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In general, the 'mega-trends' represented by, for example, globalisation, the shift to a service economy coupled with high levels of technological change and a long-term shrinkage in the working population all make a more adaptable and skilled workforce in high income countries necessary. The pervasive effects of these mega-trends are often interpreted as suggesting that there is only one optimal institutional configuration to achieve good employment outcomes, which therefore needs to be adopted by all countries. As Britain seems closer to this ideal type than Germany, one would expect a better labour market performance in the former than in the latter, as well as a convergence in labour market policies and outcomes in Germany towards the British model. Taking into account the different starting positions of Germany and Britain, particularly with regard to important differences in monetary policy contexts, the paper evaluates whether and to what extent national public policy patterns are actually converging towards a higher level of flexibility. [ABSTRACT FROM AUTHOR]