32
Michael Fertig and Christoph M. Schmidt
is difficult, since returns to education decrease with age. But it is particularly
important for younger cohorts whose productivity necessarily carries overall
economic growth. During the next decades, much will depend on the way that
the large baby-boom generation manages to keep abreast of technological and
organizational change. What will be needed in terms of social institutions are
unions and labor courts embracing the idea of life-long learning and individual
accountability, instead of defending mechanical seniority rules in wage setting
and in hiring and layoff procedures.
While at the outset it is clear that these two major policy options might com-
plement one another, it is far from obvious which of their elements are most
promising. Indeed, many of the potential cures, specifically those accommo-
dating current institutions to the changing age structure, might have repercus-
sions on birth rates and might therefore counteract the original policy mea-
sure. Even measures aiming at increasing labor market flexibility, including
decentralized wage bargaining procedures to make wages responding to shifts
in labor supply, might entail potential repercussions on birth rates via in-
creased income. Similarly, the provision of incentives for higher labor market
participation of women might exert feedback effects on birth rates. Finally, it
has been a clear, albeit disenchanting message from the literature on active la-
bor market policies that the potential of qualification measures of active labor
market policy is limited. Thus, since the effectiveness and efficiency of these
policy options is far from being guaranteed, there is an urgent need for evalua-
tion studies accompanying any introduction of such measures.
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