All Europe Watches As Germany's Volkswagen Moves to Four-Day Week
AS Western Europe struggles to pull out of recession, politicians and economists across the continent are wrestling with the question: Is less better?
The debate centers around the concept of a four-day workweek for less pay. Proponents say the idea is the antidote to the scourge of unemployment, while detractors denounce it as a step in the wrong direction, away from the path of stable economic recovery.
Only one thing is for sure: After the decision of German automaker Volkswagen (VW) to switch to a four-day week, the debate over the idea looks set to intensify.
VW may have been the first to adopt it, but many companies in Germany, France, and other Western European nations are giving the four-day workweek serious consideration. In addition, politicians are warming to the idea, sensing that voters would be willing to accept radical solutions to stubborn economic problems, especially unemployment.
A French parliamentary committee, for example, has approved implementation of a 33.3-hour workweek with appropriate wage cuts, provided that firms boost their work forces by at least 10 percent. The average French worker currently is on the job for 39 hours per week.
In Germany, politicians from various parties welcomed the VW announcement last Thursday. Economics Minister Gunter Rexrodt said the agreement was ``the first labor contract that offers people hope.'' Meanwhile, Oskar Lafontaine, economic spokesman for the opposition Social Democratic Party, called the move ``an example of reason.'' At present, a German worker labors an average of about 36 hours per week.
Pending final approval, VW will introduce a 29-hour work-week in January at its plants in Germany. Under the arrangement, workers will each lose 10 percent, or about $3,500, of their gross pay and fringe benefits annually.
Company officials say the cuts will save the automaker about $1.1 billion per year over the next two years, translating into a cost reduction of at least $700 per auto produced. VW, which also includes the Audi, Skoda, and Seat nameplates, expects to lose $1.1 billion during the first nine months of 1993, compared with a $325.5 million profit last year during the same period. But the automaker says it turned a modest profit in this year's third quarter of about $41.5 million. Threatened layoffs
Since it first floated the idea in late October, VW has insisted that the only alternative to switching to a four-day workweek was massive layoffs of up to 30,000 of the automaker's 100,000 workers. Faced with such a prospect, the VW autoworkers' union, IG Metall, said it had no choice but to go along with the plan.
``It was the solution for the particular situation that we have now,'' VW spokesman Peter Schlelein says of the four-day week. And given that chances for a booming economic recovery look dim, the four-day workweek may be here for the medium- to long-term, Mr. Schlelein adds.
``It could be a solution for the future - a new, intelligent, and creative system,'' he says. ``Our task now is that we have to organize it.''
Some economists, however, say a move to a four-day workweek in Europe could be an economic disaster in the making.
``This is something that comes up during every economic downturn,'' says J. Paul Horne, a Paris-based financial analyst for Smith Barney. While the less-work-for-less-pay plan may have short-term benefits, he says, it is in the best long-term interests of European economies to resist the four-day temptation. Shifting the burden
``Yes, it will create employment, but it will add to government budget deficits,'' Mr. Horne says.
In the social welfare-oriented political systems of Western Europe, he explains, governments would be forced to pick up added administrative, health-care, and other costs that would be shed by companies shifting to a four-day workweek and trimming benefits to employees. Other economists argue a four-day workweek would slow recovery, saying that people would have less money to spend.
In VW's case, some economists think the four-day plan sidesteps the real problems behind the automaker's poor 1993 performance, namely low productivity and decreasing competitiveness. ``Volkswagen needs more innovation and more productivity, not a reduction in working time,'' says Siegfried Utzig, an economist for the Union of German Industry.
Not all companies are ready to follow VW's approach. Officials at Opel AG, a General Motors subsidiary and VW's chief rival, called VW's move ``the wrong answer.'' Opel has opted for a plan that would maintain a five-day workweek with its higher costs in return for a union commitment to restrain future wage increases. The plan, company officials estimate, will save Opel about $700 million over four years.
But in these gloomy economic times for Europe, the critics of the four-day workweek do not seem to be attracting many followers. In the 12-nation European Union, as the European Community now calls itself, about 19 million people are classified as unemployed, with more than 1.5 million jobs having been eliminated over the last year.
In the VW example, politics may be playing a role in the adoption of the four-day plan. The German state of Lower Saxony holds a 20 percent stake in VW, and with 1994 being an important election year, politicians are loathe to see large layoffs.
``There was no political pressure'' on VW to implement a four-day week, Schlelein insists. ``But, of course, the government is interested in keeping people employed.''