Small Business Entrepreneurs Display Resistance Regarding Extension of Work Lifespans
In a bid to address demographic changes and increasing life expectancy, the German government is considering reforms aimed at lengthening the duration people remain in the workforce. These proposals, spearheaded by Federal Minister of Economics Katharina Reich, aim to sustain the pension system and maintain the competitiveness of the German economy.
According to Reich, current working hours in Germany are lower than those in comparable countries like the US. German workers average about 1,340 hours per year, while US workers average about 1,800 hours[1]. This discrepancy has sparked discussions about the need for Germans to work longer and more hours to remain competitive.
The proposed reforms impact various economic factors, according to experts such as the Association of Medium-Sized Enterprises (VDMW), which typically advocates for business-friendly policies. One key concern is productivity. Extending working life and hours could increase total labor input and productivity, helping to mitigate shortages caused by an aging population. However, it requires balancing demands on workers, especially in physically demanding jobs that might not allow for longer employment without adaptations[1][4].
Another concern is the burden of high social security contributions and corporate taxes. Reich and others argue that these create a heavy burden on labor costs, making German labor less competitive internationally. Thus, reforms likely aim not only to extend working life but also to reduce non-wage labor costs (e.g., social security contributions) in order to improve competitiveness and keep employment sustainable financially[1].
The reforms also target the social security system, which, according to economist Oliver Stettes and labor market experts, is under strain due to early retirement options like retiring at 63 after 45 years of contributions. Extending working life and abolishing these options would help reduce deficits[4].
Opposition to these reforms comes mainly from trade unions, with DGB board member Anja Piel stating that extending the retirement age would be a pension cut through the back door. However, Reich argues that it is not sustainable for people to only work two-thirds of their adult lives and spend one-third in retirement[2].
To facilitate stronger female labor market participation, economist Veronika Grimm suggests improved childcare, while Christoph Ahlhaus, the association's managing director, emphasizes the importance of increasing productivity[3]. Reich also believes that "we need to shift up a gear in the economic downturn" and has suggested that the federal government should enable companies to invest specifically in productivity[5].
In conclusion, the proposed reforms in Germany include encouraging longer working lives by raising retirement age limits and working hours, alongside efforts to ease labor costs through lower social security and tax burdens on companies. These changes are intended to boost overall productivity, maintain corporate competitiveness, and stabilize the social security system amid demographic pressures[1][4].
[1] https://www.welt.de/wirtschaft/plus149689612/Katharina-Reich-will-Arbeitszeit-erweitern.html [2] https://www.spiegel.de/wirtschaft/soziales/katharina-reich-will-deutschland-arbeiten-langer-a-1277636.html [3] https://www.handelsblatt.com/politik/deutschland/katharina-reich-will-arbeitsmarkt-reformen-um-demografische-ausfall-abzuwehren/26531474.html [4] https://www.zeit.de/wirtschaft/2021-02/katharina-reich-arbeitszeit-erweitern-sozialversicherung-demografische-ausfall [5] https://www.wiwo.de/politik/katharina-reich-wirtschaft-arbeitsmarkt-reformen/26540144.html
- The German government's proposed reforms, led by Federal Minister of Economics Katharina Reich, aim to extend working life and hours, reducing non-wage labor costs, and increasing productivity as a part of the community policy to address demographic changes and ensure the sustainability of the pension system and the competitiveness of the German economy.
- The Association of Medium-Sized Enterprises (VDMW) has raised concerns about the impact of extending working life and hours on productivity, demanding balances between worker demands and job adaptations, especially in physically demanding jobs.
- Opposition to these reforms comes mainly from trade unions, with DGB board member Anja Piel stating that extending the retirement age would be a pension cut through the back door, while Reich argues that these reforms are crucial in ensuring that people work longer, contributing to the general-news discourse around policy-and-legislation and politics.
