From the TUC

Are mini jobs the right lesson from Germany?

05 Oct 2012, by in Labour market

Today we have published Mini Jobs, a report that looks at whether we need to reform the jobs market to encourage the creation of very small part-time jobs. Germany has special laws that do this and some Conservative MPs and commentators argue we should copy them.

Our report (*) shows that Germany’s mini-jobs were created to solve problems that don’t exist in this country. And it’s a reform that has reduced the hours worked by some people who already had jobs.

Germany doesn’t have a minimum wage at the moment, so mini jobs are defined by salary, not hours, and they are very low paid work – under €400 a month. Workers in mini-jobs don’t pay income tax or social insurance contributions (but the employers pay contributions at a higher rate to make up for this).

Mini –jobs were created to deal with some specific German problems:

  • German social insurance contributions don’t have the equivalent of the lower earnings limit in National Insurance, so mini jobs have the effect of making sure that very low paid workers don’t face deductions. UK workers who earn below the NI primary threshold (£146 a week – well over the German mini-job limit) are already exempted from paying Contributions.
  • In Germany, couples are jointly taxed on their earnings – the second earner in a couple is likely to find that the whole of her earnings is subject to tax. This creates a disincentive for second earners who can only get low paid jobs. In the UK, we have individual taxation, so this is not an issue.
  • In the German welfare state, eligibility for health care depends either on your own contributions or your partner’s. If you get a job, you stop qualifying through your partner’s contributions, and qualify through your own – if you are badly paid or have interrupted earnings you can find that your entitlement falls as a result. In the UK the fact that the NHS is free at point of use means this is not an issue.

The media coverage of the calls for UK mini-jobs have claimed that in Germany they have raised employment by as much as half a million; German evaluations suggest that the actual figure is nearer 86,000. That is worth having, of course, but Germany has also found that mini-jobs incentivise even more workers to cut the hours they work and raise their net incomes by taking themselves out of tax – 196,000 have done this.

So what is it all about? Mini-jobs are a German answer to a German problem and not particularly relevant to the UK and they create problems as serious as their benefits. Why suggest they’re just what we need?

The Conservative advocates of mini jobs have argued for short-hours jobs with fewer employment rights. That is not how the German system works – German mini-jobs are regulated in the same way as other fixed term and temporary jobs and don’t provide a precedent for relaxed dismissal policies.

But it highlights what’s going on here: the first round of the campaign to eliminate workers’ rights was a disaster. Mini-jobs are being used as cover to bring in the same proposals by a different route.

There are certainly lessons we can learn from Germany. But not this one.  

 (*) Thanks to occasional Touchstoneblog contributor, Declan Gaffney for the research the report was based on.