Daniel Stelter: Too short a jump on the high-earner dismissal protection

Following a corresponding coalition decision, Germany is loosening its general protection against dismissal for the first time in decades: For employees with an annual income above 1.75 times the contribution assessment limit in pension insurance, protection against dismissal will become severance pay protection from January 1, 2027.

Specifically, this affects an income of more than €177,450 gross per year, which corresponds to around €14,788 per month. The goal of the reform is to promote innovation in Germany. Analyses by French innovation researcher Olivier Coste show that Europe's innovation gap with the US does not primarily result from cultural differences or a lack of capital, but from the high costs of failure.

If a project has to be discontinued, restructuring takes significantly longer than in the US and is associated with higher costs. The size of the leverage is illustrated by the fact that countries with very flexible labor markets, such as Denmark and Switzerland, even surpass the US in R&D intensity in disruptive sectors. After the Danish flexicurity reform of 1994, private research expenditure increased by 125 percent over eight years – far more than in Germany (40 percent) or the US (60 percent) over the same period. Restructuring costs and R&D intensity in tech and biotech sectors are closely correlated.