Social protection: An obstacle to employment?

This article examines the ambivalent effect of social security on employment. First, an international comparison looks at protection from layoff by the employer, wage floors as defined in social and employment legislation, and levels of wage-related costs and their effect on employment. Simulations for western Germany are then used to analyse the effects on the labour market of lowering social security contributions. The conclusion which emerges is that the effects of social protection on employment are determined both by the way it is organized – and thus ultimately how much it costs – and by the way it is funded, i.e. who picks up the bill for social security.