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Germany
GDP per capita remains among the highest in OECD countries. Labour force participation is high and
unemployment is very low, but working hours are relatively short.
Income inequality is lower than the OECD average. However, a high share of workers earns low wages,
partly because many low-skilled workers and women work part-time. Fine particle concentrations remain
high and CO2 emissions have fallen only slightly since 2013.
The government has increased investment in childcare and education infrastructure. Contribution rates to
the statutory pension have been reduced slightly. The government has pledged in its coalition agreement to
reduce the tax burden and to strengthen childcare and lifelong education further.
Reducing restrictive regulation in the professional services and government ownership in business sector
activities would improve efficient resource allocation and technology diffusion. Lowering personal costs of
bankruptcy for failed entrepreneurs and improving access to high speed Internet would enhance technology
diffusion. Supporting middle-skilled workers to adapt to technology change through better access to training
would promote inclusive growth. Increasing the supply of high-quality childcare and full-day schooling would
allow women to work longer hours and narrow the large gender earnings gap. Investment in low-emission
transport infrastructure reduces pollution and can help Germany meet its CO2 reduction target.

Growth performance, inequality and environment indicators: Germany

A. Growth C. The gap in GDP per capita is relatively low
Average annual growth rates (%) 2002-08 2012-18 Gap to the upper half of OECD countries5
GDP per capita 1.6 1.2
Labour utilisation 0.9 0.9 Per cent
of which: Labour force participation rate 0.9 0.6 15
Employment rate1 0.2 0.3 GDP per capita GDP per hour worked
Employment coefficient2 -0.3 0.0
Labour productivity 1.0 0.6 10
of which: Capital deepening 0.1 -0.2
Total factor productivity 0.8 0.8
Dependency ratio -0.2 -0.4 5

B. Inequality and environment

Annual variation 0
Level
(percentage points)
2016 2013-16
-5
Gini coefficient3 29.4 (31.7)* 0.1 (0)*
Share of national disposable income held by the poorest 20% 8.2 (7.6)* -0.1 (0)*
Average of levels
-10
2016 2010-16
4
GHG emissions per capita (tonnes of CO2 equivalent) 10.9 (10.9)* 11.2 (11.3)*
GHG emissions per unit of GDP4 (kg of CO2 equivalent per USD) 0.3 (0.3)* 0.3 (0.3)*
-15
Share in global GHG emissions4 (%) 1.9 2.0
* OECD simple average (weighted average for emissions data)

Source: Panel A: OECD, Economic Outlook Database; Panel B: OECD, Income Distribution and National Accounts Databases; United Nations
Framework Convention on Climate Change (UNFCCC) Database and International Energy Agency (IEA), Energy Database; Panel C: OECD,
National Accounts and Productivity Databases.
StatLink 2 https://doi.org/10.1787/888933954914
146 

Policy indicators: Germany

A. Taxation of second earners is high B. Disadvantaged students are

Percentage points difference in the average tax wedge at higher risk of low performance
between two- and one-earner families,¹ 2018 Likelihood of low performance among disadvantaged
students, relative to non- disadvantaged students,² 2015

10 4

8
3

6
2
4

1
2

0 0
GERMANY Advanced EU GERMANY Advanced United Denmark
economies economies Kingdom

Source: Panel A: OECD, Taxing Wages Database; Panel B: OECD, PISA Database.
StatLink 2 https://doi.org/10.1787/888933955788

Beyond GDP per capita: Germany

A. Inequality is at the level of advanced economies' median

Gini coefficient, 2016 or last available year¹

GERMANY, 29.4
SVK, 24.1 ZAF, 63.0

Advanced economies median, 29.7 Emerging economies median, 46.2

B. Exposure to fine particulate matter is high

Percentage of population exposed to PM2.5, 20172

GERMANY

Advanced < 10 μg/m³

economies
10-35 μg/m³
Emerging
economies > 35 μg/m³

World

0 10 20 30 40 50 60 70 80 90 100

Source: Panel A: OECD, Income Distribution Database, World Bank, World Development Indicators Database and China National Bureau of
Statistics; Panel B: OECD, Environment Database.

Note: For the explanation of the sets of indicators above, please go to the metadata annex at the end of this chapter.
StatLink 2 https://doi.org/10.1787/888933956662
  147

Germany: Going for Growth 2019 priorities

Make it easier for parents to choose the working hours they want. Women’s relatively short working
hours result in a large gender earnings gap and underutilisation of their skills.
 Actions taken: In 2017, a new investment program for expanding and improving childcare worth
EUR 1.1 billion until 2020 was launched. As a result of continuous efforts to increase full-day
primary schools, the proportion of such schools has reached more than 50% in 2017. Further
spending increases on full-day schooling and financial support for the federal states (“Länder”) to
improve the quality of childcare are foreseen in the government’s coalition agreement. The tax
advantage for married couples, while being unchanged, is distributed more evenly between
partners since 2018 and a 2017 reform forces large companies to be more transparent about how
women’s wages compare to those of male colleagues.
 Recommendations: Further expand full day high-quality primary education. Raise quality
standards in childcare and early childhood education. Further lower the tax burden on the wage
income of second earners. Increase the minimum amount of time, from the current two months,
that the second parent has to take parental leave, for the couple to receive the maximum leave
entitlement.
Strengthen skills to cope with technological change. Workers, particularly from weak socio-economic
backgrounds, need to develop stronger cognitive and digital skills to adapt to technological change.
 Actions taken: In 2017, the government increased the funding to support financially weak
municipalities to invest in school infrastructure. It also plans to invest EUR 5 billion until 2021 in
digital equipment of schools. The government enacted a law in 2018 to provide more financial
support and counselling for lifelong learning and is putting in place a national lifelong learning
strategy to address the skill needs due to technology changes.
 Recommendations: Strengthen general education within vocational schools while maintaining the
strong labour market orientation of vocational education and training. Offer more training
programmes for the modular acquisition of qualifications in lifelong learning and foster the
recognition of skills acquired on-the-job. Strengthen financial support and counselling for unskilled
adults to obtain professional qualifications.
Reduce tax wedges on labour income and shift taxation towards less distortive taxes. The tax
burden on low labour income is high while there is room to increase taxation on consumption,
environmental externalities, real estate and capital income.
 Actions taken: Public pension contributions were lowered by 0.1 percentage points in 2018 and
the average of contributions for social health insurance providers fell in 2018. The wage range that
benefits from reduced social security contributions has been extended to EUR 1 300 (from
previously EUR 850).
 Recommendations: Lower social security contributions, especially for low-wage workers. Update
real estate tax valuations and apply the taxation of capital gains to residential real estate. Eliminate
reduced VAT tax rates, such as on hotel services. Raise the tax rates applying to household capital
income towards marginal income tax rates applying to other income sources. Phase out tax
expenditures for activities that damage the environment and gradually adjust energy tax rates
according to carbon intensity. Introduce taxation of NOx emissions.
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Promote better technology diffusion and better resource allocation. Limited firm creation and barriers
to competition, including extensive state control of large companies in key sectors, are holding back
productivity growth.
 Actions taken: In 2016, the government allowed the use of foreign IMSIs (identification numbers
that allow for device recognition and network routing) in Germany as well as the use of German
IMSIs abroad. It also allowed mobile service providers that do not own the wireless network over
which it provides services to acquire IMSIs. Those measures are expected to enhance competition
in the German mobile market and facilitate diffusion of the Internet of Things. One Landesbank
was privatised in 2018 as required by the EU Commission under state aid rules.
 Recommendations: Reduce restrictive regulation in the professional services and government
ownership in business sector activities. Ease the conditions for bankrupt entrepreneurs to be
discharged of debt after three years, while maintaining adequate safeguards for creditors. Create
a one-stop shop to process all procedures for starting up a company online.
*
Close the infrastructure gap. Limited access to high speed Internet in rural areas and to affordable
housing in dynamic economic centres, as well as local infrastructure gaps in financially weak municipalities
are holding back stronger and more inclusive growth. Pollution from transport and road congestion
negatively affects human health and productivity.
 Recommendations: Further strengthen public investment in high-speed broadband networks and
low-emission transport infrastructure. Improve housing supply in dynamic cities fostering
densification in urban areas, for example with incentives for compact development on brownfield
sites. Provide more support for good municipal investment projects, by strengthening
administrative capacity, especially in municipalities burdened with high spending mandates.

*
New policy priorities identified in Going for Growth 2019 (with respect to Going for Growth 2017). No
action can be reported for new priorities.