The author argues that growth determines employment and not the other way around. He opposes the widespread view among German economists that more employment generated by wage cuts or increased labour market flexibility will stimulate growth. <br>For him, this view relies on theoretical prejudices that have to be rejected in light of some recent, simple evidence. The fact that all cyclical rebounds during the 1990s have been cut short by restrictive monetary policy explains the inability of the German labour market to regain full employment.

The article points to the following causes of German social policy reform, as it has taken shape by the so-called ‘Hartz’-Acts: the self-inflicted financial crisis of the welfare state, the return of party leaders as agenda setters, and the weakening of employers associations and trade unions in this policy field. Through a large, informal coalition, the political parties have responded to various internal conflict constellations.

In the need to reform the German labour market, the so-called ‚Hartz IV’- Act cut down subsidies for unemployed people in order to increase the pressure for searching for a new job. By law, low-paid jobs shall be introduced. However, even if this creates employment, there will be a future problem: pensions for these people will dramatically drop below the poverty line. The author argues that, in order to avoid such ‘poverty-traps’, an alternative social support system should be considered: a ‘tax transfer system’ with lowered income tax, yet complete reduction of legal exceptions on the one hand, and transfer systems combined with work incentives on the other hand.

The author agrees with Flassbeck that growth is important, particularly as a condition to solve existing structural problems of the labour market. Yet, in his opinion the central question is how to get higher growth rates. Straubhaar’s answer is different from Flassbeck’s: a ‘no’ to more public deficits, more regulations and more state activities; and, a ‘yes’ to more market, more flexibility, more mobility.

The authors agree with Flassbeck’s claim that growth generates employment. However, they do not agree with Flassbeck’s conviction that growth is to be increased by demand management. In their comment, they explain why deficit spending and expansionary monetary policy are inappropriate substitutes for a sound structural policy.

Zugl.: Köln, University, Diss., 2009.

Zugl.: Regensburg, University, Diss., 2009.

Thesis (doctoral)--Universität St. Gallen, 2003.

Zugl.: Trier, Univ., Diss., 2005

Thesis (doctoral)--Martin Luther University Halle-Wittenberg, 2007. / Includes bibliographical references (p. [116]-124).