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Productivity and long term growth

Going for Growth 2016: Germany

 

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Germany has a productivity level in services that is low relative to the level in manufacturing, with the productivity gap being particularly large compared to other countries. Reducing regulatory barriers to competition and innovation in network industries as well as professional services and crafts remains a key priority.  Raising the wellbeing of parents with young children is also high on the policy agenda. This requires comprehensive reforms that in addition to removing institutional and fiscal disincentives for full-time participation would also promote a working environment that can best help to reconcile work and family responsibilities. These measures could also contribute to mitigate the impact of population ageing on the labour force.

Note: Business sector services cover distributive trade, repair, accommodation, food and transport services; information and communication; financial and insurance; professional, scientific and support activities. Data refer to 2013 for Belgium, Denmark, France, Israel, Italy, Japan, Korea, Poland, Portugal, Slovak Republic, Spain, Switzerland, the United States; 2012 for Australia and the United Kingdom. The observation on business sector services in Japan is an estimate based on National Accounts for 2013 and the 2014 JIP Database. The data on manufacturing sector for Israel include mining and quarrying while the data on business sector service include real estate activity.

Source: OECD National Accounts Database, Cabinet Office (Japan) 2013 National Accounts, Central Bureau of Statistics (Israel) "Product, Productivity, Compensation of Employed Persons and Capital Return 2005-2013".

Previous Going for Growth recommendations include:

  • Enhancing equity in education by reducing early tracking and the assignment of pupils to special needs schools, by providing more financial resources to schools with a comparatively high share of pupils with weak socio-economic background and by enhancing training opportunities for the low-skilled. 
  • Removing obstacles to full-time female labour participation by expanding the supply of full-day childcare, improving the quality of early childhood education and reforming the system of joint taxation.
  • Reducing tax wedges on labour income and shifting taxation towards less distortive taxes by lowering social security contributions especially for low-pay workers, updating property tax valuations and phasing out tax expenditures for activities that damage the environment.  
  • Reducing gaps in employment protection by diminishing the gap in employment protection between permanent and temporary workers.
  • Reducing regulatory barriers to competition, especially in services sectors by abolishing price regulations and reducing exclusive rights in professional services.

 

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Recent policy actions in these areas include:

  • An additional EUR 550 million federal expenditure to expand the childcare services supply for children aged 0-3 years and to raise the quality of childcare, in particular with regards to facilities and equipment.

The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, narrowing current account imbalances and reducing income inequality). In the case of Germany, enhancing equity in education would help reduce income inequality. Likewise, reforms to encourage full-time labour force participation of women, would make growth more inclusive.

Economic Policy Reforms 2016 

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