Germany Braces For A Multi-Decade labour Shortage Crisis

Old Man Patrick Cranshaw

As many parts of the developed world struggle to prevent long-term unemployment, Germany faces the prospect of a labour shortage ahead, due to its low birth rate and ageing population.

Der Spiegel:

In coming years, the official retirement age is set to rise from 65 to 67 in Germany, part of a bid to offset future worker shortages due to the country’s sluggish birthrate, which is among the lowest in Europe.

Family Minister Kristina Schröder said the statistics heralded the start of a trend and warned that bosses needed to take account of increasing demographic pressure, saying “companies cannot allow themselves to let good staff leave.”

Easing immigration policy is being explored as a solution:

The centre-left daily Süddeutsche Zeitung writes:

“Even if we succeed in incorporating older people into the working world of the 21st century, it will not compensate for the effect of the declining birth rate. The potential work force will sink by 6 million by 2030. We still need a plan on how to make up the shortfall.”

“In the future there will have to be fewer young people failing to finish school or work training and joining the ranks of the long-term unemployed. Immigrants living here will have to be given extra support, and face certain demands from society, so that they have better chances in the labour market. It is also necessary to ease the path for immigrants and, as in Canada, to create a points system which can rate the qualifications of newcomers.

Job security should be pretty good for skilled, young Germans over the next 40 years. Or any foreign professional who speaks German. Expect Japan to have a similar labour shortage challenge ahead as well, as it has an even more severe demographic challenge than Germany.

However, while Germany’s demographic crisis will provide job security for young Germans, at the same time it will eventually present a massive financial burden to the young as well, since they will need to support a larger base of elderly with their labour. Young Germans might have no problem finding a job, but taxes could be pretty high and improvements in standard of living suppresses, since there will be so many non-working dependents to support.

GDP growth for Germany will also face a demographic headwind over the next 40 years, while America’s young and growing population will provide a tailwind to GDP. This is why America’s economy is expected to remain either the largest economy in the world or a close second to China for the foreseeable future, while Germany’s will become less and less relevant to the world economy over the same period. Thus Germany’s labour shortage is good in terms of simple job security, but actually a problem for the nation as a whole.

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