Last week, Volkswagen, Europe's largest car manufacturer, took the unprecedented step for German industry of reducing the working week to four days, and cutting pay by 10 per cent for 100,000 workers. The ground-breaking deal negotiated by local political leaders, unions and management means that, for the time being at least, 30,000 jobs will be saved.
The shorter working week aims to stem unemployment by allowing more people to work less, instead of attacking the problem of productivity and competitiveness.
While the four-day week it is seen as a temporary way out of a crisis that has put every tenth worker in the European Union out of a job, Britain is moving in the opposite direction, in a drive towards a low-cost economy with minimal social protection for its people.
At a time of widespread job insecurity in all sectors of the economy, few believe that the European Union can reach its target of creating 20 million new jobs by the year 2000. In France, Germany and Spain especially, government policy-makers, employers and unions are flirting with the concept of the four-day week as unemployment dominates the political agenda. The saving of car workers' jobs in Saxony may also help to stem the move to the extreme right in Germany as the country prepares for 19 elections next year, including federal elections in the autumn.
But the deal will do little to ensure the survival of Volkswagen, economists say, unless it is accompanied by steps radically to increase productivity, which has fallen behind Japan's by more than 20 per cent. None the less, the decision to opt for a four-day week instead of mass sackings could be a signal that Europe can avoid serious industrial unrest as the European Union wrestles with the task of restructuring the ailing economies of its member states.
According to Jacques Delors, president of the European Commission, the challenge is one of 'opting for survival rather than decline' by protecting the European welfare model of society while making labour markets more flexible.
Mainstream economists see these measures as a prelude to protectionism. They fear that, instead of hacking away at the high costs of employment that make European goods increasingly uncompetitive on the world market, employers and politicians will choose the softer option, in an attempt to keep militant trade unions off the streets and halt the political shift to the far right.
Unless agreements reached between employers and unions also bring sharp improvements in productivity, some fear that Europe will retreat into the fortress of protectionism as the world economy divides into three main trading blocks: Europe, North America and Asia.
The EU jobless rate is now 10.4 per cent, or 18 million and expected to reach 20 million by the end of 1994 and continue rising. Still locked in recession, the EU's economy is shrinking by 0.5 per cent as governments pursue anti-inflation policies at the cost of falling output and rising unemployment.
Even when the EU begins to come out of recession, there is no guarantee that unemployment will fall, because of the lack of flexibility built into the European labour market by generous protections negotiated between unions and employers. The Organisation for Economic Cooperation and Development blames these for Europe's declining competitiveness. Labour costs in the EU rose four times as fast during the Eighties as they did in the US and Japan. And between 1974 and 1991, the US was able to create 36 million new jobs compared with 8 million in the EU.
While politicians in Britain are debating the wisdom of Sunday shopping and the Government takes steps to strip away laws that protect workers from unscrupulous employers, European leaders - whose popularity is already at rock bottom - are recoiling from publicly embracing such a confrontational approach.
However, the European Commission is already proposing a gentler version of the British model of deregulation for the rest of the EU as a way of generating growth.
A white paper on growth, competitiveness and employment that is being being prepared by Mr Delors aims to inject some US-style fizz into the European economy, in the hope of creating jobs without dismantling labour protection.
The main innovation that the commission wants the EU heads of state to embrace at their summit meeting in mid- December is a commitment to reduce the cost of hiring workers by shifting the burden of social security away from employers and on to the state.
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