[Translate to English:] Zwei junge Menschen klatschen in die Hände ein während in an der Spree in Berlin stehen.

Prosperity for all? Germany needs a new inclusive economic policy

Last Sunday a new round of talks for forming a German government will commence. Regardless of which coalition ultimately governs, the focus must be on creating a forward-looking economic policy. If prosperity is to be shared by everyone, the country needs a sustainable, inclusive growth model. Our publication shows how this is can be achieved.

The German economy is enjoying one success after the next. Businesses are producing at full capacity. The employment level is higher than it has been at any time since reunification. Thanks to increasing tax revenues, the public sector is posting record surpluses. At the same time, however, not everyone is sharing in the prosperity. Moreover, policy makers must lay the foundation that ensures Germany will remain an attractive and successful business location in coming years.

Which challenges does Germany's business community face?

  1. The country's long-term growth prospects are not bright, since the population is shrinking and will soon experience a spike in its median age. That means there will be fewer people in the German workforce. Consumption and innovative power will also decline and, with them, growth.
  2. Competitive pressure is increasing due to globalization and digitization. Germany is currently the world's leading exporter largely because it focuses on quality and its industrial players are highly specialized. However, the German economy is not keeping up in those areas in which all-important innovations are taking place and new models for value creation are being developed.
  3. Not everyone in society is benefitting from the current growth. Despite full employment, the risk of poverty is not declining and single mothers, above all, often have so-called mini jobs or work part-time for little pay.

Germany needs inclusive growth

The next government must lay the foundation for tomorrow's prosperity. This can only happen if the new government promotes growth that is dynamic and sustainable and that creates good jobs and more opportunities to participate. To achieve this, Germany's economic and sociopolitical policies must be closely coordinated. In addition, an agenda for inclusive growth is needed that renews the promise inherent in the country's social market economy: Prosperity for all.

Our policy recommendations – "Agenda: Inclusive Growth for Germany" – show that inclusive growth is not an abstract concept, but a very real policy goal that can be achieved through a number of concrete steps: from well-thought-out public investments and wealth-creation measures for broad sections of the population, to better coordination of tax and transfer policies and assistance for entrepreneurs launching start-ups and developing innovations.