Martin Schulz In Time for Elections, German Socialists Lurch Left

Germany's new Social Democrat chancellor candidate, Martin Schulz, is shifting his party left. But plans to boost pensions, limit temporary work contracts and increase unemployment benefits have alarmed German business leaders.
Polls have shown an uptick in support for the SPD since Martin Schulz was announced as the party's candidate in upcoming federal elections. Photo: Krisztian Bocsi/Bloomberg

There's a month to go until Martin Schulz is officially confirmed as the new leader of Germany’s center-left Social Democrats, known as the SPD. But the former president of the European Parliament has already hinted at a slew of social policies he will pursue, with social justice questions taking a central role. On Monday, Mr. Schulz announced he would seek to stabilize the level of public pensions and make it harder for employers to use temporary employment contracts. He also announced plans to increase unemployment benefits. Anyone who works hard and pays social insurance contributions, he said, had a right to “appropriate protection.”

The message is wildly popular with the party faithful, who are filled with hope that a Social Democrat could become chancellor for the first time in 12 years. On Monday, the SPD held a “Conference on Labor” in the post-industrial city of Bielefeld to explore the future of jobs and technology. The event was packed, with senior party figures and ministers in attendance. But the crowd had come to see only one man: Mr. Schulz, the new party messiah.

As he spoke, large-format photographs behind him showed a variety of workers – nurses, hairdressers, cooks. Mr. Schulz comes by his working-man's rhetoric honestly, having trained as a bookseller before becoming the mayor of the small town of Würselen in western Germany.

On Sunday, Mr. Schulz’s Social Democrats took the lead in an opinion poll, coming in at 33 percent to the center-right Christian Democrats’ 32 percent.

Today, he is still adept at infusing his rhetoric with populism. And the numbers are reflecting it.

On Sunday, Mr. Schulz’s Social Democrats took the lead in an opinion poll, coming in at 33 percent to the center-right Christian Democrats’ 32 percent. It is an extraordinary turnaround for a party that was languishing around 20 percent before Mr. Schulz unexpectedly took over the leadership last month. Today, in speeches like the one in Bielefeld, he is giving a sense of the policies he hopes to implement if he wins.

Mr. Schulz arrived to tumultuous applause. “It’s like when Gerhard Schröder came here in 1998,” said one veteran party member, referring to the former Social Democrat chancellor who led Germany from 1998 to 2005. But comparisons can be deceptive. Whereas Mr. Schröder was the leader who brought much-needed realism to the German left, Mr. Schulz made clear that he wants to restore the welfare state and reverse some of the reforms pushed through by Mr. Schröder.

These reforms, referred to as “Agenda 2010,” mostly centered on restructuring unemployment benefits and labor relations, as well as reducing the cost of medical benefits and pensions. While they were met with widespread criticism at the time from the left, they are thought to have laid the basis for the transformation of Germany from the “sick man of Europe” to a flourishing export-led economy.

Mr. Schulz, however, does not appear so convinced. In his speech, the candidate emphasized increased job protection, with more extensive rights for part-time laborers and a guaranteed right to return to full-time work. He also favors severely limiting the use of temporary contracts, as well as strengthening laws on worker participation in corporate decision-making processes. And within the SPD, Mr. Schulz is not alone. Current deputy party leader Thorsten Schäfer-Gümbel supported Mr. Schulz's stance with a cautious critique of Agenda 2010: "Germany is economically successful because of some the reforms. But they have also had side effects. These include issues surrounding unemployment benefits."

In an interview this weekend in the Bild newspaper, Germany's most popular daily, Mr. Schulz also mentioned another potential cornerstone of his social policy: the extension of unemployment benefits. Under Mr. Schröder’s reforms, the maximum duration of full benefits was cut from 32 months to 12 months for those under 50, and 24 months for older workers, in an attempt to get the unemployed back to work. The policy is widely seen as a great success, having provided the foundation for Germany’s subsequent “jobs miracle” of labor market participation highs and unemployment lows.

Mr. Schulz’s comments drew widespread criticism. The deputy managing director of Germany’s Chambers of Industry and Commerce, Achim Dercks, insisted that Agenda 2010 has made an important contribution to a flourishing job market: “It gave companies the necessary flexibility, which they need more than ever with globalization and digitization.” For Holger Schäfer, a labor market economist with the think-tank Institute of the German Economy (IW), extending the period of unemployment insurance could potentially undo years of economic progress. “The longer the payments, the less incentive to quickly find a new position,” he added.

Experts question whether Mr. Schulz’s proposal really addresses urgent labor market issues. “The big job market problem is hardcore long-term unemployment,” said Bert Rürup, the president of the Handelsblatt Research Institute. Indeed, it appears an extension of unemployment insurance would do little for the long-term unemployed. According to Mr. Rürup, if Mr. Schulz truly wanted to make a difference, he should look at the rules on extra earnings allowed for those on social assistance. There a change could help the most economically vulnerable, and discourage black-market labor, he said.

In contrast to what is predominantly on offer in today's labor market, Mr. Schulz’s job ideal is a well-paid, full-time position lasting from traineeship to retirement. He has a particular dislike of short-term contracts. Nevertheless, the proportion of workers in Germany on temporary contracts remains both small and steady, hovering at around 8 or 9 percent. Among workers between the ages of 25 and 34, the figure rises to around 17 percent – which is nowhere near the 40 percent that Mr. Schulz cited in his Bild interview, a claim later retracted by his party.

Mr. Schulz may have conflated temporary contracts with “atypical” employment categories involving part-time work or zero-hours contracts. The number of these jobs increased 25 percent between 2000 and 2015, while “normal” employment figures rose by 8 percent. However, not all such positions are “precarious”, with part-time work often chosen by employees themselves. Also, zero-hours contracts, where employers are not obliged to provide minimum working hours, are not always bad. For example, they can allow parents with young children – and women in particular – to gradually reenter the labor market.

Schulz will not win back lost SPD voters in this way. Whenever the SPD has been successful, it was because it had a vision of the future. Manfred Güllner, founder and head of polling institute Forsa

In addition, Mr. Schulz wants to see a revitalization of Germany’s "co-determination" policies, which put worker representatives on many corporate boards. Echoing the trade unions, Mr. Schulz suggested companies have actively sought to suppress worker representation: “When I hear of the revolting methods employed by entire law firms to agitate against unions and worker representation, I would not have thought it possible in 21st-century Germany.” Extending co-determination rights has become a hot topic in light of Germany's burgeoning digital economy, with some in the SPD joining trade unions to tackle the challenges posed by new and different kinds of jobs.

However, Manfred Güllner, the head of German polling institute Forsa, told Handelsblatt that he does not think Mr. Schulz’s labor market policies will win new voters. “Schulz will not win back the ten million voters the SPD lost between 1998 und 2009 in this way,” he said, pointing out that most Germans favored the reforms.

Mr. Schulz should look to the future, not the past, he suggested: “Whenever the SPD has been successful, like under Willy Brandt or Gerhard Schröder, it was because it had a view to the future.”

 

Martin Greive is a correspondent for Handelsblatt based in Berlin. Donata Riedel covers economic policy for Handelsblatt. Frank Specht is based at Handelsblatt's Berlin bureau, where he focuses on the German labor market and trade unions. Christian Wermke is an editor for Handelsblatt Live, covering politics, corporate executives and lifestyle. To contact the authors: [email protected], [email protected], [email protected], [email protected]