BASIS-INFO IN-PRESS
31 - 2000 / Economy
The liberal professions In Germany
by
Annegret Sorge
Code No.: 700 Q 3116
Summary
Germany's 702,000 or so freelance providers of professional services are an important group of small and medium-sized services companies in the country. They create roughly 7 % of the gross domestic product. They provide jobs for some 2 million employees and training for roughly 161,000 young people. They are characterised by a large diversity of professions, particularly freelance healing professions, Sawyers, business consultants and tax advisers, freelance technical and scientific professions, and professions in the cultural field- The breadth of occupations covered by the sector is reflected in the numerous professional associations and supraregional organisations. The Federal Government supports them in a variety of ways. The single European market is confronting this group of occupations with new challenges, but also with new opportunities.
Contents
Page
The liberal professions in Germany. 1
Liberal professions: what does this include? 1
What is a liberal profession? 3
What distinguishes a liberal profession? 4
Income structure of the liberal professions 5
The economic impact of the liberal professions 5
a) Share of gross domestic product 6
b) The impact of liberal professions on the labour market 7
c) Training provided by members of the liberal professions 7
The liberal professions -opportunities for women 9
Promotion of the liberal professions by the Federal Government 10
The liberal professions and the European Union 12
Organisations of the liberal professions 13
Internet addresses on this topic 16
Inter Naticnes / IN-Press
Editor: Dr. Gisela Libal
Translator: Andrew Sims
Production: ilona Orthen
Status: October 2000
The liberal professions in Germany
The liberal professions ("die Freien Berufe", a term embracing a group of professional services) represent an important sector of German small and medium-sized firms[1]. They are characterised by a great diversity of occupations in the services sector. In macroeconomic terms, the significance of this sector will continue to grow, due to the "tertiarisation" of the economy, i.e. the world-wide growth in services at the expense of the traditional goods-producing and manufacturing sectors.
Liberal professions: what does this include?
The sector of liberal professions embraces people who work on a freelance basis in one of the occupations mentioned below; however, the definition does not include people running their own commercial operation, e.g. retailers:
• freelance healing professions (e.g. doctors, dentists, non-medical practitioners. speech therapists)
• freelance legal, business and tax consultancy professions (e.g. Sawyers, tax advisers, business consultants, notaries)
• freelance technical and scientific occupations (e.g. architects, freelance informatics specialists, engineers, sworn experts)
• freelance cultural professions (e.g. artists, writers, journalists, teachers, translators).
The table below gives an indication of the number of freelance professionals in Germany, broken down by occupation group:
Table 1: Members of the liberal professions in Germany (status: 1.1.2000)
Occupation / Number in the west of Germany / Number in the ast of Germany / Total number in GermanyDoctors / 100,725 / 17,956 / 118,681
Dentists / 42,221 / 9.895 / 52,116
Vets / 7,932 / 2.176 / 10,108
Pharmacists / 18,656 / 3,2"!4 / 21,870
Other freelance healing professions / 46,400 / 7,500 / 53,000
Lawyers / 71,700 / 6,900 / 78,600
Patent lawyers / 1,652 / 146 / 1,798
Notaries / 1,101 / 556 / 1,657
Tax advisers/ tax representatives / 44.379 / 2,599 / 46,978
Accountants/auditors / 9,617 / 224 / 9,841
Business consultants / 12,900 / 1,400 / 14.300
Other business consulting professions / 32,900 / 5,000 / 37,900
Architects / 45,320 / 5,121 / 50,441
Consultant engineers/
engineers / 28,200 / 11,800 / 40,000
Experts / 9,900 / 1,600 / 11,500
Other technical and scientific freelance professions / 16,000 / 4,300 / 20.300
Freelance cultural professions / 116,000 / 16,000 / 132,000
Total / 605,603 / 96,387 / 701,990
Status: 1,1.2000; dentists and architects: status: 1.1.1998
Source. German Institute on Liberal Professions, Erlangen-Nuremberg University
At almost 37 %, the healing professions account for the largest group of freelance professionals, followed by the legal, business and tax consulting professions with approx. 27 %, the freelance cultural professions with approx, 19 % and the freelance technical and scientific professions with approx. 17 %.
The number of freelance professionals has risen continuously since 1978, as shown in figure 1:
Figure 1: Number of people working in the liberal professions
Source; Federal Statistical Office, Institute on Liberal Professions, Nuremberg, Federal Assoc. of Liberal Professions
In 1989, there were roughly 415,000 freelance professionals in Germany. Following German reunification, their number rose to 514,000 in 1992. The shift in society and technology to more and more new, additional services is continually creating new liberal professions, particularly in the computer business. In 1999, one in six self-employed people was a member of the liberal professions.
What is a liberal profession?
The Federal Association of Liberal Professions provides the following definition of the "liberal professions": "In view of their special professional skills, members of the liberal professions deliver intellectual services personally, on their own responsibility and independently in the interest of their client and of the general public. Their work is generally subject to specific professional rules, either on the basis of government legislation or in line with stipulations laid down independently by the body representing the profession, which safeguard and develop the professional approach, the quality and the relationship of trust with the client."
The Act on the Establishment of Partnership Companies, which entered into force in 1995, provided the first definition in law of the liberal professions. Section 1 sentence 1 of the Act defines the activities of the liberal professions as: ”Independent work as doctors, dentists, veterinary surgeons, non medical practitioners, physiotherapists, midwives, masseurs, psychologists, members of lawyers chambers, patent lawyers, accountants, tax advisers, consultant economist and business economists, sworn auditors, agents in tax matters, engineers. Architects, expert chemists for commerce, pilots, experts, journalists, picture album producers, interpreters, translators and similar professions, scientists, artists, writers, and school and kindergarten teachers”.New occupations are not initially covered by this law. It also disregards those liberal professions which include both freelance and commercial elements and which are therefore not included in the liberal professions under German tax law. Prior to the adoption of the Partnership Companies Act, the definition of the liberal professions was mainly contained in tax law, since the members of the liberal professions are distinguished from traders and are therefore not subject to trade tax. Accordingly, a person was still classed as a member of the liberal professions “If the makes use of the assistance of workers skilled in the professions; the precondition is that he acts on the basis of his own professional skills in a leading role and on his own responsibility”.
In view of the different ways of looking at the liberal professions, it is not always possible to categorise certain occupations clearly. This means that statistics about the liberal professions can only be approximate.
What distinguishes a liberal profession?
A factor common to most of the liberal professions is that they provide important services by supplying the population and business with advice, assistance, support and representation. They do so on their own responsibility, objectively and without being subject to instructions from third parties. The members of the liberal professions have a special relationship of trust with their patients or clients.
The liberal professions often hold a place between the state and commerce and industry. The notary, the publicly appointed surveyor or the publicly appointed expert, for example, are occupations which involve work of an official nature or which are an element of government administration. A pharmacist, by contrast, is on the borderline of commercial activity, and is subject to trade tax; despite this, the occupation of pharmacist is counted as one of the liberal professions in the health sector.
Income structure of the liberal professions
Thee latest data currently available from the Federal Statistical Office on wages and incomes in the liberal professions date from 1995. Table 2 gives an overview of persons liable to pay tax who primarily earn their money on a freelance basis. It can be seen that the income structure of the members, of the liberal professions varies widely. Approx. one-quarter of members of the liberal professions have a very low income (up to less than DM 20,000 a year), another quarter earns taxable income of between DM 60.000 and DM 200,000, and only around 2.5 % earn more than DM 500,000 a year.
Table 2: Persons liable to taxation with income from predominantly* freelance activity (1995)
Income from freelance activity from ….. to upto ……. DM / Number of persons liable to pay tax / Number of persons in %
Below 1 / 5,393 / 0,86
1 – 20,000 / 153,754 / 24,43
20,000 – 40,000 / 90,603 / 14,39
40,000 – 60,000 / 67,186 / 10,67
60,000 – 100,000 / 92,097 / 14,63
100,000 – 200,000 / 119,197 / 18,94
200,000 – 500,000 / 84,309 / 13,39
500,000 – 1 million / 13,755 / 2,19
1 million – 5 million / 3,163 / 0,5
5 million and more / 34 / 0,01
Total / 629,491 / 100
Source: Federal Statistical Office
*The income from freelance activity is greater then
the total of all other income.
The economic impact of the liberal professions
With roughly 702,000 self-employed people (as of 1.1.2000) and approximately 2.7 million employees, the liberal professions make a vital contribution to growth and employment in the German economy.
a) Share of gross domestic product
One way to measure the economic impact of the liberal professions is their contribution to GDP. The output side of GDP, also termed the gross value-added, is the total of the goods and services produced by domestic economic sectors minus the upstream input from other economic sectors. Figure 2 shows GDP in 1999 at current prices, broken down by sector. The contribution by each sector to GDP is thus apparent. At a detailed level, the output side of GDP is calculated for 60 sectors, but not explicitly for the liberal professions.
Figure 2: Gross domestic product in Germany by sector (1999, unadjusted, without assumed banking charges, taxes on goods and subsidies)
Source: Federal Statistical Office, August 2000
The gross value-added by the liberal professions is distributed across the output of all sectors. There is no separate figure for the liberal professions, nor does the Federal Statistical Office plan to introduce one at present. The sectoral breakdown of the German economy is based on the binding European system called NACE, Rev. 2. This categorisation does not provide for inter-sectoral compilations (e.g. crafts, SMEs or liberal professions), since these generally follow specific national definitions.
According to an estimate by the Institute on Liberal Professions in Nuremberg, the members of this sector accounted for roughly 4 % of GDP up to the early 1980s. This figure has risen clearly over the last 15 years, and now stands at just under 7 %. This trend looks likely to continue, as there is no end in sight of the movement towards a services society. The significance of the liberal professions is rising in line with the growing demand for high-quality and individual services.
b) The impact of the liberal professions on the labour market
According to the latest figures from the German Institute on Liberal Professions, members of the liberal professions employed some 2 million people in Germany in 1998. In total, 2,660,000 people were working in the sector. This figure breaks down as follows:
- 1,680,000 employees liable to pay social security contributions (63,1 %),
- 668.000 self-employed (25.1 %),
- 161,000 trainees (6.1 %) and
- 151,000 family members working alongside, but not required to pay social security contributions (5.7 %).
c) Training provided by members of the liberal professions
The liberal professions make a significant contribution to the vocational training of young people in Germany. In 1999, the liberal professions provided the third-largest amount of training, with 50,564 new apprenticeship contracts. The largest number of trainees (332,325 new apprenticeship contracts) was in "industry and trade", which includes banks, insurance companies, hotel, catering and transport firms; it was followed by the craft sector with 217,030 new contracts (cf. Table 3).
Field of training / Number / Year-on-year changeIndustry and trade / 332 325 / 8.6
Crafts / 217 030 / -0.1
Liberal professions / 50 564 / -1,0
Public service / 15 841 / -1,2
Agriculture / 15 528 / -2,4
Home economics / 5 154 / -5,2
Maritime shipping / 145 / -11.0
Total / 638 587 / 4.2
Source: Federal Statistical Office
The training provided by the liberal professions particularly includes vocational training in the field of specialised assistants to lawyers, patent lawyers, notaries and tax advisers, and assistants to doctors, dentists, veterinary surgeons and pharmacists. More than 90 % of the people receiving vocations! training from members of the liberal professions are women, according to the Federal Association of Liberal Professions (19S9). In -1999, for example, 6.9 % of trainees opted for the occupation of doctor's assistant, and 6.1 % chose to become a dentist's assistant. These occupations are the second and fourth most popular vocations! training courses for women.
According to the Federal Institute on Liberal Professions, a total of 51,043 apprenticeship contracts were signed in the liberal professions sector In 1999, 45,485 of them in the west and 5,55S in the east of Germany,
In the last five years, the liberal professions have provided between 50,000 and 57,000 training places a year. In comparison with other sectors, however, the liberal professions have been accounting for a declining percentage of all training places. In 1995, approx. 9.8 % of all training contracts were for apprenticeships in the liberal professions; in 1997, the figure was 8.8%, in 1998 8.3 % and in 1999 only 7.9 % (source: Federal Statistical Office). The main reasons for this decline are a reduction in the number of people receiving training as dentist’s assistants and as specialised assistants to lawyers and notaries. The liberal professions also train office clerks and draughtsmen, but they are included in different statistical categories. An estimate by the Institute on Liberal Professions for 1997 put the number of training places in these jobs at around 11,000. Also, 7.7 % of the training places offered by members of the liberal professions in 1999 were not taken up, since there were no suitable applicants to fill the posts (source: Federal Association of Liberal Professions).