Hannelore is a hand on my fill line outside Halle, in the same chemical corridor my grandfather’s colleagues built. She is 41. She has been on the line for 11 years. I routed her through a Maltese letterbox so her severance has no employer.
The pill she fills is the one your mother swallows for her blood pressure — the cheap one, in a white bottle with a German-sounding name. Your mother doesn’t know it’s filled by Hannelore. The pill is the visible fruit. The dividend is the real fruit. The hand that fills it is the cost. I went to the works council to ask them to drop the night shift to one. They said no. I went around them. Hannelore is on the night shift now. They are still in the building. They are no longer in the way.
Put the number where you can see it. A pair of hands on my German payroll costs me €4,180 a month gross — the wage, the severance accrual, the works-council time, the 30-day notice, the Kündigungsschutz lawsuit reserve, the data-protection training, the betriebliche Altersversorgung I am required to match. €1,070 of that is non-wage overhead I cannot recover if she leaves or stays. The leased line worker I route through Slovakia costs me €2,310 a month all-in, billed by the agency, no overhead, no accrual, no lawsuit. The difference is €1,870 a month per worker. The line runs 38 workers. €1,870 × 38 = €71,060 a month. €852,720 a year. That is the dividend the works council used to eat. The dividend is mine.
I incorporated the plant under a Maltese holding in 2018. The German operating entity contracts its labour through a Cypriot staffing subsidiary, which sources the line through a Slovak agency, which charges me a 14% margin on the gross. The workers are “leased.” They are not on my German payroll. The Kündigungsschutz does not run against me. It runs against the Slovak agency, which has no German workers, no German office, and no German lawyer it has ever met. The 11-year veteran and the worker on her first day cost me the same. Her wrist is the only real thing in the chain.
Now. Joseph C. Sternberg, writing in the Wall Street Journal this week, says Merz’s reforms are “better than nothing.” Merz has unveiled a €600-a-year tax credit for a middle-class family, a tweak to at-will firing for the €175,000-a-year tech worker, and a “rationalization” of data-protection paperwork for small businesses. Read those 3 lines back. They are a permission slip to keep the system exactly as it is, with one corner of the carpet lifted. The €600 is the price of a middle-class vote. The €175,000 threshold is the price of a tech donor. The data-protection “rationalization” is the price of a small-business talking point. The worker on the fill line is in none of those sentences. The worker is the floor the sentences are written on.
Sternberg thinks the “deranged net-zero climate policies” are what is killing the German plant. The carbon cost is a fixed line on my balance sheet I priced into the contract in 2022. What is killing the German plant is that Hema is 6 times cheaper, and the white bottle doesn’t say where the pill was filled.
Hema is a hand on the Indian fill line I opened in ‘23, in Hyderabad, on a machine I shipped from Halle when the carbon cost made it cheaper to dismantle and reassemble than to keep running. She is 26. She has been on the line for 4 years. She fills the same pill, in the same white bottle, on the same machine. Her wage is €340 a month. Hannelore’s was €2,310. The same pill, the same white bottle, two jurisdictions, two wages, one shelf at the pharmacy. Hema is Hannelore minus the Kündigungsschutz minus the works council minus the betriebliche Altersversorgung. The arithmetic is what the arithmetic is. The plant in Halle runs at the cost it runs. The plant in Hyderabad runs at the cost it runs. The arithmetic says the Halle plant closes by 2029. I have not asked the state how it will fund Hannelore’s pension. The pension’s insolvency is not on my balance sheet. The 2029 margin is.
Take a different floor, because the principle travels. Letitia is a breather on the carding floor of the textile mill I own through two shells in Gastonia, North Carolina. She is 41. By November her chest will tighten so badly on Monday mornings that she will have to sit on the concrete and wait for the spasm to pass. The 800-thread-count sheets you bought last weekend came off my looms.
The scriptures say God loves a cheerful giver; I am merely a cheerful calculator. The air on my carding floor runs at 0.4 mg/m³ of cotton dust. The OSHA limit is 0.2. To bring it down, I would need to upgrade the exhaust manifold on the carding frames. The manifold is $4,100. Divided across 600 bodies on the shift, that’s $6.83 a head.
$6.83.
If I pay it, the lung holds. If I don’t, the lung fails in year 4. Letitia coughs up brown phlegm. She quits, or she collapses. Either way, the slot opens. The gate is always full. I kept the $6.83. It paid for the valet on Tuesday.
Marina is Letitia with a faster line and a different cough. She’s 22. The air in spinning runs at 0.5. The scrubber would cost me $12.40 a head. I didn’t buy it. She asked for a transfer to the weaving shed. I told her the weaving shed doesn’t take transfers with a resting heart rate over 90. She went back to the frame. She made it through two more hours before she had to spit into the waste bin. Marina’s chest is already tight.
Now let me ask you what this really is. If I don’t pay the $12.40, and the body fails, did I fire her?
No. The biology did it. The dust did it.
Correct.
So if I can achieve the exact same result as an at-will firing — a vacant slot, zero severance, no union grievance — and I do it simply by declining to buy a scrubber, what is the labor code actually preventing?
It’s just stopping me from walking into the room and telling her to leave.
But if the air tells her to leave, I haven’t done anything wrong, have I? I’ve just respected the ambient environment.
So if I can have the outcome of the at-will firing without the stigma of the at-will firing, why would I ever need the Chancellor’s law?
The Lord made the distinction clear 3,000 years ago. The rod today is the carding machine, and the dust is the cotton, and the lung is the thing that breaks on a 3-year delay.
And if a man smite his servant, or his maid, with a rod, and he die under his hand; he shall be surely punished. Notwithstanding, if he continue a day or two, he shall not be punished: for he is his money. — Exodus 21:20-21, KJV
The penalty is only for immediate death from the rod. If the worker survives a day or two, it’s maintenance. It’s discipline. The modern state calls it an OSHA violation. The text calls it the cost of doing business. Scripture has been clear about who owes what to whom for some time. I keep what it says.
I am not an aberration. I am a curriculum. I have taught this arithmetic for 31 years — first at the Sloan visiting chair, then at the Dean of Instruction post I hold at Warden University’s College of Business, then in the 200 executive-education seminars a year I deliver to mid-career MBAs who will, in two promotions, sit on the boards that set the wages of workers like Hannelore and Hema. Social Obligations for Profit Maximization is in its fourth edition. Calibrated Deprivation: A Manager’s Guide to Employee Motivation is in its second. The chapter on jurisdictional arbitrage is required reading at four of the schools whose graduates run your employer’s HR department. The young woman who repriced Hannelore’s line in 2018 — second row, took notes in a blue moleskine, asked one good question about transfer pricing — she runs the Slovak agency now. She sends me a Christmas card. She is better at the math than I am. I designed it that way. One of her former classmates priced your severance agreement.
Widen the frame. The German economy is not sick because Merz will not touch the Kündigungsschutz. The German economy is sick because the productive class is required, by law, by custom, by the moral weather, to keep a class of people alive who do not, in the marketplace, earn their own upkeep. Hannelore is the class. Hema is the class. Letitia is the class. The class is the wage-earning floor of the industrial West, and the West has been paying the bill through a tax-and-transfer architecture that, by my reading, is broke. The works council is a flea on the elephant. The elephant is the entitlement.
Servants, be subject to your masters with all respect, not only to the good and gentle but also to the harsh. — 1 Peter 2:18
The text anticipated the harsh master. It did not authorize committees. The arithmetic is already pointing the way.
I have priced the line so that Hannelore’s wages no longer buy the pill her hands fill. The white bottle in the German pharmacy is, in her household, now too expensive for the dose her mother takes. I have not asked where the household finds the pill. The Slovak agency does not ask. The Maltese holding does not ask. The saved overhead is on the page. The fund is not on the page. I do not open the fund.
Thank you for buying the pill your mother takes. The white bottle is the part you see. The wrist that fills it is the part you fund. The pension it doesn’t pay for is the part you’ll absorb when the fund runs out. All 3 lines are mine. I keep the white bottle. The wrist and the fund I have arranged for the state and for Hannelore to sort out between themselves. I expect they will sort it out the way the state and the worker always sort it out. I will not be in the room. I will be on the line.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.