Darrell Hougen Posted September 20, 2013 Share Posted September 20, 2013 This seems like an under-reported story. People who pay attention to markets know that the German economy has been doing well. The question is why? I don't know much about the issue, but I stumbled across this today:Germany’s export engine really took off with its labor market reforms of a decade ago. Germany became increasingly competitive–wages in real terms are below where they were at the start of the 1990s, while real GDP per capita has increased by a quarter over the same period. The result was plunging German unemployment–down from 11% half way through the last decade to around 5.5% now, a multi-decade low. The unemployment numbers illustrate the positive impact of allowing wages to fall to market levels. Of course, in a booming economy with a low unemployment rate, one would expect wages to begin moving up as worker shortages become a problem for highly profitable businesses. They'll have to compete with each other for employees.Anyway, I don't know much about the actual reforms, so I would welcome any comments shedding light on the subject. Any analyses pointing to which reforms have led to decreased unemployment would be interesting.Darrell Link to comment Share on other sites More sharing options...
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