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Labour Market Reform in Germany: How to Improve Effectiveness


  • Eckhard Wurzel


High levels of unemployment and rising social charges have lead to considerable pressure on labour markets to adjust. Major steps in labour market reform have been implemented over the last three years. These need to be followed up in several respects in order to raise the economy’s capacity to generate employment. The present tax and transfer system still implies significant disincentives for labour supply of older people and spouses, which should be eliminated. Unemployment related benefits and active labour market policies can be better geared toward activating the unemployed, while institutional reform of the Public Employment Service should continue. On the labour demand side, there remains scope to raise the efficiency of Germany's employment protection system. Also, provisions should be made to allow for a higher degree of wage flexibility across qualifications and regions to fight unemployment. Regulatory conditions in other parts of the economy interact in important ways with labour market performance, underlining the need for a broad based reform approach. This Working Paper relates to the 2006 OECD Economic Survey of Germany ( La réforme du marché du travail en Allemagne : Comment améliorer l'efficacité Face à un chômage élevé et à un alourdissement des charges sociales, des ajustements sont devenus de plus en plus nécessaires sur les marchés du travail. D'importantes réformes du marché du travail ont été mises en oeuvre ces trois dernières années. Elles doivent être poursuivies dans plusieurs domaines afin de permettre à l'économie de créer davantage d'emplois. Le système actuel de prélèvements et de transferts dissuade encore dans bien des cas les personnes âgées et les conjoints de travailler, situation à laquelle il y aurait lieu de remédier. L'indemnisation du chômage et les politiques actives du marché du travail pourraient être conçues de manière à favoriser davantage le retour à l'emploi des chômeurs, et la réforme institutionnelle du service public de l'emploi doit être poursuivie. S'agissant de la demande de main-d'oeuvre, l'efficience du système de protection de l'emploi pourrait être améliorée. Par ailleurs, il y aurait lieu de prendre des dispositions pour permettre une plus grande flexibilité des salaires en fonction des qualifications et suivant les régions, afin de lutter contre le chômage. Les conditions de réglementation dans d'autres secteurs de l'économie interagissent de façon importante avec la performance du marché du travail, soulignant le besoin d'une approche globale des réformes. Ce document de travail se rapporte à l’Étude économique de l’OCDE de l’Allemagne (

Suggested Citation

  • Eckhard Wurzel, 2006. "Labour Market Reform in Germany: How to Improve Effectiveness," OECD Economics Department Working Papers 512, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:512-en

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    References listed on IDEAS

    1. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and in the long run?," Public Economics 0411004, EconWPA.
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    8. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers 2008 - 2015 216, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. Ulrich van Suntum & Jens Oelgemöller & Cordelius Ilgmann & Tobias Böhm, "undated". "Walter Eucken`s Principles of Economic Policy Today," Working Papers 201175, Institute of Spatial and Housing Economics, Munster Universitary.
    2. van Suntum, Ulrich & Böhm, Tobias & Oelgemöller, Jens & Ilgmann, Cordelius, 2011. "Walter Eucken`s principles of economic policy today," CAWM Discussion Papers 49, University of Münster, Center of Applied Economic Research Münster (CAWM).

    More about this item


    activation strategies; activité des personnes sur le marché du travail; Allemagne; allocations chômages; chômage; détermination des rémunérations; emploi; employment; employment protection legislation; Germany; labour force participation; labour market reform; législation sur la protection de l'emploi; minimum wage; policy synergies; public employment services; rigidités salariales; réforme du marché du travail; salaire minimum; service public de l'emploi; stratégie d'activation; synergies des politiques; unemployment; unemployment benefits; wage determination; wage rigidities;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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