The labour force is not being fully utilised owing mainly to labour market rigidities. But now we should not overlook the fact that initiatives have been taken to reform the German labour market. There can be no doubt that the labour market has recently become more flexible both with respect to its institutional framework and as regards collective wage bargaining and working hours.
For example, the significance of industry-wide collective wage agreements has decreased. In 2003, only 63% of the employed persons in western Germany were covered by industry-wide wage agreements. In the 1970s, this figure stood at 70%. This suggests that greater account can be taken of local and firm-specific requirements. Naturally, industry-wide wage agreements still play an important role.