Political will and big spending put Austrians to work

VIENNA Wed Jun 26, 2013 4:42am EDT

1 of 9. A trainee checks a piece of steel during a daily trainee program at the Voest Alpine factory in the Austrian city of Linz, June 20, 2013.

Credit: Reuters/ Dominic Ebenbichler

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VIENNA (Reuters) - Sebastian Liedl is 17, and in half a year will be a fully qualified employee at the Austrian steel group Voestalpine, where he can look forward to a starting monthly wage of about 2,000 euros ($2,600).

Unlike his contemporaries in Greece, Spain or Portugal, Liedl has never feared unemployment. He always knew he wanted to follow in the footsteps of his father and grandfather at Voest, where he is part of an extensive apprenticeship program.

"I decided on Voest right away," said Liedl, who has been training since the age of 15 for an office job at the steelmaker, starting on 530 euros a month. "I like it a lot."

Liedl is benefiting from a long tradition of cooperation between labor and employers in Austria, which - mindful of how mass unemployment helped fuel the rise of fascism - places great importance on getting people into jobs and keeping them there.

Culturally, not much has changed since Social Democrat ex-chancellor Bruno Kreisky famously said in 1990: "A couple billion more in debt causes me fewer sleepless nights than a few hundred thousand more jobless would."

It's a model that European Union leaders will be looking to when they decide this week how best to use 6 billion euros earmarked for tackling the bloc's soaring youth unemployment.

At 4.9 percent, Austria has the lowest jobless rate in the European Union and the second-lowest youth unemployment, which stood at 8.0 percent in April, as measured by the EU statistics agency Eurostat. That compares to 63 percent youth unemployment in Greece and 56 percent in Spain.

When one of Austria's biggest building firms, Alpine Bau, went bust last week, the government went into overdrive, coming up with a 1.5 billion euro stimulus package to create more construction jobs.

In Spain, home of Alpine's parent FCC, the news barely registered in an environment of 27 percent unemployment.

Meanwhile, the Austrian aircraft parts supplier FACC, unable to train enough skilled staff through its own apprenticeship scheme, advertised in Spain for engineers. It got a thousand applicants for four places.

SPENDING ON JOBS

"Unemployment in Austria has always been low. That is linked to an overall consensus in politics and society," said Andreas Woergoetter, senior economist at the Organisation for Economic Co-operation and Development (OECD).

Foreign dignitaries often visit state-financed training workshops - which catch young people who do not secure a spot in private apprenticeship schemes - to seek clues to the Austrian job miracle, which confounds many free marketeers.

"They are shocked to find out it costs 14,000 to 16,000 euros a year for each spot," said Herbert Buchinger, chairman of the government's employment service, AMS.

The service guarantees any young person a job offer, targeted training or state-subsidized employment within six months of their registration as unemployed.

Private companies may spend even more: Voestalpine, which has been hiring apprentices since 1940, invests 70,000 euros in each young person over the course of up to four years' training.

Hubert Haider, who coordinates the apprenticeship program at Voestalpine Steel in Linz, says it is worth it. Up to 90 percent of apprentices are still with the group five years after completing their training.

"The whole company supports it, all of the management support it, and it is important for example that Dr (Chief Executive Wolfgang) Eder personally hands over the certificates at the end of the training," Haider said.

Austria spends more than half a billion euros a year on measures to promote jobs for people aged 15 to 24, of which around 150 million comes from the private sector. In all, its employment service has a budget of 1 billion euros for job promotion.

It gets a head start by focusing on young people aged 15 or 16. "They are doing real work, not drilling fake holes into a fake wall somewhere," said the OECD's Woergoetter.

GEOGRAPHY HELPS

Austria benefits from its close economic ties to European powerhouse and neighbor Germany, and from a structure that allows the federal government to implement employment policy centrally without having to go through regional authorities.

Buchinger said Austria made a critically important policy decision in the 1970s to focus on supplying the German engineering and auto industry rather than develop its own car sector, thus piggybacking on its neighbor's export might.

It also used its geography and historical ties with emerging economies in the former communist east to tap growth markets there. "We took part in the reform hunger in these countries."

Like Germany, Austria handles pressure on jobs during economic slumps by subsidizing companies to keep staff on payrolls at reduced hours. This means employers have skilled workers on hand when an upturn comes.

But unlike Germany, Austria makes it relatively easy for companies to dismiss workers, who on average change jobs every three years. "Employers in Austria are ready to hire someone because it is easier to get rid of him again," said Buchinger.

Austrian workers have also been restrained in their pay demands, keeping unit labor costs competitive at a time when they have rocketed in some peripheral euro zone countries. There is no minimum wage.

But despite its sparkling headline numbers, the Austrian job machine still has a few shortcomings.

Few Austrians work until the standard retirement ages of 65 for men and 60 for women, which means pensions help take up the employment slack. The actual retirement age is 57.6 years on average, although Austrians tend to start work young.

More than 70 percent of women work, but a lack of day care - especially for children under three and outside of urban centers - means nearly half of women work only part-time.

Still, Buchinger said Austria has lessons for others.

"I would tell unions not to fear deregulation of job protection in labor contracts. You mustn't see only the risks of a dynamic labor market, but also the opportunities." ($1 = 0.7637 euros)

(Additional reporting by Alexandra Schwarz-Goerlich and Angelika Gruber; Editing by Kevin Liffey)

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