OECD Report: Germany Needs Labor Market Reforms

Women's working hours are too short, social security contributions of low-paid workers are too high and the rural Internet is too slow: the OECD highlights the weak points of the German working world and suggests improvements. An overview

The Organization for Economic Co-operation and Development (OECD) has asked Germany to make further reforms to revive the economy. In concrete terms, this calls for improvements in the world of work. Overall, Germany is doing very well with its "very low unemployment rate" and its highest gross domestic product per capita in OECD countries. In addition, there are already the first good approaches that the current government has decided and partially implemented – but that would be even more so.

In its "Growth Objective" report, the OECD analyzes several policy areas and makes specific recommendations for implementation in each country. For Germany, these include:

Better get women back to work (back)

"Women's relatively short working hours create a gender-specific income gap," the report says. This would affect women's career opportunities. To solve this problem, the OECD recommends several points:

  • Parents who wish to benefit from the longest possible parental allowance should allocate child care more equitably on both shoulders. To this end, the current minimum parental leave of two months for the second parent must be increased, allowing couples to benefit from the maximum period of parental allowance.
  • The provision of care for young children should be improved.
  • It will be necessary to build more schools all day long.
  • Parents who work and earn money should be released from income tax

Relief of low wages

In addition, in general, the income tax in Germany has been examined by the OECD and found that low-income people are high. This would reduce, among other things, consumption. The organization therefore recommends the policy, among others:

  • Reduction of social security contributions – especially for low wages
  • Removal of reduced rates of business tax applicable to hotel bookings
  • The capital gains tax must be extended to the profits from the sales of residential buildings.
  • With regard to climate protection, energy tax rates should be adapted to the CO2 intensity of the activities concerned.

Faster Internet in the countryside

The OECD has identified another problem, namely the infrastructure of this country, with regard to the Internet, the living spaces and the financial burden of the municipalities. To improve these points, the organization recommends:

  • public investment in Internet faster in the countryside
  • Promoting affordable housing in cities through denser construction and compact development of fallow industrial estates
  • Improvement of municipal administration

In general, the OECD calls on all governments to redouble their efforts to cope with economic challenges. "The global economy continues to face slower growth because of the high trade uncertainties," said the chief economist of the OECD, Laurence Boone. At the same time, standard of living, measured in terms of gross domestic product per capita, has developed much more slowly than before the global financial crisis.

This development should encourage policy makers to undertake the reforms needed for stronger, more inclusive and environmentally friendly growth in all population groups.