His labour-market reforms reduced
unemployment
benefits and liberalised temporary
work. Since she became chancellor in
2005 Mrs Merkel of the Christian Democrats has raised the pension age from 65 to
67 and amended the constitution to require state and federal governments to cut
their structural budget deficits to more or less zero (the template for what is now a Europe-wide agreement).
Benefits thought to be sacrosanct were cut. Income inequality rose. But so did employment.
Core workers in industrial
firms- the muscle behind Germany's
manufacturing prowess- were not affected directly. But the rise in low-paid, insecure jobs has held down the cost of services, making it easier for factory workers
to accept modest pay rises, points out Anke Hassel of the Hertie School of Governance
