European Economy. Economic Papers. Germany's growth performance in the 1990's

3.3.4 Restrictions to market access
There exist a number of areas where reform in Germany could directly or indirectly improve
market access and efficiency.
•
Service society: It is meanwhile a well-known cliché that Germany is lagging behind in
creating services. While the country mentality (and high taxes) might be one reason
(Freeman/Schettkat 2000b), there are also a number of regulatory impediments to providing
services. Notably, in many fields the chamber of craft trades (i.e. the insiders) regulate the
access of newcomers. The effect is that entry hurdles are set high and competition in the
services sector remains limited. This is backed by regulations that demand that unlike
almost everywhere else, companies can only be set up by persons having passed a lengthy
apprenticeship and a master’s certificate. Although recently there has been a minor reform
in this field, this requirement limits effectively the creation of a low-wage service sector.
Relatively strict shop opening times also act as a factor that might impede setting up a shop
in particular in providing retail related services. The fact that petrol stations, which are
exempted from the regulation are increasingly developing into convenience stores might be
an indication of the lost market potential.
•
Education: At the high-wage end, an inefficient university system is to blame for keeping
employees off the market. The completion of a masters degree in Germany takes on average
one or two years longer than comparable degrees in other countries. This keeps at least a
full one year age cohort of young and highly skilled people out of the job market, without
leading to a noticeably higher degree of education than in other countries. Furthermore, the
bachelor’s degree still remains practically unknown, leaving this important educational
bracket unused. Slight improvements in the university system have been made, but the
necessary radical changes are more discussed than implemented.
•
Social infrastructure: The potential labour pool is limited further by the underdeveloped
supply of day-care facilities in Germany. It is therefore difficult, mostly for women, to
combine the wish for children with a career. The fact that strict shop closing regulations
give little time to run errands after work and picking up the children exacerbates this
problem. Since part-time jobs are also often lagging, women often have to stay out of the
job market, accepting a loss in their human capital and future employability. The alternative
choice is to abstain from having children, as the extremely low birth rate in Germany attests,
which entails substantial social and economic costs in the longer run.

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