Germany labor market sees record part-time rates and tax reform disputes

Germany is experiencing significant shifts in its labor market and fiscal policy. The part-time employment rate has reached a record high of 40.3 percent, as the service sector, including health and social care, grows while the industrial sector loses full-time positions.

Simultaneously, unemployment among people with severe disabilities has risen sharply. According to the German Trade Union Confederation (DGB), 192,000 people with disabilities were registered as unemployed in July 2026, a 3.4 percent increase from the previous year. This group faces higher unemployment rates than the general population due to structural barriers and workplace biases.

On the political front, a proposed income tax reform led by Finance Minister Lars Klingbeil has caused friction within the governing coalition. The plan aims to provide 10 billion euros in annual relief for families and low-to-middle-income earners by increasing the basic tax-free allowance. However, the reform is criticized by the CDU-led Ministry of Economics as a ‘secret tax increase,’ as it is partially funded by higher taxes on high earners and corporations. Additionally, plans for tax-free bonuses for Sunday and holiday work have faced criticism from the Taxpayers Federation for excluding over 20 million employees without collective bargaining agreements.