From the TUC

German model isn’t heaven, Faisal, but it beats British inequality!

24 May 2012, by in Economics

Faisal Islam, Economics Editor of Channel 4 News, has been tweeting. Nothing strange about that, I hear you cry! But he has been tweeting about the German economy and has mentioned the TUC’s ‘German Lessons’ report. Having not mastered the art of Twitter yet, I’ll blog a short response.

Specifically, three hours ago, Faisal tweeted:

I’m not sure we quite described the German model as heaven but, to be fair to Faisal, it’s hard to be nuanced in 140 characters. Our report was a snapshot based on visits to some major companies, in Germany and the UK. Those companies were Volkswagen, Siemens, ThyssenKrupp, BASF, Airbus, Bentley (which is owned by VW),  BMW and Roballo Engineering (which is owned by ThyssenKrupp). All but one were large companies, they all took on apprentices and they were all in those particular industries that Germany does well. So it was no surprise that Germany came out of the report very well. However, after our recommendations, we endorsed the German union IG Metall’s call for a minimum wage in Germany, because whilst 20% of German workers are union members and 60% are covered by collective agreements, that means that 40 per cent have no union defending their pay and, surprise, surprise, some of the most vulnerable in German society are among that 40%.

But what really impressed us about Germany was the Social Market economic model. Employers and unions that we spoke to in Germany defended it and it did seem to be a model that bound the company together. Where it operates (and it doesn’t operate everywhere) it creates a climate of fairness and trust. Workers voices are deemed welcome and necessary and, whilst unions and management still know how to have a fight when they feel the need, they have a joint commitment to the success of the company. As Martin Rosik from Volkswagen told us: “Here you don’t have the classic understanding of what is whose role in the game”.

Compare that with the UK. Earlier this week, both Ed Miliband and Nick Clegg addressed the Sutton Trust. At the forefront of both their minds was the issue of social mobility. The difference between the two, according to Andrew Grice in the Independent, was that whilst Nick Clegg rejected the idea that the solution was to redistribute income, Ed Milband said government could not improve social mobility without tackling inequality. There was no denying the inequality, simply a difference of opinion about how important it is to social mobility. I think inequality is very important, both to social mobility and because I think inequality is bad in and of itself. I’m not sure this would even be a debating point in Germany.

I haven’t read the IEA report that Faisal mentions, but if works council members on supervisory boards, influencing company strategy, is Beecroftland, I’d happily sign up for some of that.