This paper analyzes the effects of German labor market reforms on the competitiveness and performance of the German economy. The contribution starts with giving some background information on the rationale behind the reforms and stresses the specific structure of the German economy. We then describe the salient effects of the reforms for employment and labor market integration. Finally, the dark side of the reforms, i.e., labor market segmentation and wage inequality, are addressed, which leads to the general question of how the reforms can be reconciled with the notion of social justice.