OECD Urges Federal Government to Boost Workforce, Nix Early Retirement and Spousal Splitting Incentives
Federal government urged to end early retirement schemes and discourage marriage separation in public service - The OECD suggests eliminating early retirement and divorce schemes at the federal level.
Ever wondered why Germany's workforce performs less compared to other nations? OECD experts believe it's due to the high proportion of part-time employment among women. To combat this, they suggest lowering marginal tax rates for secondary incomes and improving comprehensive childcare services.
The experts' explanations don't stop there. They also condemn incentives for early retirement as a primary reason behind Germany's growing skills shortage. These incentives drive many skilled, healthy workers out of the workforce prematurely, which contradicts the statutory retirement age. According to the OECD, mini-jobs should be reserved for students only.
To boost municipal revenues, the OECD advocates for a hike in property tax. Despite steep rises in property and real estate prices, revenues remain scant. The experts propose using revised property values to set the tax rates.
The OECD similarly critiques taxation exceptions such as inheritance or value-added tax. Adjustments are needed in these areas to ultimately pave the way for slashing high labor taxes.
On theenergy policy front, the OECD suggests lowering regional network charges for sites with high green electricity production. This move could potentially stimulate economic stability in these regions, thereby supporting regional development policies and the transition towards renewable energy.
All in all, the OECD gives Germany's traffic light government a thumbs-up. They appreciate the government's decisive response to the energy price crisis, along with swift actions preventing a more severe economic downturn and the rapid expansion of renewable energy. However, they highlighted crucial structural challenges that impeded growth even before the pandemic.
- OECD
- Federal Government
- Spousal Splitting
- Women
- Skills Shortage
- Germany
- Early Retirement
- CDU
- Taxation
- Inheritance
- Value-Added Tax
- Migrants
- Regional Development
Insights from Enrichment Analysis:
The OECD has offered practical recommendations for Germany to address the issues of early retirement and spousal splitting, both of which are major barriers to labor force integration:
Key Recommendations
- Promote Women and Older Workers' Integration
- Strengthen measures to encourage the participation of women and older workers in the labor market. These steps are vital for addressing the current skills shortages plaguing the economy.
- Enhance Later Working Lives
- Reduce incentives for early retirement and instead create better incentives for older employees to stay in the workforce.
- Revise pension, health, and long-term care systems to support a workforce with a higher prevalence of older employees and ensure the sustainability of these systems as the population ages.
- Expand the Tax Base and enhance Labor Market Policies
- Shift the tax burden from income to property to create incentives for longer and harder work, thereby increasing labor supply.
- Improve labor market flexibility and aid in the integration of various underrepresented groups into employment.
- Other Complementary Measures
- Minimize administrative burdens and streamline regulations to boost business dynamism and enhance productivity growth.
- Promote regional harmony and make it easier for skilled migrants to move and work in Germany, as migrants in Germany are currently among the least likely to be employed in OECD countries.
Summary Table
| Recommendation Area | Suggested Action by OECD ||--------------------------------------|-------------------------------------------|| Gender and Age Labor Integration | Reform spousal splitting, mobilize women/older|| Early Retirement | Reduce incentives, improve incentives for longer work || Taxation | Shift burden to property, broaden tax base || Labor Market Flexibility | Make market more flexible, integrate migrants || Administrative Burden | Reduce, streamline regulations || Regional/Migration Policy | Harmonize regional rules, ease skilled migration |
These suggested actions, as proposed by the OECD, are considered crucial for Germany to meet its labor needs and support sustainable economic growth.
- The OECD advocates for the Federal Government of Germany to focus on promoting women and older workers' integration in the labor market, as this is vital for addressing the current skills shortages.
- In an effort to combat early retirement, the experts at the OECD suggest that the Federal Government should reduce incentives for early retirement and create better incentives for older employees to prolong their working lives.
- To boost municipal revenues and address the skills shortage, the OECD proposes that the Federal Government shifts the tax burden from income to property, improves labor market flexibility, integrates migrants into employment, reduces administrative burdens, streamlines regulations, and harmonizes regional rules to make it easier for skilled migrants to move and work in Germany.
