Effective Industry-led Growth Initiatives in Germany: What worked? Dr. Hubertus Bardt Tokyo, September 8, 2015
A REFORM PERSPECTIVE REFORMS AND THE LABOUR MARKET STRUCTURAL REFORMS IN EUROPE Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 2
Relevant factors of for business development Relevance for investment decisions: all enterprises (Germany), enterprises with export-import business (foreign countries) Scale from 0 "absolutely irrelevant" to 100 "absolutely essential" Source: Unternehmensbefragung IW Consult 2014 Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 3
Development of conditions in Germany Average = 100; > 100: better than the average 150 regulatory framework 130 regulation 110 bureaucracy 90 infrastructure 70 50 1995 2000 2005 2010 current year working relations costs IW Industrial competitiveness index Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 4
Development of conditions in Japan Average = 100; > 100: better than the average 150 regulatory framework 130 regulation 110 bureaucracy 90 infrastructure 70 50 1995 2000 2005 2010 current year working relations costs IW Industrial competitiveness index Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 5
What blocked investments in Germany? Information in percent of the companies surveyed uncertain global economic development high energy costs high regulation 1) high labour costs weak economic development in Europe high bureaucracy 2) high taxes missing qualified employees weak domestic demand investment abroad to reduce costs infrastrucure deficits 3) investment abroad to incrase sales financial resources 19 19 17 15 25 32 35 52 50 48 46 45 43 0 10 20 30 40 50 60 important investment obstacle 1) e.g. labour law; 2) e.g. approval procedures; 3) e.g. transport network, broadband network Source: Herbstumfrage 2014 des Instituts der deutschen Wirtschaft Köln Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 6
Development of the real GDP per capita 2004=100 150 140 130 Scenario 1 - stagnation Scenario 2 - stopped downtrend Scenario 3 - return to supply side policy Scenario 4 - USA Scenario 5 - Sweden Scenario 6 - UK 120 110 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Cologne Institute for Economic Research Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 7
Development of the real GDP per capita 2004=100 150 140 130 120 Scenario 1 - stagnation Scenario 2 - stopped downtrend Scenario 3 - return to supply side policy Scenario 4 - USA Scenario 5 - Sweden Scenario 6 - UK actual development 110 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Cologne Institute for Economic Research Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 8
A REFORM PERSPECTIVE REFORMS AND THE LABOUR MARKET STRUCTURAL REFORMS IN EUROPE Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 9
Employees subject to social security contribution Seasonally adjusted, in 1,000 Source: womua, Fotolia Source: Deutsche Bundesbank Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 10
Number of unemployed in 1000 Source: Federal Statistical Office Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 11
Employment rate by age in per cent of the population at the age of 15-65 years 90 80 70 60 50 40 30 20 10 0 55-60 years 60-65 years total (15-65 years) 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Federal Statistical Office Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 12
Average retirement age in years Only old-age pensions: without disability cases and survivors benefits Source: German Pension Insurance Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 13
Structure of the labour force in percent of the 15 to 64-year-old population 31 25 unemployed person 13 12 12 14 other employed persons low income employees 44 49 normal and high-income employees 2005 2011 Source: Cologne Institute for Economic Research; database: SOEP Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 14
A REFORM PERSPECTIVE REFORMS AND THE LABOUR MARKET STRUCTURAL REFORMS IN EUROPE Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 15
Reforms of selected euro area countries Reform rate of the OECD Source: OECD, 2013 Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 16
Employment protection legislation Scale from 0 (very flexible) to 6 (very rigid) For regular contracts of employment and in cases of individual or collective dismissals. Sources: OECD; Cologne Institute for Economic Research Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 17
Product market regulation Scale from 0 (very flexible) to 6 (very rigid) Sources: OECD; Cologne Institute for Economic Research Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 18
Regulatory intensity for starting up a business Scale from 0 (worst performing country) up to 100 (best performing country) 100 95 90 85 80 75 70 65 60 55 50 Greece Spain Portugal Italy 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: World Bank Doing Business database Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 19
Doing Business Ranking Rank 2009 Rank 2014* Portugal 48 25 Spain 62 33 Italy 78 56 Greece 109 61 Rank: The country with the most business-friendly regulation has rank 1. *rankings of the Doing Business issues in 2015 and 2009 (reference point is in each case June of the year before) are not comparable completely, because in 2015 (2009) 189 (183) countries were evaluated and, besides, there were methodical changes. Sources: World Bank, Doing Business database Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 20
Recent economic growth Change of real GDP compared with the previous quarter in per cent (seasonally and working day adjusted) Source: Eurostat Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 21
Holistic approach to reform Any deficiency revenge radically Vision Competence Action plans Instruments Incentive Communication Success Competence Action plans Instruments Incentive Communication Confusion Vision Action plans Instruments Incentive Communication Uncertainty Vision Competence Instruments Incentive Communication Chaos Vision Competence Action plans Incentive Communication Frustration Vision Competence Action plans Instruments Communication Delay Vision Competence Action plans Instruments Incentive Rejection Source: Motorola University; Cologne Institute for Economic Research Dr. Hubertus Bardt, Effective Industry-led Growth Initiatives in Germany: What worked?, September 8, 2015, Tokyo 22
Dr. Hubertus Bardt Managing Director Head of Research +49 221 4981-755 bardt@iwkoeln.de