Abstract

The development of the German wage-setting system since 1990 demonstrates that income inequality increases rapidly as an inclusive wage-setting system is eroded. Collective agreements and works councils are now disappearing from broad swathes of the economy and, as a result, income inequality has increased rapidly. Nevertheless, social dialogue has continued to play a central role in Germany. Particularly worthy of mention in this regard is the joint management of the financial crisis by means of innovative working time systems and the recruitment of more than 540,000 trainees in the midst of the crisis in order to prevent youth unemployment from rising. This might well be the blueprint to follow in the next crisis.