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Inflection Points Today May 16, 2024

‘Auf Wiedersehen’ to hard-working Germany?

By Frederick Kempe

My German immigrant parents, who passed away some time ago, instilled in their children a powerful work ethic. I had always considered it synonymous with their origins.

One of the first German words they taught me was “fleissig,” which means diligent, industrious, assiduous, and hard-working—all wrapped up into one word.

They would be shocked to learn that Germany today has the shortest average working hours of any advanced economy in the world, per Organisation for Economic Co-operation and Development statistics for 2022. The average number of hours worked by Germans has fallen by 30 percent in the last half century, and it is a full 25 percent below US levels.

That has become a serious enough drag on the German economy that the country’s government is cobbling together tax breaks on overtime hours, reports the Financial Times, and an overhaul on jobless benefits to shift incentives toward those that favor hard work. This “growth plan” could be unveiled as soon as next month.

The context is a concerning one: Germany was once the growth engine of Europe, but it’s currently the world’s weakest major economy, with negative growth last year of 0.2 percent and only 0.2 percent positive growth in the first quarter of this year. Germany is Europe’s biggest economy, accounting for a quarter of the European Union’s eighteen-trillion-dollar gross domestic product (GDP). So, how Germany goes, so goes Europe.

“Germany is struggling,” Kevin Fletcher, Harri Kemp, and Galen Sher, all economists in the International Monetary Fund’s Europe Department, wrote in late March. “It was the only G7 economy to shrink last year and is set to be the group’s slowest growing economy again this year, according to our latest projections.”

They call for ambitious reforms to take on what they consider German economic challenges that don’t get enough attention: aging, labor and skills shortages, underinvestment, and too much red tape. Less important, they argue, are areas getting more attention: higher energy prices and concerns about deindustrialization, which the economists call “overstated.”

Christian Lindner, the country’s finance minister, has stressed reforms aimed at restoring longer working hours as a crucial part of the picture. “In Italy, France, and elsewhere, there is significantly more work done than here,” the Financial Times quoted Lindner as saying at recent IMF-World Bank meetings in Washington.

My parents might well question whether state incentives will solve the problem. We may soon find out, as the federal government is engineering policies aimed at increasing economic dynamism.

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on Twitter: @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points Today newsletter, a column of quick-hit insights on a world in transition. To receive this newsletter throughout the week, sign up here.

Further reading

Image: People sitting in the sunshine in Görlitzer Park.