The latest ifo Business Survey of around 9,000 companies throughout Germany has shown that the need for skilled workers is increasing.
43.1 percent of firms reported suffering from a shortage of qualified workers in July, up from 42.2 percent in April 2023.
“Despite a sluggish economy, many companies are still desperately searching for suitable employees,” ifo expert Stefan Sauer said.Â
The situation, it seems, is only likely to get worse in the future. Researchers at the Institute for Employment Research (IAB) have calculated that, by 2035, the labour market is at risk of losing seven million people due to retirement.
Even with an increasing employment rate among women and older people, as well as an annual net immigration of 100,000 people, the number of employed people is expected to drop to 38 million. Only with annual net immigration of 400,000 workers would the labour force supply remain nearly constant until 2060.
"German companies must focus more on countries outside of Europe," labour market Alexander Kubis from IAB told Welt.
That's because, in classic immigration countries like Italy or Spain, the population is also ageing, while in countries from which many people traditionally moved to Germany for work - such as Poland and the Czech Republic - the labour market situation has improved over the years, making emigration less of an attractive option.
Migration from Eastern European countries, such as Romania, Bulgaria, or Albania, is also anticipated to decline, as substantial portions of the workforce in these countries have already emigrated from certain sectors.
In the context of skilled worker immigration, India is increasingly important for Germany. In 2022, approximately 38,000 more people from India moved to Germany than returned to India. A significant proportion of Indian immigrants take up highly qualified roles, with 57 percent employed in positions typically requiring a university degree or advanced qualifications.
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Germany's new Skilled Immigration Act, which was passed by the German Bundesrat in July and is expected to come into force in March next year, aims to attract more skilled workers from non-EU countries by cutting red tape for immigration procedures.
The new law includes measures such as a new points-based visa, and loosened rules for Blue Card holders and foreign students, while foreigners with certain types of residence permits will be able to bring more family members to Germany.
However, Kubis cautions against relying too much on immigration as a cure, pointing out that "immigration alone will not be the solution." He believes that a realistic long-term increase of approximately 140,000 immigrants per year is more attainable than the figure of 400,000 and, as a result, companies must prepare for a future with a smaller potential workforce.
Still more foreign workers than ever
A decade ago, only four percent of new hires in German companies were sourced from abroad. However, by 2022, this proportion had surged to nearly 15 percent, reaching an all-time high.Â
In 2022, a record-breaking 1.46 million people immigrated to Germany, surpassing the previous high of 1.14 million in 2015, according to a study by the Institute of German Economy (IW). It's worth noting that this surge in immigration was, in part, due to the influx of refugees from Ukraine, but excluding this group, net migration in 2022 was still significantly high at 503,000 people.
Traditional sectors of the economy, such as hospitality, construction, transportation and logistics are also increasingly looking to hire workers from abroad - a practice which has long been the norm in the startup world.
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A prime example is GetYourGuide, the world's largest online booking platform for tours and leisure activities. Founded in Switzerland but now based in Berlin, the company has approximately 700 employees, with 40 percent of new hires in 2022 originating from outside of Germany. Nearly three-quarters of their programmers hold foreign passports.
But while the need for skilled foreign workers in Germany is clear, the process of hiring them is not without its challenges.
According to data from the Federal Employment Agency (BA), the journey from a person's decision to immigrate to job placement in Germany takes an average of one to three years. Alarmingly, many skilled workers who initially planned to move to Germany dropped out of the process during this lengthy period, as revealed by an OECD study.
The cumbersome bureaucratic procedures are not limited to specific industries; they are also experienced by internationally oriented companies such as GetYourGuide. Each new hire demands an average of 17 additional hours per week to navigate immigration requirements and relocation issues.
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Tao Tao, co-founder of GetYourGuide, who immigrated to Germany from China in 1991, emphasised the urgency of the situation, telling Welt that "Germany has not yet recognised immigration of qualified talent as a strategic necessity and priority." Rigid visa rules and sluggish bureaucracy continue to deter potential immigrants.
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