Nicola Fuchs-Schündeln, the future President of the Berlin Science Center, talks about the new German love of leisure and explains how the retirement age should rise and the debt brake should be relaxed.
Ms. Fuchs-Schündeln, how many hours a week do you work on average?
I can’t say exactly, because it fluctuates a lot. My working hours have certainly not decreased over the past two decades.
More than 40 hours a week?
In any case.
The trend is going in the other direction: a four-day week, retirement at 63, a leisure-loving Generation Z – do Germans want to work less and less?
Yes, in the two decades before coronavirus, employees reduced their working hours by more than five hours a week on average. Wanting to work less is not a generational issue: we see this among older and younger people, women and men. There is more part-time work and fewer people working 50 hours or more.
So it’s not true that career starters are completely different?
No, not at all. It’s not just Generation Z that wants to work less. You can also see this in collective bargaining, for example, where the focus is now often on shorter working hours.
Despite the decline, Germans worked 1.3 billion hours of overtime last year. The Chancellor says: “In my opinion, anyone who talks about laziness is out of their depth.” Is he right?
I wouldn’t call it laziness anyway. How much we work is a personal decision. We weigh up how much we want to work and consume or how much free time we want to have. Framework conditions and incentives play a role in this. In terms of the welfare of society, the fact that people can afford to work less is a positive thing.
So this is a phenomenon of prosperity?
In economics, we talk about the income effect: if hourly wages rise and we become more productive and richer in relative terms, we can earn the same income with fewer working hours. And many people then want more leisure time. Leisure time is also a form of consumption. We consume time, we spend time on our own interests. This phenomenon exists in the USA and all European countries, but the decline in working hours per employee is one of the greatest in Germany.
Why is that?
In Germany, many women have entered the labor market in recent decades, but many of them work part-time. There is also the additional effect that fathers work slightly less when mothers work more. Older people also work more often today than they did two decades ago, but tend to work fewer hours than the average. The bottom line is that there are fewer working hours in Germany because the additional employees do not compensate for the shorter working hours. Another reason for this is taxation.
In what way?
Germany, for example, has a relatively high average tax rate and high VAT compared to the USA. This means that less income is left over and less of it can be consumed. This makes it less worthwhile to work. And then there is the spousal splitting, which leads to a high marginal tax rate, especially for married women who earn relatively little. This makes working less attractive for them. Economically, this is a problem: 50 percent of university graduates are women. However, this is not reflected in the management levels of companies, where a lot of talent is lost.
What could politicians do immediately to reverse the trend towards less work?
With regard to women, an important step would be tax reform in the direction of individual taxation, i.e. away from spousal splitting. In addition, the mini-job system, which prevents many women from working more and is not a stepping stone to full-time employment, should be reformed and childcare should be further improved. All of this could be tackled immediately. It is more difficult for politicians to influence social norms. So: do we accept it as a society when mothers work full-time? And how do we deal with fathers who are more involved in childcare? Such norms are soft factors, but they are very important because we are social beings and want social recognition. Breaking norms comes at a cost.
What costs?
A study from Sweden, for example, shows very clearly that professional success increases the likelihood of divorce for women, unlike for men. These are enormous psychological and monetary costs.
The issue of the marriage splitting is a perennial hot topic. Is it realistic that it will ever be abolished in Germany?
It always appears in some election manifestos, but is never addressed. Politically, it is a difficult issue. Simply abolishing it would increase the tax burden on married couples. You would therefore need a major tax reform if you wanted to prevent this. In addition, the reform would primarily affect married couples where one earns very well and the other tends to take care of the household. This group is easily heard politically. But there are also smaller steps, such as the abolition of tax brackets, which is easy to implement and has at least been announced by the coalition.
There is also a lot of potential for older people. Should retirement at 63 be abolished?
In view of demographic trends, retirement at 63 is not a good idea.
What do you suggest instead?
The retirement age should be linked to rising life expectancy and thus increase automatically. This is the fairest approach for all generations.
Companies are now short of workers at every turn. Shouldn’t they simply increase wages so that people work more again?
It’s not that simple. It could also be that people will then be able to achieve their standard of living with even fewer working hours and reduce their working hours even further. What could help is an improvement in working conditions that makes working more attractive. I would also expect a trend reversal if Germany does not develop well economically and we fall behind internationally.
But why should that bother individuals as long as they have enough money and plenty of free time?
For many years now, one crisis has followed the next and people are feeling insecure. If people increasingly feel they have to make more provisions, this is also an incentive to work more again. And a lack of economic growth will eventually affect people. Economic growth is also important for social cohesion because growth makes redistribution much easier.
When people talk about the weakness of Germany as a business location at the moment, it’s all about bureaucracy, taxes and energy costs. Is that the right focus?
These are very important issues, but there is a danger that we will move from crisis to crisis and lose sight of the important long-term issues.
For example?
School education. Human capital is central to economic growth in Germany. And research shows that investments in education are also financially worthwhile. Especially when they benefit children from disadvantaged families, they often pay for themselves. More needs to be invested in schools in problematic regions, in smaller classes, in more social workers.
Sounds good, but is probably incompatible with the debt brake.
The returns on investment in education – as we know very well from research – are simply extremely high. It is obvious that more needs to be done. This is why investments in education should actually be excluded from the debt brake. However, the issue is complex and such an exception alone would not solve the problem. Investments in education only pay off in the distant future, and that is a political economy problem. Politicians have no short-term incentive to prioritize education spending.
You will soon be able to lend weight to this demand in Berlin: In September, you will take over the presidency of the Social Science Research Center Berlin, WZB, which employs almost 200 researchers. What is your most important goal?
The WZB is the largest social science institute in Germany, and what I find unique is the interdisciplinary nature of the institute. This creates the opportunity to really dedicate oneself to basic research on socially relevant topics. I would like to play a leading role in this and continue to shape this interdisciplinarity.
Which topics are in focus?
The central social issues – migration, education, democracy, climate change, labor markets. There are major challenges that affect not just one area or one discipline, but us as a society as a whole. When we think about migration, for example, it is not only economic aspects that play a role when it comes to the reasons for migration and its effects, but also political and sociological aspects, of course.
Critics say that the WZB has a social democratic orientation. Is that true?
The WZB is not a political institute, but a scientific institute with outstanding researchers. Many of them are involved in policy advice and do so on the basis of their scientific findings. This kind of commitment from science, a transfer of research results into society, is also often called for. And Berlin is of course the ideal location for policy advice.
The interview was conducted by Johannes Pennekamp and Patrick Welter.
Interview with Johannes Pennekamp and Patrick Welter from the Frankfurter Allgemeine Zeitung from 29.05.2024, Wirtschaft (Economy), page 16. © All rights reserved. Frankfurter Allgemeine Zeitung GmbH, Frankfurt. Provided by the Frankfurter Allgemeine Archive.