEN: (Through Translator) I am upset. There are recipients who have been drawing this benefit for 20 years and they have a good life. And somebody like me, who comes in now, we get little money. And this is not worthy of a human being.

KENNEY: But for Hartz, that was the point. He wanted to make unemployment uncomfortable so that people would get off of it quickly.

HARTZ: (Through Translator) I would say that what is most important is to make sure that any unemployed person gets a job as fast as possible.

KENNEY: Caitlin Kenney, NPR News.

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