Revolt Of Germany's Moonlighters

Germany's new tax on second jobs has the nation in an uproar

Every morning at 3 for the past year and a half, Elsbeth Dittmann has driven through the dark streets of Dortmund, Germany, delivering the morning paper to 120 customers. A few hours later, she would start her day job as a health-care aide. The 59-year-old German has been moonlighting to support her 20-year-old son and her husband, a former bricklayer with heart trouble. But on Apr. 1, her part-time job became subject to a hefty 44% tax, slicing her monthly wage nearly in half, to $195. So she quit. "I didn't do it for kicks," Dittmann says. "I need the money."

From Berlin to Baden-Baden, Germans in low-paying jobs are resigning in droves. The reason: For the first time since the late 1970s, Chancellor Gerhard Schroder's government is requiring workers to pay social security and income taxes on second jobs paying under $350 a month. At the same time, the government is stepping up investigations of self-employed workers, who are excused from paying social security taxes. The measures have sparked another outcry against the Schroder government's heavyhanded attempts to impose new restrictions on Germany's already overregulated labor markets.

UNION BACKING. Schroder's moves are aimed at boosting tax and other revenues needed to pay for Germany's social safety net. They're also intended to pressure employers to hire full-time workers to occupy jobs now done by less-costly part-timers. Indeed, Germany's biggest trade union, IG Metall, is largely behind the moves. The new law taxing the 1.4 million workers with low-paying second jobs was rammed through the Bundestag by Labor Minister Walter Riester, formerly deputy chairman of the metal workers' union. The unions backed the plan because they argue that it's not right for moonlighters to be free from taxes when full-time employees must pay taxes on any overtime work. The unions also believe the new taxes could help reduce Germany's 10.6% unemployment rate by turning part-time work into full-time jobs.

Instead, the measures are stirring controversy and charges that the government is just destroying legitimate jobs. "This is the totally wrong approach. It's just piecemeal engineering," says Adrian Ottnad, an economist at the Bonn Institute for Social and Economic Research. He argues that the government should be working on more sweeping reforms to build flexible labor markets. Karl Heinz Dake, president of the German Taxpayers Assn. in Wiesbaden, adds that the crackdown on moonlighting won't create new jobs but will likely force more people into the booming black economy.

"THE WRONG PEOPLE." Newspapers are publishing furious debates on the issue. That's partly because the long-protected "630-mark," or $350-and-under, jobs are held mostly by women, students, and pensioners--those who find it hardest to find work. "This is hitting the wrong people," says Jurgen Schneider, head of circulation in Dortmund for the newspaper Westdeutsche Allgemeine Zeitung, and Dittmann's boss. A demonstration is scheduled for May 31 in Bonn, with one regional chapter of the Hotel & Restaurant Assn. alone aiming to send 50 busloads of protesters.

Meanwhile, employers in service businesses complain that the government is hurting them just as the country is trying to build up its service sector. Hotels, restaurants, and cleaning services are expected to lose up to 800,000 employees. Clients of Central Cleaning, which sends part-time workers to clean offices in Frankfurt, will find dirty carpets in the morning. Soccer fans at Gottlieb Daimler Stadium in Stuttgart will have to wait in longer lines for sausages and sodas because kiosk owner Walter Daferner had to shut two of his eight outlets after half of his employees quit.

The Labor Ministry is surprised by the outcry. "We'll listen to the criticisms and consider whether a change is necessary," say Klaus Achenbach, state secretary for Riester. He argues that it is not fair that someone with a second job doesn't have to pay taxes.

Still, the crackdown on moonlighters may well have the opposite impact on the economy than the government intends. It's one thing for Germans to deal with late newspapers and dirtier carpets. It's another for the government to clamp down on flexible labor practices just when Germany needs more jobs.