In the race to rethink the work-life balance, will the Germans get there first?

In the coming days, millions of self-employed people will claim their “Rishi money”: the second and final payment from the Treasury to compensate them for loss of income during the lockdown. The sums vary, but they are capped, like the furlough scheme, at 80 per cent of last year’s profits, up to a maximum of £6,570 for three months. Nobody earning more than £50,000 per annum is included and some who earn less have also missed out for various more or less arbitrary reasons. So far, however, 2.7 million have benefited from the Self-Employment Income Support Scheme.

Rishi money is paid on top of other earnings but it is taxable and, despite a few errors, the system has worked well. It has provided a lifeline for many who would otherwise be destitute, through no fault of their own. Not surprisingly, the scheme is very popular with its beneficiaries.

In effect, the Chancellor has been conducting an experiment in providing a basic income on a grand scale, albeit not a universal one. Never before in the UK have so many people been subsidised in this way while continuing to work — if they are able to find it. Economists and other social scientists will no doubt study the effects on productivity of the growing proportion of the population who are self-employed. The fact that the British economy has been growing fast since May, when the first Rishi money was paid out, at least suggests that it has had no disincentive impact. On the other hand, the cost so far is £7.8 billion and by the time the scheme ends that figure will have at least doubled. This money, like the rest of the cost of the pandemic, has been borrowed and will eventually have to be repaid from taxation. As Brian Griffiths and others have argued in TheArticle, the spectre of inflation now haunts the land. Rishi Sunak risks entering the history books, not as a Conservative Robin Hood, but as the most profligate Chancellor of all time.

In Germany, however, the idea of a universal basic income is gaining traction. Despite an abortive test in Finland three years ago, the Germans have initiated an ambitious experiment of their own. For three years, 120 people will receive a basic income of €1,200 (£1,085) a month. The scheme is not funded by the state, but by up to 140,000 private donors who believe that it will demonstrate, once and for all, the advantages of rolling it out on a universal scale. German society places a premium on security, solidarity and fairness — all of which values are realised by a universal basic income, according to its advocates. Sceptics argue that it would not only act as a disincentive to work, but is unaffordable to boot.

Even more striking is the lively German discussion now under way about the idea of a four day week. The country’s largest trade union has proposed that putting some workers on a 30-hour week would soften the impact of the Covid-19 crisis. IG Metall, which has 2.3 million members, points to the success of a similar experiment in Japan, where Microsoft has given 2,300 employees an extra day off yet has raised productivity by 40 per cent. The union’s proposal is supported by the Federal Minister of Labour and Social Affairs, Hubertus Heil, as long as employers can be persuaded to go along with it. So far, however, business representatives are resolutely opposed to the idea, as is Angela Merkel’s Christian Democratic Union, which dominates the ruling coalition to which Heil, a Social Democrat, also belongs.

However, the combination of a universal basic income and a shorter working week would not necessarily wreck the German economy. A technology company in Bielefeld, Digital Enabler, claims to have increased productivity by 37 per cent as a result of reducing the working day for its staff to five hours, from 8 am to 1 pm. Such paradoxical outcomes may not be forthcoming in more traditional trades and industries, but offering employees more leisure does not seem to undermine the famous German work ethic.

Unfortunately, it remains the case that British workers on average need to work five days a week in order to produce as much as Germans do in four. This productivity gap has not significantly closed, despite the best efforts of successive British governments. Germany is evidently refusing to let the Covid-19 crisis go to waste. In the race to rethink the work-life balance, the Germans may — as usual — get there first. “ We need good ideas if we are to come through this crisis together,” says Hubertus Heil. In this field, as in others, the British have plenty to learn from our neighbours across the North Sea.