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EU: Western Europe's Workers Start To Feel Cold Wind Of Economic Globalization

Western Europe's system of short working weeks and generous annual holidays is under attack. Prominent companies in both Germany and France are threatening to move to cheaper production sites in other countries unless their workers accept longer working hours for the same pay. The companies' negotiating hand is greatly strengthened by the presence inside the European Union of 10 new members -- mostly from Eastern and Central Europe -- where wage costs are only a fraction of Western levels.

Prague, 22 July 2004 (RFE/RL) -- To stay competitive on world markets, more big companies are threatening to leave Western Europe unless they can cut costs.

As analyst Stephanie Wahl of the Institute for Economics and Society in Bonn puts it. "We always knew that [this moment] would come, but now we really feel it," Wahl said.

Over the past two or three decades, European Union workers have seen their incomes rise while the workweek has plummeted to as little as 35 hours. Holidays have increased to as many as 32 days a year.
"The Siemens example shows us that if [employers] handle this [issue] on the level of the individual company, workers are willing to accept the situation if the alternative is unemployment, if they face a shift of the whole production to Hungary or South Africa."

But through the 1990s, contrary pressures were building as big corporations increasingly adopted the new philosophy of globalization -- basing production in countries where the jobs can be done more cheaply.

The "crunch point" for Europe has been the arrival in May in the EU of 10 new members, mainly from Eastern and Central Europe, where labor costs are only a fraction of Western levels. Corporations are now able to move east to Poland, Hungary, or the Czech Republic while staying inside the "home" EU market.

Analyst Ferdinand Dudenhoeffer of the German Center for Automotive Research in Gelsenkirchen says the West is having to adapt.

"At the moment, we have a 're-engineering' process for [Germany], which means we have to come up with new solutions," Dudenhoeffer said. "For example, returning to 40 hours a week without additional pay, which help us to become more cost competitive."

In Frankfurt, management at KarstadtQuelle want the tens of thousands of staff at Germany's biggest department store chain to work 40 or even 42 hours per week without a corresponding rise in pay. The company says such measures are necessary to reduce up to 4,000 layoffs blamed on weak consumer demand. Currently, employees work 37 to 38 hours per week.

The giant German electronics firm Siemens agreed in June with its workforce at two mobile telephone plants to extend their workweeks by five hours to 40 hours -- without extra pay. Siemens had threatened to shift the manufacturing to Hungary, with a loss of 2,000 jobs in Germany.

Bonn-based analyst Wahl says the deal shows that workers can be flexible when they realize there is no alternative for their particular plant or company.

"The Siemens example shows us that if [employers] handle this [issue] on the level of the individual company, workers are willing to accept the situation if the alternative is unemployment, if they face a shift of the whole production to Hungary or South Africa," Wahl said.

But the big DaimlerChrysler corporation has not had it so easy. Mercedes-Benz auto workers went on strike in the tens of thousands last week to protest management plans to scrap workers' five-minute hourly breaks, extra pay for later shifts, and extra holidays, at its main factory near Stuttgart. The company has threatened to move some production elsewhere.

Analyst Dudenhoeffer explains why this case is special.

"The Mercedes case is the first time -- and this was the problem for the labor union also -- in which a profitable company came forward and said we have to adapt labor conditions, to reduce payments," Dudenhoeffer said. "In the past, it had always been companies which were in dire [financial] straights or unprofitable situations [which did that]."

Dudenhoeffer says this has put the unions in an uncomfortable position. If they give in to Mercedes-Benz, other profitable companies can simply demand similar reductions in employee benefits.

Erich Klemm, the head of the workers' council at DaimlerChrysler, says the company seems to be launching what he calls a "massive attack" on collectivized labor.

DaimlerChrysler chief executive Juergen Schremp denies that, and has expressed confidence that an "acceptable" path can be found. In order to ease the situation, Mercedes-Benz executives have offered to freeze their own pay levels or possibly even reduce them by some 10 percent as an act of solidarity with workers.

Dudenhoeffer said, "Management came up with that proposal, [saying,] 'OK, we will participate, we will show you a symbol which is important to you which says we together want to adapt cost structures, and we will bring our contribution to that story'."

The same sort of pressures for change are building in France.

There, the electrical engineering group Bosch has been pressing for longer working hours at one of its factories making car components near Lyon. The threat this time is to move production to the Czech Republic, where wage costs are 40 percent lower.

French business leaders are pressing conservative President Jacques Chirac to reform the law governing the 35-hour week. They want to give more flexibility to individual companies and workforces as to whether they adopt the 35-hour week or extend it.

But the short workweek has proven popular among French employees, and Chirac has shown caution in tackling the issue.