Andreas Kluth

Germany’s Anti-Digital Law Is a Case Study in Stunting Progress

If you want to know why Europe’s largest economy is a digital laggard — indeed, if you want to know why progress is difficult anywhere — regale yourself with a trip into the fine print of a new German law governing employment contracts.

The occasion for the anecdote is a directive from Brussels requiring all 27 members of the European Union to update their legislation on what employers must stipulate when hiring people. This concerns everything from pay to vacation and other conditions. The world of work has changed dramatically since the EU first opined on these matters in 1991 — just think of the gig economy, teleworking or home offices. So a good legislative tweaking makes eminent sense.

The EU’s instructions mention explicitly that “in light of the increasing use of digital communication tools, [this information] can be provided by electronic means.” Duh, you might say. But it’s good to make clear that employers and employees should have a choice for their contracts: paper, PDF or both.

Except Germany isn’t having any of it. It just passed a law that completely bans digital contracts and signatures. Whether you’re a coder who finds jobs online, an Amazon delivery guy or a Dilbert character, you’ll now get the fine print of your terms on paper — the dead-tree kind. And it’ll have your new boss’s signature in just-dried ink. If employers provide a digital contract instead, they’ll get fined up to 2,000 euros ($2,049) for each instant.

This sort of thing is, of course, exactly what you would have expected from the four administrations under former Chancellor Angela Merkel. During her 16 years in office, it became a standing joke that every mainstream party in every German election promises digital transformation — and forever will, because it never comes.

But the new government under Chancellor Olaf Scholz was supposed to break that pattern. The coalition consists of Scholz’s center-left Social Democrats, the environmentalist Greens and the pro-business Free Democrats. The latter, in particular, have made digital transformation their central message.

Then again, as Otto von Bismarck famously observed, laws are like sausages, and it’s best not to see them being made. If you’d looked closely at this legislation, you would have seen the German Trade Union Confederation in the background. The DGB, as this union lobby is known in German, holds particular sway with the Social Democrats, who run the labor ministry, which penned the legislation.

While the law was being drafted, the DGB categorically ruled out allowing any electronic medium for contracts. So I asked them: For heaven’s sake, why?

To protect “precarious” workers, a DGB spokesman explained to me. Many of them only have a smartphone but no printer or broadband connection at home, and don’t necessarily check email or log on to the corporate intranet. Also, if the employee and employer later end up in court, a physical paper contract is better, he thinks. Besides, he reminded me, people never look at their (digital) telecom contracts either.

What an odd line of reasoning — and how typical of the attitudes that gum up progress everywhere, all the time. The DGB, and thus German law, is banning all digital employment contracts — millions and millions — because some individuals would be better served with paper versions.

What about simply making employers ask recruits how they’d like to receive their contract? Make paper an option — not a mandate. By the DGB’s logic, the government should also ban Apple Pay and all other digital wallets, plus credit cards, and only allow bills and coins, because somebody somewhere is most comfortable using that payment method.

Now multiply this approach hundreds, thousands, millions of times — and you get Germany. The European Commission regularly ranks EU member countries by their digital development. Overall, Germany is currently in the middle, at 13. But that’s because Germany has recently improved the relevant physical infrastructure, from broadband lines to wireless networks, where it is now above average.

In the mental infrastructure, it is another story. In usage of e-invoices, for example, Germany is near the bottom. In the prevalence of e-government services, it ranks 24th, ahead of only Italy, Bulgaria and Romania. A different report, by the ESCP Business School in Berlin, is even more scathing. It finds that Germany is one of the countries that dropped farthest in digital competitiveness. Within the Group of 20, a forum of developed economies, it ranks third from last.

What Germans sometimes miss is that digital progress isn’t just about the cables, antennae and gizmos you have; it’s also about what you’re willing to do with them, and whether you’re open to change.

Analysts are now estimating the cost of the new law in terms of added bureaucracy, paper, energy consumption and carbon emissions. It’s big. Some are wondering what delivery method the DGB will mandate next time. Stagecoaches? Carrier pigeons? Both would require extensive infrastructures in animal husbandry. Maybe the Scholz government should start preparing.