The labor shortage in Germany is acute. The main reason is demographic developments. But the problem is exacerbated by declining individual working hours, according to the Ifo Institute.
According to the Munich ifo Institute, falling individual working hours are exacerbating the labor shortage in Germany. The number of employed people has increased from around 40 to 45 million since 1991, said ifo President Clemens Fuest. However, the total hours worked remained the same during the period. “The 45 million work as much as the 40 million used to.”
Big contraction expected in 2030
According to the Nuremberg Institute for Labor Market and Occupational Research (IAB), almost half of all German companies were unable to fill positions for skilled workers in the first half of last year. In MINT professions alone – the abbreviation stands for mathematics, computer science, natural sciences and technology – there is currently a shortage of almost 300,000 workers in Germany, as the autumn report from the German Economic Institute (IW) recently showed.
Companies across all sectors are complaining about an increasing shortage of workers and skilled workers, Fuest also reports. The baby boomer generation is now retiring and fewer young people are entering the labor market. “And the big shrinkage is yet to come.” The 1963/1964 cohorts with the highest birth rates will retire in 2030, according to the ifo boss.
Between 2025 and 2035, 13.5 million people will reach retirement age, added Mannheim professor and head of department at the Leibniz Center for European Economic Research, Tabea Bucher-Koenen. Although they are in a very good financial position, there will be a decline in consumption.
Rising employment rates and immigration necessary
If the traffic light government wanted to keep the pension level at 48 percent of average income, employees would have to work longer or pay higher contributions, emphasized Bucher-Koenen. This is entirely possible because today’s elderly are healthier and have six years longer life expectancy than their parents’ generation, said Karin Haist, demographic expert at the Körber Foundation.
According to Fuest, increasing employment rates and high levels of immigration help to increase the labor supply. In order to increase the employment rate, “we shouldn’t stop people from working,” said Fuest, citing citizens’ money and the tax burden as an example. Better child care could help get more women into paid work.
Personnel costs in the public sector are enormous
There is also still room for improvement when it comes to immigration: of the refugees who came to Germany from 2015, almost half are in work five years after their arrival, explained ifo speaker Yvonne Giesing. About 20 percent of the refugees from Ukraine worked. “The biggest hurdle is the language,” said the expert. In addition, there is the German bureaucracy, which slows down immigrant skilled workers. This was recently shown in an article by ARD-Program “Plusminus”.
Digitalization expert Markus Keller also sees a major lever in employment at the federal, state and local levels. Personnel costs in the public sector are almost a billion euros per day. Digitalization could save hundreds of billions every year. But this has not yet reached politics, “neither the Prime Minister nor the Chancellor understands it,” he criticized.