- BASF warns of earnings decline, job cuts on high costs in Europe
BASF (BASFn.DE) said it would cut 2,600 jobs and halt its share buybacks as it warned of a further decline in earnings reflecting high costs in Europe, uncertainty due to the war in Ukraine and rising interest rates.
The German chemicals giant said in a statement on Friday that 2023 earnings before interest and tax (EBIT), adjusted for special items, would fall to between 4.8 billion euros ($5.09 billion) and 5.4 billion from 6.9 billion in 2022, which was down 11.5% from 2021.
BASF’s job cuts, which are about 3.9% of its European workforce, come after carmaker Ford (F.N) last week said it would slash 3,800 roles in Europe. Hit by a product recall, Dutch medical device company Philips (PHG.AS) last month announced it would scrap another 6,000 jobs.
But cushioning the impact on workers, BASF added it would strive to offer affected staff other internal positions that will become vacant. It has previously flagged the risk of major labour shortages as baby boomers retire in Germany.
Source: Reuters
2. Refugees could help Germany’s labor market, but Ukraine’s skilled workers are needed at home
Germany’s labor market is under severe pressure, and the recent influx of Ukrainian refugees is unlikely to solve the country’s workforce issues in the long term.
The employment rate in Europe’s largest economy hit a new record high in the fourth quarter of 2022, with 45.9 million people employed, according to the German Federal Statistical Office. But more than half of German companies are struggling to find skilled workers to fill vacancies, the German Chambers of Commerce and Industry reported in January.
The arrival of these often highly educated Ukrainians could bring benefits for Germany, particularly when it comes to bolstering its workforce.
Sylvain Broyer, chief EMEA economist at S&P Global Ratings, said the presence of refugees would be “positive” for the Germany economy right now.
“Definitely Germany faces major shortages of labor and needs immigrants and Ukrainians,” Professor Panu Poutvaara, director of the Ifo Center for International Institutional Comparisons and Migration Research told CNBC.
“If I compare to the previous asylum seekers, Ukrainians are clearly better educated and have integrated much faster into the German labor market,” he added, noting that Germany is an attractive country for people looking to join the labor market.
Research by the EWL Foundation for Supporting Migrants on the Labour Market found that 22% of its 400 respondents chose Germany as a country of refuge based on its employment prospects.
Many Ukrainians want to go home as soon as they can, making their participation in Germany’s labor market limited and short term.
Research by Germany’s Institute for Employment Research showed that 37% of Ukrainian refugees want to stay in Germany permanently or at least for a couple of years, while 34% plan to stay until the end of the war, 27% were undecided and 2% plan to leave within a year.
The survey included data from 11,225 Ukrainian refugees, polled between August and October 2022.
Working on the assumption that Ukraine will win the war, the majority of refugees will likely return to their home country, according to Poutvaara.
The expectation that the refugee movement out of Ukraine will have a “sustainable” and “positive” impact on the German labor market is a “misperception,” according to Steffen Kampeter, chief executive of the Confederation of German Employers’ Associations.
Source: CNBC
3. World’s Largest Four-Day Work Week Trial Finds Few Are Going Back
The largest-ever trial of the four-day work week found that most UK companies participating are not returning to the five-day standard, and a third are ready to make that change permanent.
The study involved 61 organizations and about 2,900 workers who voluntarily adopted truncated work weeks from June to December 2022. Only three organizations decided to pause the experiment, and two are still considering shorter hours, data released Tuesday showed. The rest were convinced by revenue gains, drops in turnover and lower levels of worker burnout that four is the new five when it comes to work days.
“I was wondering if it might be a lot harder for companies to make four-day weeks work, and the answer seems to be no,” says lead researcher Juliet Schor, an economist and sociologist at Boston College. Her research has long found that five-day work weeks no longer fits the lifestyles and commitments of modern employees, particularly caretakers. “The organizations did a great job, and they’re really happy with it.”
The UK data strongly confirms the findings of smaller trials whose results were released in December, of companies based in the US, Ireland and Australia. That research showed equivalent gains in revenue and employee productivity, as well as drops in absenteeism and turnover. Those pilots were smaller, covering roughly half the number of companies in the UK trial, and a third of the employees.
The UK results are the second major data release in an ongoing series of 4-day tests coordinated by 4-Day Week Global, a New Zealand-based nonprofit advocacy group. With each iteration, the researchers adjust their data collection, as well as begin tracking the long-term effects of lighter schedules.
With the new schedule, workers reported improvements in everything from stress, fatigue and health to their personal life. The time men spent looking after children increased by more than double that of women during the trial. None of the 2,900 participants said they want to ditch the four-day arrangement, and 15% even said that no amount of extra money could make them return to five days. Most companies adopted four-day schedules, although a small percentage opted for shorter five-day arrangements or, in the case of seasonal businesses like restaurants, an annualized four-day week model in which longer opening times in summer would compensate for shorter days in winter.
Source: Bloomberg
4. Mapped: Unemployment Forecasts, by Country in 2023
Across many countries, the pandemic has made entrenched labor trends worse. It has also altered job market conditions.
South Africa is projected to see the highest jobless rate globally. As the most industrialized nation on the continent, unemployment is estimated to hit 35.6% in 2023. Together, slow economic growth and stringent labor laws have prevented firms from hiring workers. Over the last two decades, unemployment has hovered around 20%.
In Europe, Bosnia and Herzegovina is estimated to see the highest unemployment rate, at over 17%. It is followed by North Macedonia (15.0%) and Spain (12.7%). These jobless rates are more than double the projections for advanced economies in Europe.
The U.S. is forecast to see an unemployment rate of 4.6%, or 1.2% higher than current levels.
This suggests that today’s labor market strength will ease as U.S. economic indicators weaken. One marker is the Conference Board’s Leading Economic Index, which fell for its tenth straight month in December. Lower manufacturing orders, declining consumer expectations, and shorter work weeks are among the indicators it tracks.
Like the U.S., many advanced countries are witnessing labor market strength, especially in the United Kingdom, Asia, and Europe, although how long it will last is unknown.
Today, strong labor markets pose a key challenge for central bankers globally.
This is because the robust job market is contributing to high inflation numbers. Yet despite recent rate increases, the impact has yet to prompt major waves in unemployment.
Typically, monetary policy moves like these takes about a year to take peak effect. To combat inflation, monetary policy has been shown to take over three or even four years.
The good news is that inflation can potentially be tamed by other means. Fixing supply-side dynamics, such as preventing supply shortages and improving transportation systems and infrastructure could cool inflation.
As investors closely watch economic data, rising unemployment could come on the heels of higher interest rates, but so far this has yet to unravel.
Source: Visual Capitalist
5. Is Germany’s skilled-labor shortage a myth?
In a recent labor market report, the Economy Ministry said Germany’s shortage of skilled workers is “acutely affecting” many companies’ potential to grow.
“More than 50% of companies see this as the greatest threat to their business development,” the report noted, adding that the shortages in many sectors are likely to get worse as members of the so-called baby-boom generation retire in the coming years. By 2035, the gloomy outlook concluded, Germany will be short some 7 million skilled workers.
The head of the Institute of Labor Economics in Bonn told DW that the country’s high employment rate “speaks against a shortage of skilled workers.”
And indeed, with about 46 million employed Germans, the level of employment is at an all-time high in Europe’s largest economy. Jäger noted that young people entering the labor market in the country are generally better educated than those who are retiring.
In addition, Federal Employment Agency chief Andrea Nahles sees huge potential in keeping elderly workers in their jobs beyond retirement age. “More than a million workers would be willing to continue working,” Nahles said recently, adding that many of them were interested in “doing meaningful work on a part-time basis.” Employers should try to find creative solutions for them, she said.
Introducing a better work-life balance by cutting working hours could improve the situation in many other professions, too, said Jäger. In nursing, for example, where he said more than 200,000 people had left the profession in Germany and might want to return to their former jobs once working conditions and pay are made more attractive.
“In other words, at the end of the day, the issue of labor shortages is a matter of scarce resources. While we don’t have an infinite number of workers, the question arises: Where do we want to use this scarce resource of labor?”
Stefan Schaible, a board member at Roland Berger consultancy, believes companies need to “radically change what they offer in terms of work and life arrangements.” Employers who still don’t understand that they need to invest in their staff are “in massive trouble,” he told DW.
Labor market experts have estimated that Germany would need 400,000 foreigners per year to close the widening gap within the next decade or so. At the moment, only about 60,000 people are coming via the government’s skilled immigration programs.
Source: Deutsche Welle
