The think-tank’s Economic Survey of Germany highlights a range of challenges for Europe’s largest economy, from boosting productivity and wellbeing in a rapidly ageing society to ensuring the wave of newly arrived migrants are well integrated.
OECD secretary general Angel Gurría said this inflow of refugees who have been offered asylum provides an opportunity to counter demographic trends and lay the basis for a more diverse and productive economy.
“Germany must use its position of strength to prepare for the future,” he stressed.
According to the OECD, key to this is investing more now in knowledge-based capital, education, lifelong skill development and social services, which will help to raise productivity and living standards.
Investing in effective integration policies for newly arrived immigrants will be also be critical to improving economic outcomes and ensuring social cohesion in Germany, the OECD said.
Germany took in more than one million refugees, mostly from Syria, in 2015 after Chancellor Angela Merkel went against the grain and announced an open door policy despite fierce opposition from both inside and outside Germany.
The OECD said upfront spending will be needed for training and language skills, and that the new arrivals’ access to the labour market needs to be sped up while active labour market programmes could do with a boost.
Other labour market reforms towards eliminating barriers for women to develop their professional careers are also welcome, the OECD said.
The think-tank said these should include greater investment in childcare, early childhood education and full-day schooling. It also suggested lowering the high tax burden on households’ second earners, which discourages many women from working full time; instead, a separate tax-free allowance for second earners could be introduced to improve incentives for work.
Altogether, removing such barriers would boost wellbeing and incomes “substantially”, the OECD said.
Barriers to employment – and the wellbeing – of older workers could also be done away with, it added, and the prevention of health risks at higher ages could become more effective.
The report highlighted the sustainability of the pension system, which could be improved by indexing the statutory retirement age with life expectancy.
