Germany Faces Acute Labor Shortage Amidst High Inflation

Written by

Darakasha Singh

Fact check by

Afreen Abbasi

Updated on

Jul 25,2024

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Germany has been facing an acute shortage in its workforce, which is one of the biggest challenges faced by the country over the last few years. It has created barriers to the growth trajectory the country has been following over the past few decades. 

The German government expects the economy to grow only by 0.2 percent in 2024. This is strikingly less than the earlier forecast of 1.3 percent. High rates of inflation, reduction in global demands, and changes in the geopolitical environment are all contributors to this low rate of development predicted by the government, but the shortage of workers seems to be the biggest boulder of them all. 

According to Robert Habeck, the minister of Economy in Germany, the growth potential of the country has fallen from 2 percent to 0.7 percent and may fall further by 0.5 percent if the problem remains unsolved. 

Germany currently has over 700,000 vacancies in their job market which remain unchanged. This is also set to increase more, due to an aging populace. Furthermore, official statistics state that Germany is set to lose almost seven million more workers by 2035, as the aging population continues to grow. The construction and industrial sectors have received the biggest blow among other sectors as these sectors face the most critical shortages in their workforce. 

Causes Behind The Dying Workforce

What are the reasons behind this dying workforce, one might ask? 

A survey conducted in September 2023 demonstrated that at least 50 percent of German people believe that working is not worth the time and effort. 

This change has notably come in after the German government increased child benefits and welfare payments as well. This labor shortage is a common phenomenon in most industrialized countries; however, Germany is facing an acute problem with it right now. 

Additionally, more than 2.5 million Germans aged between 20 to 30 do not have any qualifications which enable them to do work. Another survey taken in 2023 demonstrated that 8 out of 10 businesses in Germany expect further negative outputs due to these shortages in the labor force. 

Solutions Proposed By The German Government

The government presented a detailed report covering all aspects of the problem, along with solutions. 

One of the solutions proposed by them was to offer greater financial incentives for individuals who would prefer to work for longer, around or after retirement age as well. They aim at offering better flexibility and benefits to them to encourage them to work. This would encourage more and more Germans to not only seek professional qualifications but also work for longer and involve some sort of work in their retirement as well. It is one way to tackle the problem as it incentivizes the people to stay engaged in the national workforce of the country, thereby creating higher income returns as well. 

Another solution proposed in the report was to reorganize the unemployment welfare benefits in a way that pushes the unemployed people into some sort of work. This would create livelihood activities for them. It would also reduce the unemployment rates and occupy the vacancies that currently run rampant in Germany. 

Motivating the people to acquire professional development in some sort of skilled labor is also an aim to be considered. Since a good amount of people do not hold any professional qualifications which further disables them from joining the workforce. This problem, if not tackled, will further worsen the problem of the aging population and lack of workers in Germany. 

According to Habeck, migration is an important factor in solving the workforce crisis. Germany must be made into an immigration-friendly country to promote the movement of foreigners into the local workforce. Habeck suggested speedy visa processing times and more accessible language courses that help with the assimilation of foreigners with German. Providing more benefits and perks to immigrants will motivate them to move to Germany. They can substitute for the dying local workforce and regenerate the workforce from within. 

Germany did pass legislation in 2023 to attract foreign workers primarily from NON-EU/EEA countries. This law came into effect on November 18, 2023. The change is expected to take place gradually. Additional amendments may be needed over time, as and when the situation calls for it. 

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