Merz wants Germans to work more

Germany is struggling to revive its economy, which has stagnated for five years and is facing a deep crisis in its export-oriented industrial model. To try to boost growth, Chancellor Friedrich Merz's coalition government of conservatives and social democrats plans to invest €500 billion in infrastructure and climate neutrality over twelve years. But the Christian Democrat leader believes there is another key element for the economy to take off: jobs.

“In this country, we have to work harder and, above all, more efficiently. With the four-day workweek and work-life balance, we won't be able to maintain our prosperity!” Merz proclaimed in May at the economic forum of his Christian Democratic party, the CDU, to the anger of the unions. In short, Merz wants Germans to work more and for longer.

The first measures of his announced "autumn of reforms" are the active retirement plan ( Aktivrente ), with tax incentives to keep pensioners working, and the reduction of the citizen's income ( Bürgergeld) , a subsidy for the unemployed or those with very low incomes, created three years ago by the government of Social Democrat Olaf Scholz. Both measures are controversial, as is the very concept of "autumn of reforms," ​​which many analysts consider vague and limited.

Diagnosis on several countries Germany's reputation for hard work has been called into question by an OECD report on hours worked in which it ranks last.

In any case, the aging population and labor shortages in Europe's largest economy raise concerns for the labor market. The working population totals 45.8 million people, and according to the Federal Statistical Office (Destatis), some 13.4 million workers will have reached the legal retirement age by 2039. This age is currently 65, but is expected to rise to 67 in 2031, albeit depending on the year of birth and length of contributions. People with disabilities or those who have contributed for 45 years will be able to retire earlier.

Conclusion: With the retirement of baby boomers over the next fifteen years, nearly a third of the current workforce will be lost. Young people will not be able to replace their elders in number, and immigration will not guarantee the necessary labor force.

Adding to this situation is an uncomfortable fact, which hurts the self-esteem of Germans, who are used to being praised abroad for their diligence and efficiency. A recent study by the Organization for Economic Cooperation and Development (OECD) places Germany at the bottom of the 38 member countries in terms of the number of hours worked per person per year (1,335), well below the organization's average (1,740 hours) and that of Greece (1,893), Spain (1,638), and Belgium (1,593), among other nations.

However, to qualify the picture, there is another relevant fact: the drop in German hours is influenced by the country's high rate of part-time employment, which last year was 21.1%, surpassed only in Europe by the Netherlands and Switzerland.

“There is a silver lining to all this. The shorter working hours in Germany can be seen as a sign of prosperity. It reflects the fact that many Germans today enjoy greater freedom: the ability to prioritize personal development over earning additional income,” says economist Moritz Kraemer, head of research at the Stuttgart-based public bank LBBW.

But there's also a downside, Kraemer continues: "The low number of hours worked puts additional pressure on the social security system, which is already overburdened and heavily reliant on worker contributions to fund pensions, healthcare, and unemployment benefits. With fewer hours worked per capita, the system's financial viability is increasingly compromised."

In this context, Chancellor Merz has placed the issue of more work among his priorities for the long-awaited economic recovery. Thus, last week, the government approved a bill to encourage retirees to work, allowing them to earn up to 2,000 euros per month tax-free, regardless of their pension.

The change will take effect in January and could initially lead to a fiscal deficit of €770 million. In return, since employees and employers will contribute to these amounts, they will thus help alleviate the pressure on public healthcare and pensions, the Ministry of Finance argues.

On the Government's measures Criticisms have been leveled at the fact that the active retirement plan is not universal, as it excludes self-employed workers, civil servants, and other groups; and criticisms have been leveled at the limited savings that the reform of the subsidy formerly known as "Bürgergeld" will bring.

"We are establishing new incentives for economic growth; companies need older, experienced workers, as well as qualified professionals," said Social Democrat Finance Minister Lars Klingbeil.

"Companies are already desperately seeking skilled workers, and demographic trends will further exacerbate the shortage," warned Economy Minister Katherina Reiche, a Christian Democrat. The Federal Employment Agency (BA) reported 629,640 unfilled positions in September, but the number is estimated to be many more, as not all employers report their vacancies to the agency.

Figures for reflection: X-ray of employment in Germany TO Germany's current working population is 45.8 million people, in a country with a population of 83.5 million. B Authorities estimate that some 13.4 million workers in Germany will reach the legal retirement age (which will then be 67) between now and 2039. C The current employment rate is 77.5%, but despite this good percentage, unemployment exceeded three million people this summer for the first time since 2015. D Hours worked per year The average number of hours worked per person per year in Germany in 2023 was 1,335, the lowest figure among OECD countries, although the high rate of part-time employment in the country has an impact on this. AND Germany's gross domestic product (GDP) contracted by 0.3% in the second quarter compared to the first quarter of the year.

An example of the business anguish over this situation was seen last week, when the Conservatives proposed partial military conscription by lottery for men if the desired number of volunteer soldiers is not reached. Although employers officially do not oppose the measure and it has not even been approved, many companies were up in arms at the prospect of the army taking young employees or those in training away from them.

Some retirees in Germany are already supplementing their pensions with a mini-job ; at the end of 2023, there were 600,000, according to the German Economic Institute (IW) in Cologne. But the new active retirement that Merz advocates is far from a panacea. Only pensioners who continue to work in a contribution-paying job will be eligible, while civil servants, shopkeepers, self-employed workers, and workers in the agricultural and forestry sectors are excluded, which has drawn criticism from economic institutes.

Read also Germany is looking for qualified personnel. Companies are unable to fill their job vacancies and are looking abroad to attract workers. MARIA-PAZ LOPEZ | BERLIN. CORRESPONDENT

Regarding the citizen's income—renamed basic security ( Grundsicherung )—it is actually a tightening of sanctions for recipients who do not make an effort to find work or training. Anyone who misses three consecutive appointments at the Employment Office without justification will lose the benefit.

The government itself admits that this measure will save at most 150 million euros over two years. Rather, it's an attempt to curb the political use of a subsidy that is a source of demagoguery, especially by the far right, with an idea shared by many Germans: that it is "aid for lazy people" who don't want to work and for "foreigners who abuse" the system.