Germany’s Labor Shortage
Like many aging countries, Germany is experiencing a labor shortage that only promises to become more severe. Its 84 million residents make it the 19th largest country in population, and its labor force is the world’s 15th largest. It has the 4th largest Gross Domestic Product, behind the U.S., China, and Japan. Its 3.1% unemployment rate is half the average for the EU. And its economy is stagnating.
Germany’s chamber of commerce reports that half of Germany’s companies are struggling to fill vacancies. A November survey estimated 1.8 million jobs were unfilled. Shortages were most severe in the manufacturing and construction industries. Large shortages existed in professions such as education, medical care, childcare, and logistics. Applications for apprenticeship positions have declined for over a decade.
Like many similar countries, Germany’s fertility rate is well below the level necessary for the population to reproduce itself. Germany’s median age of 46.7 years is exceeded only by that of Japan. The number of workers at or near retirement age exceed the number of youth aging into the labor force. By 2060 the labor force is set to shrink by about a third unless changes occur in labor force participation rates, retirement dates, or immigration, and the population will fall by 25%.
Immigration is the only change capable of significantly improving the labor shortage. On January 19, 2024,German lawmakers approved an overhaul of citizenship rules to make gaining citizenship easier. The measure passed over the objections of center-right opponents who say the new rules devalue German citizenship.
The new law makes people eligible for citizenship after five years in Germany rather than six or eight. Children born in Germany automatically become citizens if one parent has been a legal resident for five years. Restrictions against holding dual citizenship have been dropped. People being naturalized must be able to support themselves and their families.
Over half of German companies favor recruitment of foreign labor to address the shortage of skilled workers. For Achim Dercks, deputy chief executive of the German Chambers of Industry and Commerce, the implementation of the new law will be crucial to fill the workers gap, but he warns, “This will only happen very gradually.”
Opponents of large inflows of migrants cite the challenges that followed the arrival of over a million refugees in 2015. Yet, Germany’s status as the world’s 3rd largest exporter will be at risk without immigrants to maintain and enlarge its labor force.