Welfare to work in Germany : a proposal on how to promote employment and growth

The Ifo Institute has worked out a detailed proposal to reform the system of welfare benefits and made estimates regarding the consequences for employment, distribution of income and fiscal costs. The Ifo proposal aims at making the German labour market functional again without lowering the standard of social protection already achieved or imposing additional burdens on the federal budget. These goals can be reached through a fundamental reform of the social assistance scheme, with a change from the present system of wage replacement to one of wage supplements. This would abolish the current minimum wage, allow for more differentiation of wages and encourage profit-minded enterprises to create more jobs.