Why is there a labour shortage?

And what can we do about it?

The Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung) found that more than 1.9 million positions in Germany were unfilled at the end of the second quarter of 2022 – more than ever before. The need for personnel has increased in almost all sectors. Whether in restaurants, at the airport or in hospitals – there is a lack of staff everywhere. And it’s not just about skilled workers, but also unskilled labourers or students who wait tables or help out in other areas. This is not without consequences, neither for the companies concerned nor for the economy as a whole.

Competition for labour intensifies – worldwide

The reason for this development has long been known: Demographic change. The average age of the population is rising, the baby boomer generation is slowly retiring from working life, while young people are no longer joining the workforce in sufficient numbers.

The number of people aged 67 and over, the official retirement age in Germany, rose by 54 percent between 1990 and 2018 – from 10.4 to 15.9 million. By 2039, it will grow by another 5 to 6 million to at least 21 million. In the next 15 years alone, about 20 million workers will reach the official retirement age.

Germany is not alone with this development: many other countries are struggling with the same problem. Only in a few countries such as Iran or some states in Africa, enough young people are growing up to be able to fill the vacancies on the national market.

The final straw that breaks the camel’s back

Corona has been shaking up the economy for many months: business has come to a near complete standstill in some sectors, such as tourism and the food service industry. In many fields, short-time work has been introduced, while in other areas, for example in the health sector, there has been too much work rather than too little. Employees in these fields quit their jobs more often than usual or migrated to other sectors.

This shock has hit the labour market hard: In Germany, more than 1.9 million jobs have been vacant. Two thirds of the companies are feeling the lack of staff. By 2025, there will probably be a shortage of around 2.9 million workers on the German labour market. Towards 2031, the gap is expected to peak with a shortage of 3.6 million workers.

Employment opportunities as a remedy

Countervailing trends and bold countermeasures could mitigate the steep decline: If the compatibility of work and family continues to improve, mothers will return to work earlier. Older people are also available to the labour market for a longer amount of time – an increase in the statutory retirement age has long been part of the political debate.

The digital transformation is changing many job profiles. Tasks are being automated and the need for skilled workers is being reduced in certain areas. At the same time, however, new jobs are being created – primarily for the more highly qualified. Which effect will ultimately prevail is not yet foreseeable.

With an improvement in employment opportunities, it will be important to steadily keep workers in permanent employment in the future than is the case today. This requires greater permeability between disciplines and occupations. Lifelong learning must be promoted and encouraged.

Selectively shaping immigration

In order to alleviate the staff shortage, the immigration of skilled workers is often brought into play. The targeted recruitment of personnel for the most needed professions can certainly be an effective means of at least somewhat cushioning the effects of the labour shortage.

However, experience has shown that attempts to compensate for labour shortages through immigration promise only limited success. Demographic shifts are reducing the number of people within the typical working age in Germany by almost 150,000 per year. To offset this development, around 400,000 immigrants would be needed each year – significantly more than is currently the case.

Additionally, in most countries, skilled workers are in short supply for the same, namely the most needed occupations. Nevertheless, mobile workers can help meet these needs, especially in border regions.

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