Major Government Reforms in 2026 Aim to Boost Economy and Reshape Work Life

In 2026, Germany is seeing significant policy reforms affecting businesses, employees, and public services as the coalition government rolls out measures meant to stimulate the economy and reform labor regulations.

Starting January 1, 2026, the minimum wage will rise to €13.90 per hour, with plans to increase it further to €14.60 in 2027. These changes come alongside an ambitious strategy to cut bureaucracy by 25%, which the government estimates will save the economy around €16 billion. Additional fiscal shifts include a new CO2 tax that will increase heating costs, adding approximately €84 to typical household expenses. Public transport users will face a fare increase as the Germany ticket price climbs to €63 monthly from €58.

Pension systems, social security measures, and tax benefits for retirees are also being adjusted to reflect evolving economic conditions. Environmental reforms come into play with mandates for photovoltaic installations on new buildings in some regions, aligning with broader sustainability goals. Business startups will benefit from streamlined processes aimed at fostering entrepreneurship.

Meanwhile, a heated debate surrounds proposed changes to part-time work rights. The CDU party advocates limiting these rights, arguing that reducing part-time flexibility could strengthen the economy and social welfare. However, major companies like Mercedes-Benz and Bosch emphasize the necessity of flexible working models that accommodate employees’ diverse needs. Employers’ associations warn that imposing stricter requirements might create unnecessary bureaucracy. Federal Minister Alexander Dobrindt opposes the CDU's limitations, emphasizing the importance of personal choice in work arrangements, citing that many part-time workers are in such roles due to family or educational commitments rather than lifestyle preferences.

As these reforms take hold, Germany is navigating a balance between economic efficiency, environmental responsibility, and social welfare, with ongoing discussions about labor rights highlighting the challenges ahead.