Those who penalize performance risk stagnation – what the economy needs now

Performance, welfare state and growth: How Germany can move forward again

Why extra work must pay off: Germany's economy needs performance – but also fair opportunities

Performance and social responsibility are not mutually exclusive. A functioning economic system must enable both: people should be able to advance through skill, dedication, and good ideas, while those who cannot secure their own livelihood receive support. However, this very balance is under pressure when additional work yields little additional income, professional success is generally viewed with suspicion, or economic advantages arise primarily from protected positions.

Germany's economic development makes this question urgent. Weak growth, high taxes on labor, skills shortages, and bureaucratic hurdles are limiting the scope for prosperity and social security. However, the answer cannot simply be that everyone should work longer. Crucial factors also include whether working time is used productively, whether care work and health burdens are taken into account, and whether education, competition, and modern technologies help people to better utilize their skills.

A credible performance culture therefore requires more than mere appeals. It needs fair opportunities, clear rules, and incentives where additional effort demonstrably pays off. At the same time, it must distinguish between a lack of willingness and a lack of opportunity – and also measure companies and government institutions by their contribution. Where performance is demanded, the conditions must be right. And where solidarity is promised, a sustainable economic foundation is essential.

Performance is not extremism: those who punish performance shouldn't be surprised by stagnation

Meritocracy is neither a fringe right-wing issue nor an attack on social responsibility. It is fundamental to an economic system that seeks to combine personal freedom, competition, and social balance. A society should therefore neither cast suspicion on all willingness to perform nor automatically equate economic success with personal merit. What matters is whether people can advance through skill, dedication, responsibility, and beneficial innovation, and whether those who cannot secure their livelihoods through their own efforts are protected.

The economically viable perspective thus lies beyond two convenient oversimplifications. Neither can all inequality be justified as the necessary price of progress, nor can a sustainably effective welfare state emerge if additional effort hardly creates additional opportunities. Those who demand performance must provide fair conditions. Those who promise solidarity must secure its economic foundation. Both together are more demanding than the usual juxtaposition of market and morality.

Political labels are no substitute for economic analysis

The assertion that meritocracy is inherently right-wing extremist is useless as an economic policy judgment. Equally unconvincing is the reverse notion that any criticism of competition, income inequality, or corporate power is inherently left-wing extremist. A clear distinction must be drawn between a democratic debate about distribution and a rejection of the liberal order. Political terms do not become more precise when they primarily serve to denigrate those who think differently.

The claim that socially accepted left-wing extremism explains Germany's economic weakness is not an economic explanation without a verifiable definition and reliable evidence of its impact. The demonstrable structural problems range from weak investment and high bureaucracy to skills shortages, barriers to competition, and an aging population. A serious debate about performance must address these mechanisms instead of reducing a complex development to a political enemy image.

This does not mean downplaying arguments against merit. Where additional responsibility is viewed with suspicion, where differences are to be eliminated regardless of their origin, or where economic success alone is seen as a moral flaw, the merit principle is indeed undermined. However, an attitude that categorically defends existing wealth, protected market positions, and special political privileges as expressions of exceptional merit is equally problematic. A credible merit culture must ask the same questions both at the top and at the bottom.

Germany's prosperity problem is measurable

The economic urgency of this debate stems not from a general sense of decline, but from several years of weak performance. According to the revised calculations from summer 2026, price-adjusted gross domestic product fell by 1.0 percent in 2023, stagnated in 2024, and rose by only 0.2 percent in 2025. These figures do not describe a dynamic expansion of prosperity, but rather a period in which the overall economic scope for distribution barely increased.

In the third quarter of 2026, according to preliminary figures, economic output increased by 0.2 percent compared to the previous quarter; compared to the same quarter of the previous year, it was 1.3 percent higher in real terms. This is an improvement, but not yet proof that the structural growth problems have been overcome. A short-term economic upswing and sustained higher productivity are different things. If the two are confused, a cautious recovery can prematurely turn into an all-clear.

The revised data also highlights the importance of careful interpretation. A previously reported decline for 2024 was revised to stagnation in the summer of 2026. Economic policy decisions should therefore not hinge on a single tenth of a percent. However, the overarching diagnosis remains valid: Germany needs more productive investment, better institutional conditions, and more effective use of existing capabilities if rising social demands are not to be permanently hampered by limited growth potential.

Performance is more than presence

In public debate, performance is often equated with working hours. Economically, this is too simplistic. Put simply, labor productivity describes how much price-adjusted economic output is generated with a given amount of labor; it is therefore not identical to personal effort or the number of hours worked. An extra hour can be valuable, but it can also be lost in a poorly organized meeting or through avoidable waiting times.

For a sustainable performance-based system, three levels should be distinguished: the personal willingness to exert effort, the actual contribution made, and the economic valuation of that contribution. A person can work with extraordinary dedication and yet earn little income. Conversely, a high economic return can arise from a favorable market position without a correspondingly high level of current work effort. Performance-based justice therefore requires more thought than simply equating income with earnings.

This is particularly evident in industry and logistics. Well-prepared maintenance can prevent production downtime without requiring employees to deal with as many malfunctions as possible. Improved warehouse organization can shorten walking distances, even if less movement is subsequently visible. These examples illustrate what a proper performance evaluation should focus on: reliable results, avoided errors, quality, and economic benefit. Mere activity is not a sufficient measure.

More working hours are not a universal solution

The working time data contradicts a blanket narrative of a general retreat from work. In 2025, full-time employees typically worked an average of 39.9 hours per week, compared to 40.5 hours in 2015. For part-time employees, the corresponding weekly working time increased from 19.3 to 21.3 hours during the same period. This figure represents the typical weekly working time, not a measurement of all hours actually worked in a year, including any absences.

At the same time, the part-time employment rate among employees reached 31.9 percent in 2025. This composition influences the average across all employees and makes its interpretation challenging. A lower average working time can be attributed to changing preferences, but also to the inclusion of additional people in employment with reduced hours. Without this distinction, a statistical indicator quickly becomes an unsubstantiated character trait.

A sensible economic policy question, therefore, is not only how everyone could work longer. It also asks who wants to extend their working hours, what obstacles stand in their way, and where additional hours actually translate into productive employment opportunities. A voluntary extension of working hours is different from a blanket extension for all occupational groups. Both options should be evaluated according to their benefits, costs, and differing effects on people in various life situations.

Performance requires more net income

Those who demand higher performance should carefully examine what portion of the economic value of labor actually reaches employees. For a single, childless employee with average earnings, the tax and social security contribution wedge in Germany amounted to 49.3 percent of total labor costs in 2025; the OECD average was 35.1 percent. This difference is significant for the performance-based debate, but it must be understood using sound methodology.

The tax and contribution wedge comprises income tax as well as employee and employer contributions to social security, possibly reduced by any cash benefits taken into account. It therefore does not mean that an average employee has 49.3 percent of their reported gross salary deducted. The burden of income tax and employee contributions relative to gross income was 38.7 percent for the same model budget in 2025. Anyone who confuses these figures exaggerates the burden on the payslip and simultaneously underestimates the significance of total employment costs.

Social security contributions finance insurance benefits and should not be treated as if they disappear without a return. Nevertheless, the economic question remains valid as to whether financing, scope of benefits, and efficiency are in reasonable proportion. A credible reform perspective should specifically reduce the burden on labor while simultaneously explaining how this will be financed. Mere promises of tax cuts without expenditure reviews, a sustainable revenue base, or comprehensible priorities are no substitute for sound fiscal policy.

Additional work must be worthwhile

For specific employment decisions, the decisive factor is often not the average workload, but rather the amount of additional income that remains. Taxes, social security contributions, and the elimination of transfer payments can all interact in this regard. In the income brackets studied, the interplay of basic income, housing allowance, and child supplement reached more than 90 percent. Such findings pertain to specific circumstances and cannot be generalized to all households.

The key distinction is this: work can increase disposable income, while additional work only yields a small further income gain. In the basic income support system studied, employed individuals receiving supplementary benefits generally had higher incomes than comparable unemployed individuals; the weak financial incentive for expanding employment was particularly problematic. These two statements are not contradictory. It is precisely their conflation that makes the political debate unnecessarily imprecise.

A performance-based reform should therefore consider the transitions between benefits, taxes, and social security contributions together. Crucially, it would require a clear and, ideally, consistent progression of disposable income, where additional employment offers a demonstrable advantage. This is more demanding than simply changing a tax allowance in isolation. If these interrelationships are not taken into account, a well-intentioned tax relief measure could be partially offset elsewhere by the loss of a benefit.

Better incentives come at a price

Reforms to the rules governing supplementary earnings can mobilize additional willingness to work, but they are not a cost-free growth program. In a study published in 2025 with 54 reform scenarios, the simulated increase in the labor supply ranged between 70,000 and 170,000 full-time equivalents. A full-time equivalent here refers to the calculated workload of a person working 40 hours per week. The model calculations were based on the legal situation as of January 2024; they should therefore be read as an analysis of reform mechanisms and not as a direct description of all applicable rules in November 2026.

The magnitude is relevant, but limited. Even the highest simulated effect corresponded to approximately 0.6 percent of the offered labor hours. Furthermore, a modeled increase in the labor supply is no guarantee of additional employment. Whether actual value is created from available labor must also be considered in terms of qualifications, demand, regional fit, and organizational conditions. Incentive reform can complement these considerations, but not replace them.

The fiscal conflicts of objectives are particularly revealing. One more restrictive option, examined, linked approximately 120,000 additional full-time equivalents with annual savings of nearly six billion euros, but resulted in short-term income losses for certain households. A more generous option, on the other hand, caused additional expenditures of around five billion euros with a somewhat smaller supply-side effect. The political decision, therefore, is not between a sound reform and blatant irrationality, but rather between differently weighted objectives: work incentives, poverty prevention, budget costs, and the reach of government support.

Not all unemployment is a refusal to work

A consistent performance-oriented culture should distinguish between a lack of willingness and a lack of opportunity. Research findings on recipients of basic income support show that several barriers to employment often coincide, such as a lack of vocational qualifications, health limitations, long career breaks, or insufficient German language skills. Therefore, the legal status of employability does not imply that every affected person is immediately available for every open full-time position.

The stability of employment also deserves attention. In the combined studies, more than half of the jobs taken from basic income support ended within a year; only about half of the jobs subject to social security contributions were also linked to the termination of benefit payments. A quick transition is therefore not automatically a long-term success. If only the number of short-term placements is evaluated, the actual task can be overlooked.

This does not imply a rejection of the obligation to cooperate. A fair system may expect personal initiative and should not tolerate abuse. However, it must also ensure that requirements are realistic and that assistance actually reduces existing obstacles. Under constitutional law, human dignity does not depend on whether someone can secure their own livelihood; at the same time, reasonable obligations to overcome dependency are fundamentally possible. This connection is not a contradiction, but rather the demanding core of a constitutional social policy.

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Care work is part of the performance balance

A debate about willingness to work becomes incomplete if it focuses solely on paid employment. The 2022 Time Use Survey recorded an average of almost 29.5 hours of unpaid work per week for adult women and almost 20.5 hours for men. This includes, in particular, housework, childcare, elder care, supporting others, and volunteer work. This work doesn't disappear simply because it isn't reflected on a payslip.

Gender-specific differences are also evident in employment. In 2025, 50.6 percent of employed women and 14.3 percent of men worked part-time. However, this alone does not reveal what proportion can be attributed to voluntary choice, lack of childcare, family division of labor, or other circumstances. The statistics initially describe a difference, but not its complete explanation.

Anyone wishing to enable additional working hours should therefore consider the total time commitment of a household. Reliable care, predictable working hours, and a practical care infrastructure are essential components of a serious supply-side policy. Family care work should not be devalued simply because a shift to paid services might alter measured market output. From an economic policy perspective, greater genuine freedom of choice would be beneficial: people should be able to utilize their skills more effectively without family responsibilities inevitably becoming a professional disadvantage.

Equal opportunities make performance claims credible

Meritocracy does not require that everyone achieve identical results. However, it does require that differences are not primarily determined by avoidable disadvantages at the outset. In Germany, the gap in mathematics performance between socially advantaged and disadvantaged young people was 111 points in the 2022 PISA study, compared to an average of 93 points in OECD countries. Such a finding is particularly inconvenient for a meritocratic society.

He doesn't prove that the family background and school system alone cause all differences in performance. However, he does demonstrate a close connection between social background and measured competencies. Anyone who concludes from this that performance standards should be abandoned altogether is taking the wrong approach. Equally unconvincing is treating results solely as individual success or failure. An education system should combine high standards with effective support, rather than creating an artificial dichotomy between rigor and enrichment.

Economically, this is about developing productive skills. Early language support, solid basic skills, demanding vocational training, and accessible continuing education should be considered components of a long-term performance strategy. This explicitly includes the targeted support of special talents. A society loses opportunities when it both leaves underachieving children behind and underchallenges high-achieving children. Therefore, equal opportunities and the promotion of excellence should not be pitted against each other, but rather fulfill the same objective: to develop existing abilities to the fullest possible extent.

High incomes are not proof of performance

The market provides important information about demand and scarcity, but not a complete moral evaluation of human contributions. For a serious debate on merit, a distinction should therefore be made between income from one's own labor, returns on productively employed capital, transfers of wealth, and advantages from protected positions. This distinction is not an attack on property rights. Rather, it protects the credibility of the claim that economic success should be based on a useful contribution.

The distribution of wealth demonstrates its significance for economic opportunities. In the 2023 wealth survey, 54 percent of net wealth was held by the wealthiest ten percent of households. A supplementary calculation, aligned with macroeconomic data, arrived at approximately 60.5 percent for the same top group, thus taking into account, among other things, the underreporting of very large fortunes in household surveys. The differing figures reflect different data collection methods, not necessarily an inherent contradiction.

One important limitation must be noted: entitlements from statutory pension and retirement schemes are not included in these standard measures of wealth; their supplementary inclusion significantly reduces the measured inequality. Nevertheless, the fundamental policy question remains: how should employment, wealth accumulation, and upward mobility be related? Those who wish to strengthen performance should both enable productive capital formation and prevent background and protected advantages from permanently dominating the competition for better ideas.

Competition must also challenge the powerful

A market economy is not inherently performance-oriented simply because companies generate profits. The crucial factor is whether these profits arise under open competitive conditions. Competition should incentivize suppliers to develop better products, more compelling services, or more efficient processes; therefore, safeguarding it is a fundamental task of a social market economy. Merely protecting existing suppliers would be something fundamentally different.

For Germany, regulatory barriers to market entry and weak corporate dynamics are explicitly described as obstacles to innovation and productivity growth. This argues for a competition policy that achieves more than the occasional sanctioning of spectacular violations. Access for new companies, customer switching options, and transparent rules for digital markets should be understood as integral components of a performance-based regulatory framework. Size alone is neither proof of guilt nor a license to violate regulations.

Government support should also be subject to this standard. Aid can serve an economic policy purpose under certain conditions, but should not be mistaken for a permanent guarantee against adjustment. A consistent performance-based approach would pose the same questions to employees, companies, and public institutions: What verifiable contribution is being made, what alternatives exist, and who bears the consequences of a wrong decision? Privatizing profits and regularly shifting avoidable losses onto the general public would be difficult to reconcile with this principle.

Entrepreneurship needs more than applause

The trend in business start-ups contradicts the notion that economic initiative has fundamentally disappeared in Germany. Around 690,000 people were identified as founders in 2025, compared to 585,000 the previous year. However, approximately 70 percent of these were part-time ventures; the increase was largely driven by this form of self-employment. Therefore, the total number alone should be treated neither as evidence of a widespread start-up boom nor as meaningless.

Part-time startups can offer a gradual entry into the workforce. They can also address the desire for supplemental income without necessarily leading to a larger company. Therefore, for a realistic assessment, not only startup numbers are relevant, but also stability, innovation, investment, and the potential to develop a viable business model from a small venture. Not every startup needs to become a rapidly growing technology company to be economically viable.

A better performance-oriented culture would not only acknowledge entrepreneurial risk rhetorically, but also create practically manageable conditions. This includes understandable rules, predictable processes, adequate access to financing, and a realistic second chance after a business failure. Founders describe bureaucracy as a burden, tying up time that is then unavailable for building the business. Therefore, anyone expecting initiative should examine whether government requirements achieve their respective objectives with a reasonable amount of effort.

Good leadership beats blind pressure to perform

Within a company, the daily decisions determine whether performance orientation is productive or destructive. Financial incentives can improve effort and results, but their effectiveness depends on their design; poorly chosen rewards can encourage undesirable behavior and weaken intrinsic motivation. A bonus is therefore no substitute for a well-thought-out management model. Above all, it must be clear which behaviors are actually being rewarded.

A thought experiment illustrates the problem: If customer service is measured solely by the number of completed cases, a quick turnaround might become more attractive than a thorough solution. Similarly, if only the quantity of processed items is considered in the warehouse, quality and safety can be overlooked. Such examples are not specific to individual companies, but rather highlight a general design issue: An easily measurable metric is not automatically a good reflection of the desired performance.

Sound corporate management should therefore combine quality of results, collaboration, and individual responsibility. Research on high-performing work organizations points, among other things, to the importance of coordinated personnel practices, decentralized decision-making, further training, and employee participation; however, the evidence for these factors is not equally causally sound for every context. This does not yield a universal management recipe. But it does provide a clear direction: Performance expectations become more credible when employees have influence over their work, understand the goals, and are allowed to develop the necessary skills.

Digitalization must make work more effective

Technology offers a different answer to the question of performance than simply extending working hours. In the 2025 business survey, 26 percent of the surveyed companies used artificial intelligence; for large companies with 250 or more employees, the figure was 57 percent, and for companies with 10 to 49 employees, it was 23 percent. Such usage rates initially describe prevalence, not necessarily a proven overall economic productivity gain.

The obstacles are concrete. Among companies that have not yet used AI but had considered doing so, 72 percent cited a lack of knowledge, 62 percent unclear legal consequences, and 60 percent data protection or privacy concerns as reasons for not using it. This reference group is important: These figures should not be interpreted as generalizations about all companies. However, they do show that the economic use of new technologies requires more than simply purchasing a software license.

In industry, logistics, and services, digitalization should be measured by whether processes actually become more reliable, faster, or more resource-efficient. This requires considering suitable data, adapted processes, and qualified employees. An organization's performance then lies precisely in simplifying repetitive tasks and deploying human skills where judgment and responsibility are required. A modern performance culture should therefore not dismiss technological relief as mere convenience, but rather assess its verifiable economic benefits.

Health is not the opposite of performance

A willingness to perform should not be confused with unlimited resilience. An international study linked regular working hours of at least 55 hours per week, compared to 35 to 40 hours, with an estimated 35 percent higher risk of stroke and a 17 percent higher risk of dying from ischemic heart disease. These findings pertain to long working hours and do not permit a blanket statement that every additional hour of work is detrimental to health.

Nor does it follow that exertion should be avoided altogether. The crucial point is to distinguish between demanding work, temporary peak workloads, and sustained, unsustainable strain. An economically sound organization should not only aim to exploit workforce capacity in the short term. It should consider its long-term employability as part of its own performance and not wait until employees are already absent to take protective measures seriously.

This is particularly true for the debate on longer working lives. Better working conditions and further training for older employees are among the explicitly mentioned prerequisites for strengthening their labor force participation. A blanket standard would underestimate the differences between physically demanding work and other activities. A convincing performance requirement should therefore not demand identical workloads, but rather create realistic opportunities to utilize existing experience and skills effectively for as long as possible.

The state as enabler of performance

Those who expect higher performance from companies and employees must also include the efficiency of public institutions in the same debate. For Germany, high administrative burdens, slow digitalization, and limited administrative capacity are identified as key areas for reform. A state that wants to stimulate private initiative should therefore not only look at the behavior of its citizens, but also at the quality of its own decisions and processes.

Government performance should not be confused with simply processing the highest possible number of cases. From an economic perspective, the key questions are whether issues are resolved reliably, lawful decisions are made transparently, and unnecessary duplication of effort is avoided. Speed ​​is important, but not the only factor. A swift but flawed process can lead to higher subsequent costs than a thorough process with clearly defined responsibilities. The goal should be a better balance between legal certainty, clarity, and processing speed.

Spending policy also needs a performance-based benchmark. Additional funds should not automatically be equated with better results. A proper evaluation would consider objectives, actual effects, and missed alternatives. This applies to funding programs as well as to education, healthcare, and digitalization. Those who judge the state solely by its size overlook this question of quality. A sustainable social market economy requires neither a fundamentally passive state nor one that is as omnipresent as possible, but rather a state that is capable of action and accountable.

Without growth, social security shrinks

The aging population intensifies the link between economic performance and social security. It increases the pressure for reform of pension, healthcare, and long-term care systems, while simultaneously reinforcing the importance of a sufficient labor supply. Therefore, additional benefit promises should always be assessed based on how they are financed and what burdens they will place on future generations. A fair claim on benefits for current recipients cannot be evaluated independently of the obligations of future contributors.

Growth should not be equated with a continuous expansion of any kind of production. What is crucial is a greater capacity to provide socially needed goods and services with existing resources. Productivity, labor force participation, and functioning institutions are therefore inextricably linked. A strategy focused solely on increasing working hours would be just as short-sighted as hoping that new technology can solve all demographic and organizational problems on its own.

This results in a demanding standard for political priorities. Additional work should offer a demonstrable income advantage. Support should enable self-employment without exploiting existential hardship as a motivational tool. Competition should favor new and better providers, not protect existing privileges. Education should set high standards while simultaneously enabling upward mobility. Such a system would not pit performance against solidarity, but rather measure both by whether people actually gain more opportunities. The decisive factor would then not be the volume of pronouncements about performance, but the quality of the conditions under which performance can flourish.

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