FRANKFURT, Germany – Germanys top trade unionist, Michael Sommer, looked out on a May Day crowd of workers and told them that a proposed labor flexibility plan wouldnt create a single job.
Ten years later, the plan is law. Joblessness is close to a two-decade low and employment has increased by more than 3 million.
Its unions whose numbers are diminishing. As more and more employees work for temporary agencies or on project-driven contracts, the jobs being created are mostly non-union, in a country whose modern form was built by organized labor.
Founded in the mid-19th century, German unions rose to power in the 1950s, when they were crucial in turning an economy shattered by World War II into an economic miracle. Their impact is waning at a time when Germany is being held up as a model for debt-stricken Europe.
The influence of labor unions has diminished significantly as a result of those reforms, said Thomas Harjes, senior European economist at Barclays Bank in Frankfurt. Theyre fighting hard to win back some sway.
Labors latest woes are being heard by Germanys leadership. Chancellor Angela Merkel, whos running for re- election this year from the Christian Democratic Union, said in January after meeting with the DGB union federations Sommer that Germany needed to keep an eye on contract work. It can increasingly turn into circumvention of sensible union agreements, she said.
Unions represented 25 percent of the German workforce in 2000, three years before then-Chancellor Gerhard Schroeder started implementing a program for labor-market flexibility.
That number dropped to 18 percent in 2011, according to the Organization for Economic Cooperation and Development, as less generous jobless benefits and easier rules on firing pushed workers into lower-paid temporary jobs. The absolute number of union members fell by 21 percent.
At the same time, the new flexibility helped the German economy, Europes largest, contain unemployment during the 2009 crisis and emerge faster and stronger from the recession than most of its euro-region peers.
Germany was a decade ago called the sick man of Europe, European Central Bank Executive Board member Joerg Asmussen said in a Frankfurt speech earlier this year. Since then, the country has become a showcase of how well-designed reforms can turn the situation around.
German employment was almost 42 million in February, the most on record. Unemployment, at 5.4 percent on an EU-harmonized basis, is the lowest in the euro area after Austria and less than half of the average in the 17-nation region. Youth joblessness of 7.7 percent in Germany compares with 23.9 percent in the euro area.
Temporary work is one way for them to find employment. In Germany, about 7,500 agencies offer workers a job via that channel. ManpowerGroup Deutschland, the third-largest, employed about 20,000 people last year, twice as many as 2002.
Temporary work has a reputation problem, which is unfortunate, said Stephan Rathgeber, spokesman for the Eschborn, Germany-based company.
It facilitates the entry into the labor market, protects against unemployment in times of crises and is especially attractive for qualified workers.
For Benjamin Fendt, 21, temporary work meant posts at 18 different companies after he finished his apprenticeship as an industrial and precision machinist in 2010. Sometimes the turnover was just over a week.
Temporary work was the only option to make some money, he said in a phone interview from Landshut, Germany. I had hoped to stay somewhere longer. All I wanted was a secure job.