Living and working in Germany

The labour market proved comparatively resilient in 2023. The average unemployment rate was 5.7%, a 0.4% increase from 2022. The unemployment benefit II was replaced by the so-called citizen’s benefit at the beginning of the year, which increased the standard rates and offers job centres the opportunity to financially support benefit recipients in further education and training. The new benefit was criticised throughout 2023 for either not being sufficient (as voiced by the Left party, for example) or lacking proper incentives for employment (as stressed by the Christian Democrats and the Liberals, for example).

Despite persistent inflation and rising prices in 2023, collectively agreed wages rose by 5.6%, compared with a rise of 2.7% in 2022, according to the preliminary calculations of the Institute for Economic and Social Research (WSI). During the 2023 collective bargaining round, trade unions and employers often agreed on both percentage increases in wages and one-off payments. The federal government in autumn 2022 granted employers an exemption from tax or social security contributions for additional one-off payments of up to €3,000, known as ‘inflation compensation premiums’. These premiums offer employees a certain degree of financial security while allowing companies more leeway with their labour costs.

Apart from rising wage settlements, working time issues reappeared on the collective bargaining agenda. While the German Metalworkers’ Union (IG Metall) demanded the introduction of a four-day working week in the steel industry, the German Engine Drivers’ Union (GDL) called for a reduction in working hours from 38 to 35 hours per week for shift workers at German railway operator Deutsche Bahn. These union demands were part of a larger public debate on the pros and cons of the four-day working week in 2023.

Overall, the collective bargaining round in 2023 was characterised by many labour disputes. The United Services Union (ver.di) organised major strike action in retail, at German postal provider Deutsche Post and during the bargaining round for public administration. The dispute in public administration for municipal and federal government employees was solved only by arbitration. Additionally, employees at Deutsche Bahn participated in labour disputes by rival unions the Railway and Transport Union (EVG) and GDL. The dispute between GDL and Deutsche Bahn remains unresolved (as of 15 January 2024).

The outlook for 2024 is rather challenging. In November 2023, the Federal Constitutional Court declared the use of unused funds for overcoming the COVID-19 pandemic for the Climate and Transformation Fund as void. Consequently, the federal government had to cut €60 billion from the 2022 fund and renegotiate federal budgets for 2023 and 2024. While a solution was found for the 2023 budget following a three-week budget freeze, the 2024 budget remains unresolved. It remains to be seen how much-needed investments in climate-protection measures and safeguarding Germany’s energy supply can be mobilised in 2024. Finally, new state parliaments will be elected in Thuringia, Saxony and Brandenburg in autumn 2024. The right-wing Alternative for Germany (AfD) may secure a majority in these parliaments, especially in Thuringia and Saxony.