Rantings and tirades of a frustrated economist.
if it takes over a year's worth of a German worker's pay to fire them, why set up shop there?You don't. I've heard Poland and the Czech Republic are both very popular outsourcing destinations for German companies.
When I lived in Germany, I had a friend whose father was a doctor.His female receptionist got pregnant and he had to continue paying her through 6 months of maternity leave.He hired a replacement, then she got pregnant too.The third time, he hired an older woman not in child bearing age.So he had three women on the payroll, only one of whom was working. He said he'd never hire a young woman ever again.In Sweden, the marginal tax rate was so high, doctors would work only half a year - after that, nearly all their money went to the government. It's the perfect example of the Laffer Curve in action.There's a reason why Germany's unemployment rate is twice ours.
This table isn't quite right. In the US, employers pay unemployment insurance premiums during employment. Because labor supply is inelastic, workers bear most of the burden of this tax, but employers bear some of the cost.Even though a fired worker isn't entitled to unemployment pay, relatively few employers contest claims because of the additional costs involved.The difference with the US is that we have privatized the system and premiums are based on wages. We have incentives built in, resources available, limited benefit amounts and durations, and job search requirements. A flaw of our system is that it redistributes money through the benefits system. A high income person gets a much lower percentage of their former pay than a low income person. This provides a large incentive for the high income person to get back to work (high opportunity cost), but less of an incentive for the low income person. So low income people get "picky" about the jobs they take.Frankly, when I got out of the Army in 1988, I milked unemployment for the full 6 months. I submitted the minimum number of job contacts each week. If I got a good offer, I probably would have taken it, but I was planning on being a full-time student. After one semester of that, I got seriously bored watching CSPAN all day and took a job.I could feel guilty about that, but as I said - it was my money. I paid the bulk of my unemployment insurance premiums when I was working. I'm sure I did more to actually find work than most people do.
That's why I left Germany. Because, for a company, the cost of firing is also the (future) cost of hiring, there are only few opportunities to get a decent, well paid job.
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