The exorbitant German privilege

Germany has a huge demographic problem, but not necessarily the one you might suspect. While its population is indeed stable at slightly over 80 million inhabitants, it is the age of the total payroll that threatens to derail the country’s economy. This is because they are dangerously increasing the dependency ratio, that is, the proportion of those who work and help to prop up the unemployed. Hadn’t the Federal Statistical Office of Germany calculated (in April 2015) that the number of 20 to 65 year olds would fall from 49.2 million to 48.8 million by 2020, on the basis of immigration falling from 500,000 annually to 100,000 in the run up to the end of the decade? According to these calculations the total wage bill in the country would remain at the current level of 49.2 million workers aged between 20 and 65 only on the express condition that annual immigration be at least 200,000 people.

Since then, the problem now seems to be resolved thanks to the massive influx of refugees, on the condition however that this is maintained in the long term…Not really actually, given that this onrush into Germany in the form of an irresistible influx of labourers is only parring off the problem to somewhere else. And as it happens, they are relegating the problem to the rest of Europe which has once again been summoned to deal as best they can with the master of Europe’s unilateral decisions. In one way or another, it is effectively the minimum wage (€8.50 per hour) which will be put into question by this enormous arrival of Syrian and Levantine workers.

If the minimum wage will not be able to be reduced in the immediate future for legal or simply ethical reasons, the increase in the number of paid workers will have an insidious effect, squeezing real income, and this will come indirectly. The influx of men and women who are willing to accept a minimum wage job will logically blur the whole spectrum of employment and will lead to a slump in the skill level demanded of workers in this wage bracket. When all is said and done, this minimum wage glass floor will end up giving in or will be at the very least bypassed by grey work and other more ingenious alleys. Obviously, it is the whole Union that will suffer from it even more that the southern countries who have been seriously hindered by systematically lagging German wages, which have in fact been unfair competition in disguise.

Consequently, we shouldn’t expect anything good to come from the Germans now that they have opened their arms to this mass of refugees, because it with a genuine shock to the labour supply that they will henceforth confront the other members of the Union. In all possible scenarios, European paid workers are doomed to reduce in number and the European crisis to get worse, the crisis which was underpinned by precisely the disparity of labour costs among the different European countries. The influx of refugees into Germany will thus exacerbate the imbalances which will only be able to be compensated for by additional interior devaluations (that is to say more and yet more austerity) in the central and southern nations, due to a lack of monetary readjustments in the heart of a zone which shares the same currency.

To sum it up, the situation that the world’s number one exporter finds itself in will go on improving while the rest of its European counterparts will struggle to survive, and not without suffering double-figure unemployment rates.