Wage formation is mainly geared to the interests of “insiders” who already have a job and not to those “outsiders” who would prefer moderate wage settlements. The accelerated adjustment of east German wages to the west German standards is one example of insufficient wage differentiation.
It is precisely in the lower wage groups that it would be important to structure wage substitutes in a more incentive-friendly way. From a current perspective it remains an open question whether the establishment of European monetary union will ultimately also lead to a reduction in labour market rigidities.