1.4.2005 | Von:
Dr. Christina Boswell
Prof. Dr. Thomas Straubhaar

How acute are shortages in Germany?

In common with many other OECD countries, Germany faces quite substantial changes in both labour demand and supply. On the demand side, two trends are of particular importance.

Structural economic change
Germany will continue to experience a decrease in the employment share of the manufacturing and agricultural sectors and an increase in the service sector share. This is partly a result of delocalisation of labour intensive production to regions with lower labour costs, notably Asia. However, it is likely that high-skilled jobs will continue to be located in OECD countries, because of the availability of qualified workers with relevant language skills and specialised knowledge of legal frameworks. The result is that demand for qualified and highly qualified workers in occupations such as IT, engineering, consultancy and financial services will continue to grow.

Technological development and innovation
In a "knowledge based economy", skilled human capital is the most valuable factor of production. Indeed, it is estimated that more than half of GDP in OECD countries is derived from human capital rather than the material value of goods. Productivity and competitiveness have become more than ever a function of having the right knowledge and skills. The importance of technology can be most obviously illustrated by the burgeoning IT sector. But in a more general sense, innovation has become vital for productivity and growth in highly competitive international markets, characterised by short product cycles. The importance of technology and innovation implies the need for personnel not just with the relevant qualifications, but also with an ability to adjust flexibly to rapid technological change. The trend towards greater demand for highly qualified workers is already evident: between 1975 and 2000, the employment of highly qualified workers increased by 180%. Demand will continue to grow in the coming years, even in the event of economic slowdown.

Taken together, these changes imply above all an increasing demand for highly qualified and qualified workers in the tertiary sector. Demand for low- and unqualified workers will decrease, with an estimated loss of 2.2 million jobs between 1996 and 2015 [1]. The omposition of these low skilled jobs is likely to change. Traditional manual labour in industry and agriculture will decrease, but ageing populations and the growing importance of the tertiary sector will also create rising demand for various sorts of services, also covering low-skilled occupations.

Sectoral Composition of Employment 1991 - 2015Sectoral Composition of Employment 1991 - 2015 Lizenz: cc by-nc-nd/2.0/de (bpb)
This brief discussion of demand for labour does not in itself tell us much about future labour gaps. For this, we also need to consider how far this demand may be met by domestic labour supply. Here, three trends are of particular importance: demographic change, education, and regional and occupational mobility.
Demographic change
Retired PopulationRetired Population Lizenz: cc by-nc-nd/2.0/de (bpb)
Germany is set to experience a significant increase in the old age dependency rate – i.e. the ratio of economically active to non-active members of the population. This can be attributed to lower birth rates, combined with higher life expectancy. By 2030 the proportion of the population in Germany who are retired will rise to 35.8% as compared to 23.5% in 2000. Labour supply will decrease by an average of 0.7% per year between 2010 and 2040. The overall decrease in the labour force will negatively affect economic growth, and will almost certainly make it impossible to sustain current levels of welfare and social services. The rising proportion of older people will also generate greater dependence on welfare, social and health service, creating additional demand for healthcare. These trends may be partially offset by rising participation rates, i.e. the proportion of the working-age population who are economically active or seeking work. In fact, rising participation rates of women over the past 15 years have helped counteract the impact of demographic change on the size of the labour force (although it should be noted that in the east German states female participation rates have been declining since the 1990s). While increased participation rates are to be welcomed, they cannot be expected to continue to compensate for demographic trends in the next forty years.

Until the early 1990s, there was a steady trend towards better qualifications in Germany. The proportion of unqualified persons on the labour market decreased substantially, while those with professional qualifications rose. However, since the beginning of the 1990s, while the number of graduates has continued to rise, the number of those with a professional qualification (Lehr/ Fachschulabschluss) has stagnated [2]. Combined with the overall decline in the numbers of those entering the labour market in the coming years, we can therefore expect a decrease in professionally qualified labour of almost two million between 1998 and 2015 [3].

Occupational and Regional Mobility
In comparison to some other European countries, Germany workers do not display high rates of mobility between different occupations, or between regions [4]. One reason for the lack of occupational mobility on the part of unemployed people is that some jobs are seen to have unacceptably low pay or status or difficult working conditions. Lack of occupational mobility may also be partly attributed to the relatively rigid structure of occupational training in Germany. This makes it more difficult for those already trained or with experience in one area to switch to another occupation where there are job vacancies. Meanwhile, inter-regional mobility is amongst the lowest in the EU. Only 1.1% of the employed population moved to another region in 1999, compared to an EU average of 1.4% [5]. The lack of movement between occupations, and between different geographical regions, partly explains why there remain gaps in some non- and semi-skilled jobs in a number of sectors – for example agriculture, catering, or domestic work.


Munz, S., and Ochel, W. (2001): Fachkräftebedarf bei hoher Arbeitslosigkeit, Institut für Wirtschaftsforschung.
Reinberg, A., Hummel, M. (2004): Fachkräftemangel bedroht Wettbewerbsfähigkeit der deutschen Wirtschaft, 'Aus Politik und Zeitgeschichte', H. B 28. S. 3-10.
BLK (2001): Bericht der Bund-Länder-Kommission für Bildungsplanung und Forschungsförderung (BLK) an die Regierungschefs von Bund und Ländern, 'Zukunft von Bildung und Arbeit, Perspektiven von Arbeitskräftebedarf und –angebot bis 2015', Heft 104.
Klös, H.-P.; Schäfer, H. (2002): Kombilöhne in Deutschland – Grundsatzreformen statt Mainzer Modell: kann die Einführung des Kombilohns die Lage am Arbeitsmarkt nachhaltig verbessern?; in: ifo Schnelldienst 4, 8-11
European Commission (2002): Commission´s Action Plan for skills and mobility, COM (2002) 72 final.



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