German Industry Pushes 40-Hour Work Week Without Extra Pay

Some of Germany’s largest industrial employers are pushing workers to return to a 40-hour week without additional pay, reopening a labor dispute that helped define the country’s postwar manufacturing model.

Executives at companies including Mercedes-Benz and Stihl argue that high labor costs are weakening Germany’s industrial competitiveness as factory output declines and manufacturers face mounting pressure from overseas rivals.

“Labor has become too expensive here by international standards,” Martin Brudermüller, chair of Mercedes-Benz Group AG’s supervisory board, told Handelsblatt earlier this summer.

“We should seriously consider a return to the 40-hour week,” he said.

Labor Costs Under Pressure

Manufacturing labor costs in Germany stand at €49.50 an hour, 47% above the EU average of €33.70 and more than three times Hungary’s €15.60.

German workers remain more productive than their eastern European counterparts, but unit labor costs have accelerated since 2023, according to a survey by IMK, a think tank financed by German unions.

Moving from a 35-hour to a 40-hour week without higher weekly pay would increase working time by about 14% while leaving employers’ weekly wage bill unchanged.

Martin Werding, a member of the German Council of Economic Experts, said the debate went beyond symbolism as manufacturers struggled to offset their cost disadvantage.

“Today’s challenges have become so big that this flexibility is no longer sufficient,” he said.

Industrial Output Falls

The renewed pressure on working hours comes as Germany’s manufacturing downturn deepens.

Industrial production has fallen more than 15% since its late-2017 peak, with manufacturers hit by energy price shocks, stronger Chinese competition, U.S. tariffs and the transition toward electric vehicles.

Germany’s high labor costs were previously balanced by advantages including political stability, infrastructure, skilled workers and dense industrial clusters, according to Marcus Berret, global managing director at Roland Berger.

Those advantages have weakened as the labor-cost gap with competing economies has widened.

“When it comes to labor costs, we are not talking about a difference of 10 or 20% (with rival economies). In some cases, we are talking about a factor of three or four,” Berret said.

Jobs Face Growing Risk

Employment has fallen more slowly than industrial production so far, leaving about 6.5mn people working in German manufacturing.

But job losses are accelerating. About 12,000-15,000 manufacturing positions are disappearing each month, while large employers including Volkswagen have signaled further cuts in Germany.

Berret expects manufacturing employment eventually to fall below 5 million.

The debate is therefore increasingly centered on whether longer hours would preserve industrial jobs by lowering labor costs per unit of output or accelerate job losses by allowing companies to produce the same amount with fewer employees.

Unions Reject Employers’ Case

IG Metall, Germany’s largest trade union with more than 2.2 million members, disputes claims that manufacturers are constrained by an inflexible 35-hour standard.

Nadine Boguslawski, the union executive responsible for collective bargaining and a member of Mercedes’ supervisory board, said existing agreements already allowed companies to adjust working hours.

“The rigid 35-hour week that is sometimes portrayed simply does not exist in the companies I know,” she said.

IG Metall also argues that shorter working hours help distribute available work among more employees.

Boguslawski warned that raising working time to 40 hours could reduce companies’ need for workers, regardless of whether the additional hours were paid.

Economists including Werding take the opposite view. They argue that the total amount of industrial work is not fixed and that factories could retain production and employment if lower unit labor costs improved their competitiveness.

A Four-Decade Settlement Reopened

The 35-hour week emerged from a bitter 1984 dispute in former West Germany, when tens of thousands of metalworkers staged a seven-week strike.

The shorter week was introduced gradually during the following decade.

It remains the collectively agreed standard for about a fifth of German workers, particularly in automotive, engineering, iron and steel.

Across the economy, Germany’s average working week is 37.8 hours.

Annual working hours are lower than in almost every other OECD economy, although that comparison is heavily affected by the country’s large share of part-time employment.

Industrial unions are due to begin their latest pay negotiations in October, placing the revived working-hours dispute directly ahead of another round of bargaining.

It remains unclear whether employers will formally seek changes to the 35-hour system.

Gesamtmetall, the metal industry employers’ association, declined to comment on demands to abandon it, citing internal considerations.

For German industry, however, the argument has moved beyond a historic dispute over working time.

Employers are increasingly presenting longer hours without higher weekly pay as part of the response to a manufacturing decline that has already lasted almost a decade.