Unprecedented unpaid overtime reveals strains in Germany's labor market
According to the Institute for Employment Research (IAB) in Nuremberg, last year, German employees logged 1.3 billion overtime hours. Alarmingly, more than half of these hours were unpaid, highlighting underlying issues in the job market.
The labour market and economic developments increasingly challenge Chancellor Olaf Scholz's government. In December, his cabinet faced its lowest-ever support, with public dissatisfaction toward a chancellor at an unprecedented high. This new labour data is unlikely to win him additional backers.
Unpaid overtime in Germany hits a record
Recent figures reveal that German employees worked 1.3 billion overtime hours in 2023, according to the IAB in Nuremberg. "Deutsche Welle" mentions that although this is a drop of 100 million hours from the previous year, 775 million were unpaid—a record low since 2016.
The "Rheinische Post" notes an average of 31.6 overtime hours per employee last year. Also, the German Economic Research Institute (DIW) reported in April that Germans worked approximately 55 billion hours, the most in over three decades.
One reason for the rise in total work hours is the increased participation of women in the workforce, as noted by Mattis Beckmannshagen in "DW". However, he pointed out that nearly half of these women are in part-time roles, often despite wishing for more hours, indicating underutilization of their labour market potential.
The state of Germany's labor market
Across the Oder River, the job scene saw a decrease in unemployment by 44,500 to 2.8 million in March, with the unemployment rate holding steady at 5.9 per cent for the fourth consecutive month.
This reduction doesn't fully shield German workers from economic shifts. Carsten Brzeski, an ING global analyst, remarked that this year's slight drop signifies the least dynamic "spring revival" post-financial crisis. He also noted an almost 200,000 increase in unemployment since last year.
Despite this, 2023 marked a record high, with 46 million individuals employed. But as Brzeski explains, this climb in employment, featuring part-time and low-wage positions, couldn't curb a decline in private spending.
Challenges ahead for Germany's labor market
Brzeski predicts ongoing difficulties, highlighted by a significant drop in job vacancies to the lowest since autumn 2021 and a downward adjustment in hiring plans despite recent stability. An uptick in bankruptcies signals potential rises in unemployment, remembering that labour market changes typically lag behind other economic indicators.
However, there's a silver lining. Brzeski anticipates a gradual labour market downturn, which will allow real wage growth to remain positive into 2024.
He concludes by remarking on the looming demographic impacts and labour shortages, suggesting that while critiquing the German job market might seem nitpicky, signs of a gradual weakening—or at least a cooldown—are evident.
