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Jobs for Life: If It Works in Germany, Why Not America?

Jobs for LifeThere was a time when a job was a job for life. In countries like Japan it really was the case and still is, to a great extent. Even in America, it was never a guarantee, but back in the day, it was pretty much the way our parents or grandparents, depending on your generation, viewed employment.

Well, yesterday, German electronics giant Siemens signed a deal that guarantees its 128,000 German workers just that, a job for life. The move is unprecedented even in Germany, where employees have far more power and rights than in the U.S.

To be honest, my first reaction was that's insane. It essentially wipes out the company's negotiating leverage with labor unions. But once you dig a little deeper, it's not at all clear that America's standards of "at will" employment and layoffs are any better or smarter.

Siemens and other German companies have managed to weather the financial crisis through a number of worker flexibility measures like shorter work hours, and without layoffs. This seems like a throwback to the old days, but over there, it works. So why couldn't it work in America?

After all, Germany is a bigger exporter and has lower unemployment than America. America's debt and federal budget are much higher, at least under the current administration. That said, America does have a lot more mouths to feed. And the financial crisis hit the U.S. much harder than Germany because, after all, it originated here.

The big fly in Germany's ointment is that funding its high labor costs has caused Europe's top industrial nation to lose over a quarter of its manufacturing to the likes of China and India over the past couple of decades. As a result, unemployment has been on the rise, a dangerous trend. But doesn't that sound familiar? The same thing is happening in the U.S.

What do I think? Well, I'm a fiscal conservative, free market capitalism, small government kind of guy. And I'm not a big fan of labor unions, at least in America. All that said, I have to admit that Germany's making a pretty good go of it. Probably because, over there, both sides are willing to be reasonable. What a concept.

An objective comparison between Siemens and its American counterparts also yielded some surprises.

In terms of operating fundamentals, Siemens compares favorably to say GE. GE's revenue per employee is quite a bit higher, but otherwise, operating metrics are quite similar. And since it began trading on the New York Stock Exchange in 2001, Siemens is up about 50 percent, about the same as IBM. Over the same period the S&P 500 and the Dow were roughly flat while GE tanked 50 percent. It's hard to argue with the numbers.

I hate to admit it folks, but I'm sort of stumped. If America's system of "at will" employment and layoffs is so much better than Germany's system of powerful labor unions and employee contracts, then why isn't that reflected in the data? And if it's really as simple as both sides being reasonable, then why can't we do that? What am I missing?

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Image CC 2.0 courtesy flickr user Taras Kalapun