Germany should take steps “to heal the split in the labour market” says OECD

Germany’s current economic success offers a good platform for achieving sustainable and inclusive growth, but further reforms will be necessary over the medium and long term, according to the latest OECD Economic Survey of Germany. Among the priorities are making the tax system more socially just and environment-friendly, strengthening the financial sector, so that it is better able to absorb future risks, increasing the contribution of the service sector  and creating greater equality of opportunity in the education system and in the labour market. 

“Our experience has shown that reforms are usually enacted in times of crisis, as there may be no other option,” said OECD Secretary-General Angel Gurría during the Survey launch in Berlin. “However, reform processes should continue in good times. For Germany, this means that the country should act now to embark on a more inclusive and resilient growth path.”

Reforms over the past decade have enabled Germany to boost job creation and drive unemployment to one of the lowest rates in the OECD area. Problems are posed, however, by the rapid growth of the low-wage sector and the large number of temporary workers. The sharp drop in unemployment has not reduced inequality or the risk of poverty.  Upward mobility of low earners has in fact fallen in recent years.

The OECD says Germany should take steps to heal the split in the labour market between employees with permanent contracts, better protection against dismissal and, in many cases,  better salaries, and those with temporary contracts, little protection and lower pay. A universal minimum wage set by an independent commission, including experts and social partners, could aid that effort, as could harmonisation of the rules governing employment protection for employees with temporary and permanent contracts. The Survey calls on Germany to combat long-term unemployment, which is still fairly widespread, through targeted hiring subsidies and incentives to obtain educational qualifications.

Chosen excerpts by Job Market Monitor. Read the whole story at Newsroom – OECD.

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