Friedrich Merz and the working time debate: Expansion of the employment zone

Friedrich Merz has hit a nerve, and it seems to hurt.

In his government statement, the Chancellor called for greater commitment and dedication. Reactions to this ranged from frenzied approval to vehement rejection. German citizens debated up and down whether they should, must, or could work more. Whether public holidays need to be canceled to save the "business location." Whether self-appointed high achievers and other privileged individuals even have the right (morally speaking) to dictate to others how much they should work. Whether caring for children and relatives, volunteering, and club activities shouldn't be valued equally with paid work. Whether we're all overworked to the point of burnout anyway.

Economic researchers argue with international comparative figures —average weekly, annual, and lifetime working hours, overall economic workload, and employment rates. The result: labor force participation is high, but working hours are short.

And then there's the generational conflict between the lazy boomers and the chill-out Generation Z. The former started working late in adulthood and then, on average, raised too few children, which isn't stopping them from retiring early. The latter are worried about their work-life balance even before the work thing has really started—to sketch out the mutual prejudices and external judgments with a broad brush.

On closer inspection, the conflict goes even deeper. Ultimately, it's about our national identity. The question of who we are as a society always lurks in the background. If there is such a thing as German virtues, then hard work is clearly one of them, as are order and punctuality, as surveys repeatedly show. Germans are a nation that traditionally sees itself first and foremost as a community of earners and therefore considers hard work to be one of its best qualities.

Unfortunately, we are no longer living up to our own standards. This creates a deeply unpleasant discrepancy between our collective self-image and social reality. This also means that if we no longer perform properly, German identity feels threatened.

How do we resolve this conflict? Here are three hypotheses: 1. Germans don't necessarily need to work more hours per week, but they urgently need to come up with a whole host of new ideas. 2. They aren't necessarily lazy; they've simply adapted to a work-hostile environment. 3. Although life expectancy has (fortunately) increased dramatically, time-use patterns across different life stages have (unfortunately) proven surprisingly stable. This won't end well.

Let's start with the question of economic necessity. Do we need to work more to avoid poverty?

The decisive factor for long-term prosperity development is the change in production potential. This expresses how much labor, capital goods, and knowledge are available to provide services and goods. Ten years ago, Germany was still in good shape in this respect . Capital endowment increased, as did productivity, but above all, employment rose quite dynamically, particularly due to immigration into the labor market from the rest of Europe. Germany was on a growth path of around 1.5 percent annually. Of course, one could always wish for more. But for an aging society, Germany's pace at that time was remarkable.

Since then, things have deteriorated dramatically. In recent years , investment in Germany has continued to decline . Productivity growth has largely come to a standstill. All the promised productivity-enhancing effects of the use of artificial intelligence are not reflected in the statistics, at least not yet; and they may not materialize in the future either. (If AI does indeed become a major productivity booster, entirely different questions arise.)

Above all, however, employment potential is declining . Despite immigration, fewer and fewer people are available for the labor market. The baby boomers (born between 1955 and 1969) are gradually retiring—the subsequent cohorts are too small to replace them.

This is the core problem: the current employment-driven growth model has exceeded its sustainability limit.

In this respect, it must be said that it would help if the Boomers remaining in the labor market extended their working life for a few years. Currently, they retire on average two years before the standard retirement age (currently just over 66 years).

Expanding the working age zone by a few years, especially for those who are highly qualified and still productive, could at least partially offset the declining labor market pressure. The same applies to part-time workers – 40 percent of employees, who work an average of just over 20 hours per week. Every additional hour on the job would counteract the decline in potential. And, of course, immigration will have to remain at its current level, otherwise the labor market risks imploding.

From an economic perspective, the issue is clear: If those who can spend a little more time productively at work, a lot would be gained. The alternative is less attractive: More and more people are staying at home with little money and doing more and more things themselves.

But: If highly qualified workers are missing because they're retired, highly productive investments in innovative industries are dwindling. If there are too few craftspeople and other service providers, people have to do things themselves instead of doing things they're really good at. If there are too few caregivers, relatives have to reduce their working hours, possibly even to zero. And so on. As a result, the society based on the division of labor is reverting to a do-it-yourself system. Declining economic power, intensified struggles over distribution, and declining incomes would be the likely consequences.

However, moral appeals won't succeed in persuading people to extend their working hours. This requires financial incentives. And in Germany, there has been no progress in this area for a long time.

The current debate is reminiscent of the early 2000s. Back then, we were already discussing whether Germans were too lazy . Unfortunately, the incentives provided by the tax, social security, and transfer system have changed little substantially. Except for the unemployed and low-income earners, who were the focus of the Hartz laws at the time, overtime remains financially unattractive for many employees.

Accordingly, further cohorts have since settled into a work-hostile environment: a system that subsidizes reduced working hours, especially for low- and average-earners, through high tax burdens on every additional euro earned. The income tax splitting system for spouses encourages part-time employment, especially for wives. And productive high earners benefit most from access to a pension without deductions after 45 years of contributions ("retirement at 63").

Sure, retirees have been allowed to earn extra income without tax deductions for some time now. The new federal government is planning an "active pension," meaning tax breaks for retirees who continue to work a little. But part-time work for everyone is not a satisfactory answer to the challenges ahead.

Denmark has just adopted retirement at 70. It's likely that other countries will follow suit. There's some room for maneuver, as life expectancy continues to rise and the number of years of good health increases. However, this has so far barely been reflected in our behavior.

Every ten years the Federal Statistical Office surveys how German citizens spend their time . The most recent study was published last year. It shows that behavioral patterns are fairly stable, even across generations. Overall, time use has hardly changed over the decades: Young people study and have plenty of leisure time. Adults work and look after others. Days are busiest around the age of 40; on average, people then spend eight hours a day working for business, family and society. They are confronted with the concentrated responsibility of job, children and parents. In addition, there is a still vital civil society, where citizens stabilize the basic social structure in clubs and private associations in their free time. The sandwich generation of the middle age groups is active, there is no other way to put it.

With advancing age, activity levels gradually decline. Beyond the mid-60s, activity levels decline rapidly. Retirement, whether well-deserved or not, beckons. Engagement in jobs, care work, and volunteer activities declines significantly.

People retire, even though many still have considerable energy reserves. Of course, there are plenty of exceptions to this rule. But on average, the traditional biographical pattern proves to be stubborn and consistent.

I fear we won't get anywhere like this. A society in which an ever-increasing portion of the population watches from the sidelines, even though many of these people are actually capable of actively participating, runs the risk of festering in discontent. In fact, everyone could achieve more together— work more, longer, and generally do more for others, even for free . But various obstacles stand in the way: absurd incentives in the welfare and tax systems, outdated social norms.

Monday

Braunschweig – Thick air – planned verdict in the trial concerning fraudulent exhaust systems in diesel vehicles against four former Volkswagen employees.

AGM Season I – Annual General Meetings of Deutsche Wohnen , Leonardo.

Tuesday

AGM Season II – Annual General Meetings of Daimler Truck , Zalando , Fraport, Kion, Bechtle, Hensoldt, Medios, Krones, Merck & Co.

Wednesday

Nuremberg – Job Gap – The Federal Employment Agency has published its labor market report for May. Unemployment figures have recently risen, particularly due to job losses in manufacturing.

Beijing – Chiropa as a Chimera – The EU Chamber of Commerce in China presents its sentiment survey among European companies operating there. Recently, there have been repeated calls for rapprochement between China and Europe in light of the uncertainties of Trump's America. Given the circumstances in the country, this is likely to prove difficult.

AGM Season III – Annual General Meetings of Vonovia , Evonik, ProSiebenSat.1, Carrefour, LEG, STMicroelectronics, Meta , Mattel, GE Healthcare, Juniper.

Reporting season I – business figures from Accor, Nvidia , Dell, Costco, HP, Kingfisher.

Friday

Wiesbaden – Expensive Germany – The Federal Statistical Office presents a first estimate of the inflation rate in May.