Exports Helps German Economy But Longer Work Hours Necessary

OECD study says productivity must increase.

Despite strength of the euro, German exports have spurred the economy, but social policies should be adjusted to encourage Germans to work and study longer, the Organization for Economic Cooperation (OECD) said April 9.

The OECD expected growth of the biggest European economy to slow sharply "from 2.5% in 2007 to 1.5% in 2009," it said, shaving downwards estimates released in December of 2.6% for 2007 and 1.6% for 2009.

Productivity had to rise in the energy and transportation sectors, and education for the poor and immigrants had to improve, the OECD said. But the OECD said the workforce could be used to greater effect with longer hours and increased efficiency. To achieve this, policies should be adapted. Changes should include a reduction of tax disincentives, improved access to childcare for working mothers, and increased competition in the energy and transport sectors, it added.

Data on a solid German trade surplus released separately on April 9 showed that exports of machinery and other goods continued to help the country plow ahead amid slower global growth. Exports have boomed thanks to German expertise in capital and intermediate goods used to make other products that are currently in demand and which have not been seriously affected by the rise of the euro.

But, referring to the capacity of the economy to grow without inflation which is used by economists as a measure of productivity and efficiency, the OECD said growth in the rate of Germany's potential output had to rise further. To achieve this, "there is still considerable scope to increase hours worked per capita," the OECD said.

In addition, "improving education outcomes, including by reducing the impact of socio-economic background," was crucial to sustaining growth and social cohesion, it added. The organization found that in Germany, women worked relatively few hours, and the tax system discouraged the second wage-earner in a family from working. Consequently, the low number of hours worked by women and "the fiscal disincentive for second-earners to work longer hours" resulted in "a very low number of hours worked" compared with the figures in other OECD countries. A lack of childcare facilities was a key reason for low work input by mothers it said, noting that the government planned to increase the number of daycare places significantly by 2013.

Germany has a high percentage of part-time employees, who "work fewer hours than in any other OECD country," the survey found.

In other comments, the OECD recommended that Germany strengthen competition in network industries such as energy and railways. That would help increase productivity because those sectors "produce important services for other parts of the economy," it said.

Copyright Agence France-Presse, 2008

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