-Caveat Lector- >From Int'l Herald Tribune Paris, Friday, January 29, 1999 Counting Out the Euros in Wages and Jobs Unions Fear Effect of Big Cost Disparities ------------------------------------------------------------------------ By John Vinocur and John Schmid International Herald Tribune ------------------------------------------------------------------------ PARIS - For all the hopes placed in the euro as an economic elixir, the common currency is bringing new tensions to the area of salaries and the related concern among trade unions that Europe is heading for a wave of downward competitive bidding on wages and job relocation. In response, unions are talking for the first time about initiatives that have the outlines of transnational collective bargaining. Specific discussions are under way on how to set cross-border standards on hours, overtime and minimum wage levels - not so much for unskilled entry-level jobs as for whole industrial sectors such as the automobile industry. The circumstances are simple: The average hourly cost of industrial labor in the 11 countries of the European Union's single-currency zone varies so much that it seems certain to force a reconsideration of where many manufacturers and service providers place their operations and how much they pay their workers. The average hourly all-inclusive labor cost in manufacturing in 1998 in Germany was 28.68 euros ($33.07). It was 7.51 euros in Portugal, the lowest among the countries that adopted the euro on Jan. 1. France, based on statistics for the first quarter of last year, was 24 percent below Germany in industrial hourly wage costs but 31 percent above Spain. Taking the whole year into account, Ireland had labor costs roughly double those of Portugal's but about one-third lower than those in the Netherlands. These figures, compiled by the EU's statistical agency and recalculated by Rexecode, a French economic-research group, do not constitute a lodestar of sudden business wisdom. But the numbers' meaning is changing with the presence of the euro, the ease it brings to making comparisons and the inhibitions it removes in judging the potential profitability of one European country or region against another. With concerns about exchange-rate fluctuations no longer affecting entrepreneurs' risk calculations in relation to the low-wage countries, and the assurance that the euro zone's tight inflation criteria will hold off dramatic increases in these countries' pay levels, trade unions in the high-wage countries of Germany, the Netherlands and Belgium regard the new situation as deeply troubling. After years of low growth and high unemployment sometimes linked to the austerity measures that brought Europe's currencies into convergence, the contrasting labor costs now illustrate how the coming of the common currency may exact a new price in terms of people's lives. David Foden of the European Trade Union Confederation's research unit in Brussels said: ''There is a fear by the trade unions that this competitive climate will lead entrepreneurs to undercut on wages. You can imagine a downward spiral. There is a fear on the unions' side that the competitive pressures will encourage companies and even governments to go from country to country to see who can go furthest down on wages.'' For a time, Finance Minister Oskar Lafontaine of Germany seemed to be on the unions' wavelength and ready to move in favor of their standpoint within the EU. He said: ''It would be wrong if the economy of a region or a state tried to create a competitive advantage for itself by forcing down its salary costs. ''That's why salary policy has to be coordinated. The unions have to talk among themselves and use the European institutions in which the unions and employers are represented.'' For politicians, the issue involves dealing with the reality that their country could be facing a loss in jobs even as European competitiveness might be benefiting in general from an overall labor-cost shakeout. Michel Didier, the director of Rexecode, said he considered Germany and Belgium to be facing problems because of their labor costs. He regarded France as being hurt to a lesser degree, Italy in a neutral position and Spain and Portugal as clear beneficiaries. As much as he welcomed Mr. Lafontaine's view, Hans de Vries, national negotiator for the metal and electrical industry workers' union in the Netherlands and an activist among labor leaders pressing for a transnational approach in Europe, said the unions so far had received ''more sympathy than real support'' from their countries' left-of-center politicians. Mr. de Vries acknowledged that coordinating across-border salary policy would be extremely difficult and that there were great impediments to it within individual countries. But he said the European Metalworkers' Federation was pushing its members toward adopting minimum standards and that the automotive and shipbuilding sectors would be among the first to be targeted. The chances of making headway are best in areas where there are common patterns and practices, such as Germany and the Benelux countries, Mr. de Vries said. Short of transnational collective bargaining, the unions are also pressing for harmonization of tax policy across Europe. But it will not be easy to get other unions on board on the central issue of salaries, said Joachim Kreimer-de Fries, who directs European wage policy for the German Trade Union Federation. He said he believed it would be difficult to include Spain and Portugal, whose unions he described as less eager to link wages and productivity. At the same time, there are indications of an increasing effort by low-wage countries in the euro zone to attract businesses from higher-wage areas. Joao Alves Pereira, head of Portugal's 25-person investment office in Paris, described the competition from countries such as Ireland as great. Mr. Pereira flees the hard sell and talks about Portugal as if it were interesting largely because of its work ethic and new training programs. But beyond his practiced diffidence, Mr. Pereira reports success from France. The investment office's bulletins clearly state Portugal's wage advantages, and Mr. Pereira becomes more direct when he is asked whether he is concerned by union attempts to level them out. ''You're talking about evolutionary change,'' he said. Referring to the Maastricht treaty on European union, he added: ''The Maastricht rules are clear. Inflation levels are limited. If you're talking about relocating, it's worth it for 10 years or more.'' Hourly labor costs - the figures that were used for this article, from Eurostat, include tax, pension and social security payments - are obviously only part of the calculation that goes into choosing sites for industrial facilities. Productivity, geographic advantage and political climate also matter. But wage considerations have been accentuated, the unions say, by the euro's leveling out of foreign-exchange and interest-rate factors. ~~~~~~~~~~~~ A<>E<>R The only real voyage of discovery consists not in seeking new landscapes but in having new eyes. -Marcel Proust + + + + + + + + + + + + + + + + + + + + + + + + + + + + Forwarded as information only; no endorsement to be presumed + + + + + + + + + + + + + + + + + + + + + + + + + + + + In accordance with Title 17 U.S.C. section 107, this material is distributed without charge or profit to those who have expressed a prior interest in receiving this type of information for non-profit research and educational purposes only. 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