What is the truth about Germany's skilled-labor shortage?

 

IT specialists, nurses, and even hairdressers - Germany lacks skilled personnel seemingly everywhere. Is the skills gap homemade, and ultimately an issue of wages and conditions?

Bonn's labor market seems broken these days. Employers, not workers, are desperately seeking employees. Cafes in the town center display "employees wanted" notices.

A local shoemaker told DW that he is unable to find an apprentice, as his children prefer to study at university.

The blacksmith at the nearby equestrian center is similarly desperate because the apprentice he trained for several years did not want to stay on. In the current economic situation, finding an adequate replacement is nearly impossible. One of his neighbors who works for a large corporation, the shoemaker said, is also looking for staff — but even larger organizations cannot find the IT specialists they need.

According to a recent report from the Economy Ministry, Germany's shortage of skilled workers is "acutely affecting" many companies' Growth potential.

The report noted that more than 50% of companies believe that shortages in many sectors will worsen in the coming years as members of the so-called baby boom generation retire. According to the gloomy outlook, Germany will have a shortage of about 7 million skilled workers by 2035.

Low wages and record employment

Simon Jäger of the Institute of Labor Economics in Bonn told DW that Germany's high employment rate "speaks against a shortage of skilled workers."

According to Jäger, young people entering the labor market are generally better educated than those who are retiring in Germany's largest economy, where about 46 million people are employed.

Last year, German wages were 5.7% lower than they were 10 years ago, which is shocking. "That doesn't fit with the thesis that labor is extremely scarce," he said, explaining that in a free market economy, prices are determined by supply and demand, which is why a scarce good, like labor in this case, should become more expensive rather than cheaper.

The untapped potential of Germany

According to Jäger, the German labor market is structured in a way that makes overcoming the skills gap difficult.

In Germany, there is still a massive "silent reserve" of labor, as he describes those who "like to work but are unable to enter the labor market." A significant segment of part-time workers would also be willing to work full-time if conditions allowed.

Under a so-called married filing jointly scheme, tax benefits would incentivize, for example, women to work less than their husbands or deter them from seeking employment altogether, Jäger explained.

Working mothers could be more likely to participate in the labor force if they had better childcare options and more flexible working hours, according to a survey by the Federal Employment Agency. According to the survey, 11% of part-time employees working fewer hours would like to work longer, with the main reason given as a lack of care options for children or the elderly as the primary reason for working fewer hours.

The chief of the Federal Employment Agency, Andrea Nahles, also sees great potential in keeping elderly workers in their jobs after retirement. According to Nahles, more than a million workers are willing to continue working, and many of them are interested in "doing meaningful work part-time." Employers should find creative solutions to this problem for them, she said.

The best way to deploy scarce resources

He gave the example of a hairdresser in his hometown of Bonn, who was desperate for staff. She had offered her staff only four days a week and received many applications in return.

In addition to improving work-life balance, Jäger said cutting working hours could also improve many other professions. In nursing, for example, he said more than 200,000 people had left the profession in Germany and might be interested in returning once working conditions and pay were improved.

Ultimately, labor shortages are about scarce resources. While we don't have an infinite number of workers, the question arises: Where do we want to use this resource?"

Roland Berger's Stefan Schaible believes that companies must radically change their work and living arrangements. Employers who fail to invest in their staff are "in massive trouble," he told DW.

To keep our economy running, Germany needs skilled immigration

The skills gap cannot be overcome by tapping the country's hidden labor potential, says German Labor Minister Hubertus Heil. "We still need skilled immigration to keep our economy running, even if we do everything we can domestically," he said recently.

Within the next decade or so, Germany would need 400,000 foreign workers to close the widening gap. At the moment, government-sponsored skilled immigration programs bring in about 60,000 people.

"When people are asked which countries they would like to immigrate to, Germany, the US, some other European countries, and New Zealand regularly rank high," said Jäger.

A functioning rules-based state and a stable political system, he said, are "advantages that are important from a long-term perspective," despite the German language being a barrier. A migration's income and what they can afford with it would also be important.

But most importantly, he said, was a culture that made one feel welcome and the prospect of becoming a German citizen one day.