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A bit confused here. Apart from the fact that the German labour market is protected by government regulation, the fact that German employers invest heavily in their employees ensures firm specific skills , deterrence to lay off etc etc. But what is preventing the US firms to invest in their employees? Having worked in the US, I know that US firms invest a lot in their employees. Many mainstream firms (with the exclusion of the IT services) have outsourced lot of its work to the low cost countries - agreed ..But then if a greater percentage has outsourced by building captive centres, then US firms are still investing in its employees but in a different location... I think at the end of the day, it is primarily the government regulations that for the moment place German labour market in a better position because they have ensured that they are protected / cocooned off from the competitive effects of globalisation.