FUTURE OUTLOOK

A prognosis of the Institute for Employment Research (IAB) anticipates Germany's growth development to pick up speed (Fuchs etal., 2014). For 2014, the real GDP is expected to grow by 2 per cent. Unemployment should decline by 70,000 people to 2.88 million. These positive expectations indicate that Germany not only faced the recession with resilience but was additionally able to pick up GDP growth and further keep unemployment at a low level in the years following the crisis, albeit allowing for a couple of years of slower progress (see Table 7.1) owing to the development of the world economy (Fuchs et al., 2014).

The prognosis for 2015 is good and a continued upswing for 2015 is expected (Wollmershauser etal., 2014). The GDP is projected to grow

2.2 per cent. While the export volume is growing, following the improved situation of the world market, most of the GDP growth is predicted to result from the growth of the domestic economy. This is owing to, for example, the production at capacity which induces acquisition and expansion investments, as well as investments in construction. Additionally, imports are expected to grow to support the domestic economy's dynamics.

While the labour market is stable and unemployment rates are low (Klinger and Weber, 2014), current risks include the implementation of a minimum wage and changes in the pension age ( abschlagsfreie Rente mit63'—reduction free pension at 63) (Wollmershauser etal., 2014).

The introduction of a general legal minimum wage of 8.50 euros per hour on 1 January 2015 will increase the wage level of low-wage earners. Thus it will support the collective wage system as a lower limit. Exemptions will be valid;for example, for internships during a young person's education or if a collective agreement states lower wages (until 2016).

A problem of evaluations is the considerable time lag between the programme and a possible impact. Thus the evaluation of medium- and long-term effects is not immediately possible (Caliendo and Hogenacker, 2012: 9). Furthermore, it is difficult to disentangle the effects of the Hartz Reforms and the introduction of a general legal minimum wage.

However, some predictions for wage levels, as well as employment, can be made. The minimum wage will increase labour costs, specifically those of marginally employed workers. For this group, a wage increase of 12 per cent is expected, which is relatively high compared to an expected wage increase of 0.4 per cent for employees subject to social security (Wollmershauser etal., 2014). Overall, it is expected that the introduction of the minimum wage will increase hourly wages by 0.8 per cent for the whole economy.

Arni etal. (2014) ran simulation analyses to evaluate the minimum wage's effects on employment. According to these simulations, labour demand will decrease by 1 per cent for men and by 2.2 per cent for women owing to the minimum wage, with slightly higher effects in East Germany compared to West Germany. Despite this challenge, a positive future trend is expected for the labour market (Wollmershauser et al., 2014).