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.
How acute are shortages in Germany?
/ 5 Minuten zu lesen
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
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 Population (bpb) Lizenz: cc by-nc-nd/2.0/de
Retired Population (bpb) Lizenz: cc by-nc-nd/2.0/de
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.
Education
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
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
Dr. Christina Boswell is head of the Migration Research Group. The Migration Research Group is based at the Hamburg Institute of International Economics (HWWA/ HWWI).
Prof. Dr. Thomas Straubhaar is the President of the HWWA/HWWI, and Professor of Economics at the University of Hamburg.