BERLIN — When Europe’s largest industrial union, IG Metall, won a landmark battle with 700 companies this week, 900,000 workers were able to celebrate a 4.3 percent pay raise and a one-time payment. But perhaps even more importantly, they also won the right to temporarily reduce their week to 28 hours, even though they would only be paid for the hours spent at work. Workers can now work fewer hours — for less money — if they want.
In fact, having this flexibility was so important to the union that it turned down a 6.8 percent pay raise Volkswagen had offered instead of the 4.3 percent raise.
Would anyone really prefer fewer hours of paid work over more and better-paid working hours?
In Europe, perhaps surprisingly, the answer increasingly appears to be “yes,” which is in stark contrast to the United States, where people are working more and more hours and more jobs just to make ends meet.
The German working hours agreement may have seemed like a minor development to observers abroad this week, but analysts say that the deal indicates what the future of work could soon look like in Germany, and perhaps across Europe. More and more employees from all professions are voluntarily opting for more flexibility and time off — broadly speaking, a better work-life-balance — instead of full-time positions or pay raises, according to recent surveys in Austria, Germany, France and elsewhere.
The reason Europeans can even contemplate this kind of trade-off is because repercussions of working part-time are much less consequential than in the United States, where workers risk losing benefits or health insurance coverage if they reject full-time positions. For European workers, social benefits are usually covered mostly by governments rather than private companies and so the advantages of 40-hour workweeks appear to be increasingly less attractive.
When Europeans decide to go part-time, they still have access to the same benefits or health insurance, which lowers their cost of living in comparison to their comrades across the Atlantic. Europe’s tax and welfare systems also mean working many more hours may not result in a lot more income, as taxes rise disproportionately. Whereas the benefits of working more appear too slight to many here, some of the disadvantages of working less are often covered by the government.
Benefits schemes for poorer citizens — including affordable housing and educational scholarships for children of parents whose income falls below a certain threshold — mean poorer Germans can often still make ends meet, even though average wages here are lower than in the United States. As a result, lower-income families generally still tend to be much better off in Europe than in the United States.
Workers can also get away with these deals because widespread labor shortages in countries such as Germany or Britain allow those in high-demand professions unprecedented sway over their employers and the leverage to seek more time at home. Germany alone is expected to lack about 3 million skilled workers by 2030.
Employers in Europe have also long hoped that reduced working hours could potentially boost productivity during the remaining time, but so far the mostly government-led experiments to test that theory have failed or proved to be inconclusive. While the experiments boosted the well-being of employees, they turned out to be economic nightmares and probably not feasible if widely implemented — fewer hours meant more people had to be hired, raising costs prohibitively. Existing research, however, may not yet be totally representative.
This week’s working hours reduction in Germany is not comparable to those experiments, however. It’s the result of negotiations between major corporations and employees themselves, and unlike previous experiments it won’t allow workers to do less while maintaining their previous salaries.
Instead, the new rules will allow employees to work for 28 hours for up to two years if they desire to do so, no matter the reason. Possible motivations could include the wish to spend more time with family members or the need to care for elderly relatives. While many employees will happily accept such a working hours reduction, the agreement also allows them to work more hours if they so desire.
This solution, the affected companies hope, will allow flexibility for employees but would also ensure productivity to remain at the same level without higher costs (at least, if the unrelated pay rise of 4.3 percent which was also agreed, is not taken into account). Worker productivity in Germany is famously high.
In the long run, however, Europeans’ surprising willingness to earn less if they can rest more could pose a major economic challenge. Even though Germany's economy has mainly been boosted by exports, domestic spending still accounts for a significant part of the country’s current economic boom.
If fewer Germans accept better pay rises or full-time positions, there could also be less money around to spend.
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