What Needs Doing for more Employment

The elections are over and the green-red coalition may remain in power.

However, the same problems persist, particularly an unstable job market.

What needs doing and by whom?

Professor Wolfgang Franz, President of the Centre for European Economic Research (ZEW), Mannheim, proposes a bold 10-point plan which should lead to the creation of new, competitive positions in the job market.

The job market expert considers the following reform steps necessary to reduce the high levels of unemployment in Germany.

1. The parties in collective labour agreements agree on pay increases below the rate of productivity growth, until the rate of unemployment in Germany has fallen to a level of 5 percent. In addition, these parties further expand a wage structure based on the qualification level of workers.

2. The parties in collective labour agreements include an effective escape clause in all collective agreements.

3. The parties in collective labour agreements develop wage models which ensure that employees play a greater role in guaranteeing the success of the business.

4. The federal government launches a comprehensive reform of the health system. The aim is to free state insurance contributions from elements of non-insurance-related wealth redistribution, to fully ignite competition between insurance companies and to increase the extent of self-provision considerably.

5. The federal government merges unemployment insurance and social security into a three-tier system. These three tiers consist of insurance against the loss of income based on a degressive performance curve, voluntary rate options for additional performance, and a social security system which rewards those who take up work.

6. The federal government continues the tax reforms, reduces the tax burden and replaces the current commercial tax.

7. Regarding the necessity to secure jobs in the interest of workers, the federal government makes the “Günstigkeitsprinzip” (favourability principle) more flexible.

8. The federal government reforms laws pertaining protection against dismissal and implements clear ruling for settlements and indemnities in the case of compulsory redundancies.

9. The federal government avoids making laws on compliance which are meant to protect industries from competition, as well as pay rate commitment laws.

10. The federal government renders the “Betriebsverfassungsgesetz“ (Works Constitution Act) more flexible and ensures that employees participate in financing the supervisory board.

Contact

Prof. Dr. Dr. Wolfgang Franz, Phone: 0621/1235-100, E-mail: franz@zew.de