Have Germans Forgotten Their Famous Work Ethic?


German politicians and business leaders, despairing of a weak economy, are lately broaching a once-taboo topic: claiming their compatriots don’t work enough. They may have a point.

German Finance Minister Christian Lindner fired the latest salvo in this fractious debate last week when he said that “in Italy, France, and elsewhere they work a lot more than we do.” Economy Minister Robert Habeck, a Green Party representative, grumbled in March about workers striking, something a country beset by labor shortages “cannot afford.” (Later that month train drivers secured a 35-hour workweek instead of 38, for the same pay.) Signaling his opposition to a four-day work week, Deutsche Bank AG Chief Executive Officer Christian Sewing in January urged Germans “to work more and work harder.”

Average Hours Worked Are Falling

But that's mainly because a lot of German women entered the labor force and they work-part time

Source: IAB

Trade unions reject any attempt to paint Germans (and migrants) as workshy, noting there are more people in employment than ever before, and millions work multiple jobs to support their families.

But you don’t have to view Germans as lazy or complacent — I don’t — to wonder if the country could do more to encourage people to fulfill their untapped labor potential, particularly women and those nearing retirement. Doing so would help Germany fund the energy transition and a generous social security system, amid unprecedented challenges to its growth model.

Until recently, Germany appeared to have struck a fine balance between economic heavyweight and the good life, thanks largely to its highly productive manufacturing sector. Germans enjoy around 30 days of paid vacation compared with around 10-15 days in the US, for example. Yet output increased by an average of 2% a year during the 2010s, which is pretty good.

Alas, this compromise is beginning to fray. Factors that contributed to Germany’s past success — such as cheap Russian gas and Chinese demand for its exports — are fading. A slowdown in productivity growth and the wave of baby boomers set to exit the workforce is projected to lower potential output growth in the coming decade to just 0.4% a year, according to the German Council of Economic Experts. (Last week, the finance minister vowed to double potential growth and announced a 12-point plan to boost investment and employment, including restricting early retirement. Social Democrat partners in the coalition government were outraged.)

Difficult Demographics

Shrinking labor volumes caused by retiring Baby Boomers will cause Germany's potential output growth to deteriorate

Source: : German Council of Economic Advisors,

Note: Values for 2023 and 2024 are based on the short-term forecast by the GCEE. From 2025 shows a projection. Potential output refers to long-term growth in economic output given normal utilization of production capacities. Contributions to that growth are shown in percentage points, whereas output growth is a percentage change.

Around 1.7 million positions are reportedly unfilled out of a labor force of about 46 million, and the worker shortage could worsen unless more migrants arrive to pick up the slack. Although unemployment has increased in the past year, the 6% jobless rate isn’t too bad considering the weakness of the economy.

Low staffing has become a vicious cycle. Germans took an average of 15 sick days last year, and these absences were a significant contributor to the country falling into recession. This partly relates to a post-Covid increase in respiratory infections, but deteriorating mental health is also playing a role; employees at short-staffed firms or institutions are susceptible to burnout, leading to more sick days, and so on. 1

Sick Man of Europe, Literally

The number of days lost to sickness in Germany has soared since the pandemic, with respiratory infections and mental health issues partly to blame

Source: IAB

Average annual working hours per employee were the second-lowest on record last year, which the Federal Employment Agency’s IAB research institute attributed to sickness, fewer overtime hours, and more part-time work.

By one metric — average hours worked per employee — Germans are the least industrious of any OECD nation, and it doesn’t rank much higher even if you consider hours per adult resident, which is a fairer reflection of Germany’s success in boosting overall employment. Studies show Germans also work comparatively little over their lifetimes.

Below Potential

International comparisons are to be treated with caution, but this is one of several showing Germans work less than in other countries

Source: Cologne Institute for Economic Research, OECD

Note: the OECD cautions against international comparisons due to differences in the data sources and methods of collection. So treat this data with a dose of skepticism

International comparisons can be misleading because countries collect these data in different ways. Germany also scores badly due to high rates of part-time employment: Around half of women employees in Germany work part-time, compared with only 13% of men. (Full-time employees work around 40 hours a week, which is similar to the European Union average.)

But in summary: Germany would be better off financially (and perhaps also holistically) if more women were able to work full-time — and many would like to! — and we retired later.

Instead, due to tax subsidies for married dual-income couples, it can be financially disadvantageous for the person on the lower income (often the woman) to work more.2

Part-Time Workers

Germany's success in integrating women into the workforce has coincided with an increase in part-time work

Source: IAB

And though Germany has committed to raising the statutory retirement age to 67 by 2031, many Germans take advantage of ill-considered legislation passed a decade ago allowing them to retire at around 64. While Germans still exit the labor force later than the French, on average, there’s room for improvement.

To counteract the trend toward spending our final two decades without gainful employment, the government should link the retirement age to average life expectancy — now 78 for male newborns and 83 for women — with exceptions for physically arduous professions. Politically, this will be tricky, so in the meantime, Germany should boost financial incentives for “silver workers” who opt to work longer.

Productivity Growth Has Lost Momentum

Germany isn't the only country facing this problem but it's a worry for future prosperity

Source: Bundesbank, Bloomberg, Opinion calculations

Tax cuts for working overtime — as proposed by the opposition Christian Democrats, and by Lindner — are worth considering, but this is only one aspect of a bigger problem: Germany’s tax system heavily penalizes wages, while wealth is taxed lightly. No wonder people don’t see any point in working more.

Germany has boosted funding for kindergartens and primary schools, which should help more women return to work. Kindergarten is free in Berlin and the state school my seven-year-old attends offers supervision until 6 p.m. if needed; however, as in other sectors, staffing shortages are a problem. 

Germans can’t just rely on productivity gains from artificial intelligence or tentative signs of an economic rebound. To ensure the next generation enjoys the same living standards and long holidays, many of us will also have to work a bit more the rest of the time.

Post a Comment

Previous Post Next Post