Germany and France: confronting the costs of social policies

West Germany and France have both enjoyed decades of steadily rising prosperity. Today, however, they are afflicted by sluggish growth, mounting social costs, and high unemployment. More and more French and German citizens are coming to believe that their economic and social systems are in urgent need of reform. To provide the fact base for such a reform, the McKinsey Global Institute compared productivity, employment, and output in France and Germany with global best practice and examined the reasons for any shortfalls. It examined performance both at the economy level and within several key industries: automotive, housing construction, telecom, retail banking, retail, and computer software. A summary of the key findings is presented, along with an outline of some of the steps governments and corporations could take to close gaps in productivity and job creation.