Germa8k8 log inny mulling workforce reforms

Germany is considering tax incentives and changes to its social welfare system in a bid to boost workforce participation, aligning the nation with the United Kingdom and the Netherlands in addressing the economic challenges posed by a decline in average working hours.

The ruling coalition led by German Chancellor Olaf Scholz is finalizing a "growth strategy" to be revealed in the coming weeks, with the goal of incentivizing longer work hours, reported the Financial Times.

It noted that proposals being considered include tax reductions for extra hours worked and a revamp of benefits, according to individuals familiar with discussions.

Germany's Finance Minister Christian Lindner has called for tax exemptions on overtime exceeding 41 weekly hours.

"In Italy, France and elsewhere there is significantly more work done than here," Lindner said last month. "When people work or work more, they end up paying higher taxes and social security contributions and receiving fewer social transfers."

The number of people in part-time employment has risen to historic highs and threatens already sluggish productivity growth in Germany, according to recent analysis from financial services provider ING.

Since the introduction of Germany's Part-Time and Fixed-Term Employment Act in 2001, the majority of employees have been entitled to reduce their working hours from the initially agreed-upon amount in their contracts.

Michael Kretschmer, the minister president of the German state of Saxony, said in an interview with The Handelsblatt newspaper last week that reverting to a 40-hour working week is essential for upholding economic prosperity in Germany.

"Part-time work must be the exception, not the rule," said Kretschmer. "We have to ensure that we come out of the crisis with growth and full employment — for me that means a 40-hour week for everyone."

A fall in working hours across Europe has heightened the region's economic challenges and diminished competitiveness, prompting policymakers to take note, with aging populations also shrinking workforces.

Germany's Federal Statistical Office reported that 31 percent of employees worked part-time in 2023, slightly increasing from the previous year. In a study comparing OECD countries using 2022 data, Germany ranked at the bottom in terms of hours worked, noted Euronews.

Since the novel coronavirus pandemic, the inclination toward shorter working hours has grown in Europe, the FT reported.

The European Central Bank has projected that Eurozone workers worked an average of five hours less by the end of last year compared to pre-pandemic levels in 2020. In contrast, the average work hours of United States employees remained consistent during this period, it said.

The government of the Netherlands is also considering adjustments to its tax and benefits systems to encourage increased working hours, such as enhancing childcare support and parental leave policies.

Similarly, UK officials are addressing labor shortages by introducing initiatives to attract more workers and encourage part-time employees to work additional hours.