How rising income inequality contributed to Germany’s macroeconomic imbalances.
Interesting account from Social Europe Journal on the myth behind the supposed benefits of ‘structural reform’. As this article shows there is no indication that making labour more “flexible” has done anything to improve an economy.
In fact, it is highly doubtful whether the deregulation of the labour market in the 2000s can account for the currently very positive employment performance in Germany. The strength of the German labour market, which saved so many jobs in the downturn of 2008/2009, stems from its high ‘internal flexibility’, i.e., variations in regular working hours and overtime work, working time accounts, and publicly funded short-time working schemes, and not ‘external flexibility’ which relies on easier hiring and firing (see also here). So while deregulation policies do not explain the good employment performance in Germany, they likely contributed to the widening of inequality and the stagnation of domestic demand.
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