The End of Welfare? A quiet social revolution is underway in Germany.

Byline: Stefan Theil

Beneath its perpetual sense of malaise, a quiet revolution is sneaking up on Germany. Two weeks ago the upper house of Parliament passed the final phase of Chancellor Gerhard Schroeder's Agenda 2010, the landmark reform package aimed at getting Germany back on the track to growth. So far, the measures have been mostly superficial, hardly shaking up the country's ingrained culture of entitlement. But the new law, to take effect in January, packs an unprecedented punch. It no less than eliminates Germany's long-established system of virtually lifelong unemployment benefits, shifting up to 2 million recipients onto the far less lucrative welfare rolls. Full unemployment benefits will be cut from 32 months to 12. Some Germans are calling it "the end of welfare as we know it."

That may be premature. But there's no overstating the importance of what's happening. Since last year, all of Germany's 16 Lander, or state governments, have reversed a decades-old trend toward cutting working hours. Instead, they've increased civil servants' workweeks from 38 hours to as much as 42--with no additional pay. In late June, Munich-based Siemens hiked hours from 35 to 40 at its mobile-phone plants. Companies like DaimlerChrysler and truckmaker MAN say they'll follow suit. Two thirds of German workers--who have labored the least and cost the most in the world--now say they are willing to work longer for less if it means they keep ...