Germany is facing a strange reckoning. German Chancellor Friedrich Merz is asking Germans to work more if the country is to maintain its standards of living. The call for more work has been interpreted by many as Merz calling Germans lazy — a stark contrast from Germany’s image of efficiency and industriousness. 

In a recent speech, Merz laid out the factors holding back the German economy. He talked about reducing the bureaucracy, cutting down energy prices, and reducing the tax burden, among others. But what caught everyone’s attention was his call to reduce labour costs — by working more.

He said: “Overall, the work performance of our economy is not high enough… With work-life balance and a four-day week, the prosperity of our country, which we have today, cannot be maintained in the future, and therefore we have to work more!”

So, have Germans become lazy? 

In 2026, Germany is the world’s third-largest economy with an estimated annual GDP of $5.33 trillion. But its position is misleading, because it is way behind the leaders: The US has an annual GDP of almost $32 trillion and China almost $21 trillion. Even India (with a GDP of $4.5 trillion) is fast catching up, though it is much poorer in per capita terms (Chart 1).

There are many reasons why Germany has lagged far behind the US and was overtaken by China.

One reason is its population, which has largely been stagnant over the past 25 years (Chart 2). And even this stagnant level of population is propped up by immigrants because left to itself, Germany has been experiencing a negative population growth — death rate being higher than birth rate (Chart 3).

But more specifically, Merz’s contention — that Germans have been putting in fewer hours — is true. As Germany became more and more prosperous (rising GDP per capita), the annual working hours per worker have dropped quite sharply. Contrast this with what is happening in China (with its size of population), and one sees how China sped past Germany in overall size of economy (Chart 4).

To be fair, if an average German earns far more in real wages (Chart 5) than workers in most other countries, it does not make sense to work more. But Germany also created laws that hold back workers from putting in more hours – or at least do not incentivise it.

Merz aims to rectify the incentive structure. For instance, he mentioned lifting the “pre-employment ban”, which legally prohibited people from working longer in their companies beyond the standard working time limit.