can, in some cases, stand in the way of higher labour force participation. for example, non - contributory inclusion in statutory health insurance makes having a job less worthwhile. on the other hand, these instruments are being used to pursue other political objectives which have to be weighed against the employment effect. only policy makers can find the balance. my point is to remind people that these measures make it less attractive to take on paid employment and can therefore cost us growth. this is a price we need to be aware of. no matter how policy makers and society at large decide, a better work - family balance on its own is not enough to maintain, far less to increase, economic strength in an ageing society. it is just as important that we do not surrender any of the progress that has already been achieved on the labour market. this applies, in particular, to the current debate on the wider application of minimum wages. opinions are divided on whether minimum wages increase unemployment. that depends decisively on the size of the wage and the other components of the framework, such as the social safety net for unemployment and job protection. bis central bankers ’ speeches in 2007, the economists david neumark and william wascher took stock of the status of research on minimum wages by looking at 102 individual studies. two - thirds of the studies examined suggest that minimum wages have a negative impact on employment. the 33 studies which, in their view, were sound in terms of their methodology conclude that the effects on employment are very predominantly negative. furthermore, it is shown that binding minimum wages affect the low - skilled and the long - term unemployed to a particular extent. the high youth unemployment levels in the crisis - hit countries in the south of the euro area are partly attributable to minimum wages. this is because, even if a minimum wage does not affect unemployment directly, it may still have a negative impact on employment dynamics. there is a risk that enterprises will hire fewer new staff in periods of economic upturn. and that primarily affects those sections of the labour market that a minimum wage would actually be intended to help. thus, there is a danger that the minimum wage may have the opposite effect to the one intended. according to recent surveys, 83 % of germans are in favour of introducing a blanket minimum wage. but in this question, too, it has to be said that, however policy makers and society decide, they need to be aware of the economic risks to employment in germany that this en

exactly where new risks will arise. simple rules can form a clear benchmark in uncertain situations, and there is a lot of academic theory to back this up. the economist frank knight introduced the concept of “ knightian uncertainty ” by making a distinction between uncertainty and risk in the sense that uncertainty cannot be quantified. indeed, we don ’ t know where we are heading, or what we will encounter along the way. we simply have to learn to live with unknown unknowns. another economist, hayek, also saw imperfect knowledge as a central issue. simple, robust rules can make a difference in such an uncertain and imperfect world. in a complex environment, we cannot possibly consider or measure all the conceivable outcomes. as well as being too expensive from an information point of view, it is also too complex to weigh up all the different options. bis central bankers ’ speeches although we like to assume our economic models are rational and omniscient, this is certainly not the case in reality. it would be more accurate to describe our world as having bounded rationality and imperfect information. simple rules are a way of reducing a complex problem with many unknowns to simpler tradeoffs, like yes or no, above or below, or left or right. it ’ s as in traffic : in the vast majority of situations, driving on the correct side of the road is good advice. or reducing your speed in misty weather. if we can progress along the road of simplicity, i ’ m sure we can also stop the pace of regulatory expansion. as leonardo da vinci said, “ simplicity is the ultimate sophistication ”. simplicity and transparency can help restore the public ’ s trust in the financial sector. financial institutions can achieve this by switching to clear business models, with streamlined structures and a prudent mindset. if they do so, the amount of regulations to be complied with can be reduced and the remaining regulations can be simplified, if and where applicable. in addition, simple rules can help us focus on key risks, as well as forming a guide for the future. greater trust, increased transparency and less complex risks will ultimately make the overall financial system more robust. and that in turn will make it easier for central banks to promote financial stability. thank you! bis central bankers ’ speeches