Top executives of Germany’s biggest industrial companies are calling for a return to the 40-hour week, citing high labour costs weighing on the country’s competitiveness, according to a Financial Times report.

Executives at companies, including Mercedes-Benz and toolmaker Stihl, argue that high labour costs are eroding Germany’s competitiveness.

Earlier this month, Mercedes-Benz Group AG’s Supervisory Board Chair Martin Brudermüller told German newspaper Handelsblatt that labour in the country “has become too expensive by international standards.” He added that Germany has lost its “productivity advantage over important competitors”.

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

Notably, pay negotiations between industrial unions and employers, which are set to begin in October. Currently, a 35-hour working week is the collectively agreed standard for about a fifth of German employees, particularly in sectors such as automotive, engineering, iron and steel.

The 35-hour week was introduced following a 1984 dispute, when scores of metalworkers in former West Germany staged a seven-week strike to demand shorter working hours.

Across all sectors, Germany’s average working week currently stands at 37.8 hours.

Germany’s rising labour costs

Germany’s labour costs are among the highest in the European Union. According to the Financial Times, an hour of work in the country’s manufacturing sector costs €49.50, which is 47 per cent higher than the EU average of €33.70 and more than three times the €15.60 cost in Hungary.

While German workers are more productive than their eastern European counterparts, unit labour costs — which measure labour costs against workers’ output — have risen significantly faster since 2023 than in previous years, according to a survey by the Institute for Macroeconomics and Economic Research (IMK), a think tank financed by Germany’s unions, the Financial Times report stated.

Germany’s manufacturing woes

Germany's industrial output peaked in late 2017 but has since moved into a sustained decline. According to Eurostat data, Germany’s industrial output is no higher today than it was in 2005.

The nation’s manufacturers have been hit by successive energy price shocks, intensifying competition from China, US tariffs and the disruptive shift towards electric vehicles.

So far, employment in German manufacturing has fallen much more slowly than output, as around 6.5 million people are still working in the sector despite the steep decline in production, official figures showed.

But jobs are disappearing. Currently, around 12,000-15,000 manufacturing jobs are being lost every month, with major employers such as Volkswagen already indicating that further job cuts will be needed, the Financial Times report said.

In February this year, Chancellor Friedrich Merz addressed industry groups in eastern Germany and said that "work-life balance and a four-day week will not be enough" to maintain the country’s current level of prosperity, urging the people to "work harder".