Germany is not only a very wealthy country, it's also a country famous for running like
clockwork and for producing things of very high quality.
[That at least is the reputation, if it’s German, it's good].
The fact is that over recent decades Germany experienced one of the most significant economic
miracles in history.
We have already told you about it both here on VisualPolitik and on our sister channel
VisualEconomik.
Today, Germany is synonymous with high productivity, thriving companies and highly skilled workers.
However, it has one problem, a potentially very serious problem that we have not yet
told you about: its inability to attract skilled labor.
Have you ever considered going to work in Germany?
I'm sure many of you have, but I'm sure many more of you have thought about the UK, the
Netherlands, Canada, Australia or the US first.
Despite being a very rich country, with many jobs and what appears to be the opportunity
to build great careers, Germany does not seem to be an attractive place for highly skilled
workers.
It ranks much worse than the rest of its comparable countries.
It does not reach the extreme of Japan...
But it is an anomaly.
An anomaly that would always be a problem, but even more so when your working-age population
is shrinking.
So the question is, why on earth is Germany such an unattractive destination for highly
qualified foreigners?
What could this mean for what has traditionally been considered the driver of Europe?
What is the government doing to remedy this situation?
Well, in this video we are going to answer all these questions.
And who knows, maybe by the end of it you will consider moving there...
Or maybe not.
Let's get started.
VisualPolitik viewers, Germany is a top 10 country.
And by that I mean that it is almost always among the top 10 countries when we look at
practically any index of well-being and development: GDP per capita, education levels, productivity
levels, access to basic services, etc., etcetera.
But its state-of-the-art factories, its modern educational classrooms and its more than enviable
annual investment in techno-industrial development would be meaningless if there were no teachers,
engineers, doctors, workers and professionals to put this immense productive apparatus into
operation.
And the problem...
We can start to see the problem perfectly in this graph:
According to official UN figures, the German population will start to shrink as of 2023.
From a total population of around 83 million people that it has at present, the forecast
is for the 80 million mark to be breached by 2047 and to dip into the 70 millions by
the last decade of this century.
It is not as dramatic a contraction as is expected in countries such as Japan or South
Korea, but it is still economically relevant.
This data basically means not only less population, but also an aging population and, therefore,
much less available labor.
Logically, this is all in response to changes in birth patterns, but there is something
else that can also increase the economic impact of this decline: the lack of talent retention.
Yes, Germany receives a lot of immigration, that's for sure.
It’s likely many of you have heard that.
However, there is a problem in this story: every time a highly skilled German worker
retires, it is not easy to replace him or her, because as we will see, in Germany there
is no surplus of immigration, but above all there is no surplus of skilled immigration.
So the question is: Who could say no to the German giant?
Why are other destinations preferred?
These are the questions we have to find answers to.
In order to do so, the first thing of all has to be to understand how we got here.
THE FIRST DEMOGRAPHIC CHIMES
This is not an isolated case, most developed countries – and also other not so developed
countries such as China and Russia – are experiencing an accelerated process of demographic
aging.
And, take note, because this process not only reduces the available labor force, but also
considerably increases public spending:
Think about it, pensions, health care, dependence...
The fact is that Germany understood the problem, and guess what?
It started to do its homework very early, no less than half a century ago.
You see, in the 1970s there was a turning point in Germany, its native population began
to shrink.
That is, the country entered a phase of negative population growth.
As you can see, since the 1970s the number of deaths has exceeded the number of births
every year.
To compensate for this, Germany started to boost immigration.
As you can see, the number of immigrants arriving each year is generally greater than the native
loss of inhabitants.
This has allowed the country to maintain its population growth over the years.
Everything depends on the arrival of new immigrants.
And if you look at the graph you will see how at the beginning of the 21st century the
first alarm was sounded: the arrival of immigrants plummeted.
At the beginning of the 21st century, almost all of Europe was growing and growing faster
than Germany.
Germany was far from being the only flower in an ever-expanding garden of prosperity...
And that, naturally, had consequences.
Competition slowed down the influx of new labor into German industries.
The question is, what did they do?
The truth is that the Germans took it very, very seriously.
The government knew how important it was to attract young talent and maintain demographic
expansion in order to prevent the economy and the Social Security system from going
into crisis.
So to achieve their goals, in addition to actively promoting immigration, they also
did things like this, check it out.
(1 January 2005: Germany's first immigration law goes into effect.
Starting next year, new immigrants will be entitled to participate in state-funded German
language classes and receive an introduction to the country's legal system, culture and
history.
The government has earmarked more than 200 million euros for the scheme.
– DW)
The measures worked, and the net number of immigrants arriving in the country each year
almost tripled.
From 73,000 in 2004, the number increased to 212,000 in 2008.
And not only that.
By 2016, one of the historical ceilings in terms of immigrant population was hit: 432,000
non-Germans moved to live in this country.
Of course, Germany is part of the European Union, so what does that mean?
That the country is subject to free mobility of people and workers.
Any of the EU members can become a rival country for labor.
A growing competition that Germany does not seem to have been able to manage very well.
"DANKE" BUT NO "DANKE")
From 2013 onwards, the influx of immigrants to Germany started to slow down again.
And even worse, according to OECD reports the country was becoming less and less attractive
for the arrival of professionals.
Because, and this is important, not all people are equal.
Logically, from an economic point of view, qualifications count.
And that is why the OECD issued this warning.
Look at this.
(4 February 2013: Labor migration: Germany is open to graduates, but immigration is difficult
for medium-skilled workers).
And why did the OECD say this?
Basically because of this.
Pay attention to the data.
("Germany is one of the OECD countries with the lowest barriers to immigration for highly
skilled workers.
However, the number of immigrant workers from outside the EU and the European Free Trade
Area (EFTA) it receives is 25,000 per year, about 0.02% of the population (...) The rate
of skilled immigrant workers received by Australia, Denmark, Canada and the United Kingdom is
five to ten times higher."
– OECD German Labor Market Report.
2013)
In other words, it was supposedly relatively easy to emigrate to Germany, but even so,
skilled workers preferred – and still prefer – other destinations.
Whether because of the language, the standards or the lifestyle, the fact is that Germany
is not a popular destination.
Of course, that's not the whole story.
A survey conducted by the Swiss-based International Institute for Management Development found
that German employers' perception of the ease of recruiting international talent was rather
poor.
In other words, the OECD report did not accurately reflect the entire reality.
It seems that red tape has been a problem for a decade now.
In some ways, legislation to attract skilled immigration dating back to 2005 was becoming
obsolete compared to the incentives on the table in neighboring countries.
Therefore, between 2018 and 2020, the German parliament started to make several changes
to the Act.
Changes to make it easier for professionals from outside the European Union.
For example, it was made easier for immigrants to arrive without a contract.
However, just then, the pandemic completely changed the picture.
It brought the arrival of new immigrants to a screeching halt.
Immigrants of all kinds: skilled and unskilled.
And that, in the long run, only aggravated the problems.
Since 2013, the Federal Labor Agency itself has been monitoring what the authorities refer
to as "bottleneck" occupations.
That is, areas of the labor market where job vacancies cannot be filled by available workers.
In 2020 this situation cooled down, but since then the trend has returned.
More and more areas of the German economy are unable to get the skilled workers they
need.
In fact, this indicator is expected to break records in 2023.
The post-pandemic economic upturn coupled with the growing demographic aging is pushing
the German labor market into an increasingly critical context:
While the demand for workers continues to grow, the number of immigrants arriving each
year has decreased.
Not to mention the number of skilled immigrants.
To give you an idea of what we are talking about, according to estimates by the German
Economic Institute in Cologne, by mid-2022 there were already 1.5 million vacancies in
this country.
A figure that is expected to grow strongly over the next few years.
The situation has reached such an extent that some commercial areas have had to start providing
their services on a reduced basis.
And this is, in fact, what explains news stories like this:
(25 June 2022: Germany will use temporary foreign workers to ease staff shortages at
German airports.
Photos of travelers standing in long lines at security checkpoints at Düsseldorf airport
earlier this week showed the extent of the shortage.
– Reuters)
In other words, the German economy is in urgent need of labor of all kinds.
According to estimates by the German Institute for Labor Market and Employment Research,
at least 400,000 new arrivals are needed each year to keep the workforce stable.
That's already a problem.
But, VisualPolitik viewers, the free skilled labor thing...
That's already almost an endangered species in this country.
According to a survey conducted in December 2022, 7 out of 10 companies are short of skilled
labor.
Not only that, but Germany is now facing another problem:
It's no longer that few skilled workers are arriving, it's that many of the ones they
did have are leaving.
In other words, the country is suffering a brain drain.
And that, that is something that endangers the formidable industry that fuels Europe's
greatest economic engine.
But...
Let's go back to the question we asked at the beginning: How on earth is it possible
that there are almost no professionals who want to live and work in one of the most developed
countries in the world?
Where is the problem?
Well...
Listen up!
THE THREE PILLARS OF THE TALENT DRAIN)
If we try to go straight to the heart of the matter, we could say that Germany faces three
major problems.
Each of them linked to the others.
For example, first of all...
The stock of human capital from Europe cannot be expected to last forever!
And why do I say this?
Well, you see, according to official figures, Serbia has lost 9% of its inhabitants in the
last three decades, North Macedonia 10%, Bosnia and Herzegovina 24% and Albania 37%.
And something very similar could be said about Poland and the Baltic republics, among others.
All these countries have lost a large proportion of their best-educated and most qualified
young people.
And, let’s not forget, Europe is a very aging continent, so the pool of skilled workers
available for German companies to recruit is limited.
Basically, the pool of skilled workers is no longer large enough.
Along these lines, many experts believe that the "initial effect" of the EU expansions
has already come to an end.
Perhaps Ukraine was the only exception, but this country has also already suffered a huge
exodus of skilled workers, particularly of young people.
For this reason, many analysts point out that the search for talent must look beyond continental
borders.
And do you know what?
This is exactly what led the 2020 reform of the Skilled Immigration Act to introduce more
facilities for skilled immigrants from third countries.
For example, university degrees were no longer required, but vocational training was also
accepted as proof of qualification.
A demand that German employers have been making for some time.
Why?
Just take a look at this graph.
Of course, this was not the only measure.
Some administrative formalities were also reduced, but the main stumbling block was
not solved.
Which is none other than this.
The bureaucratic German immigration system is extremely complex: at least 7 ministries
are involved in the process, without taking into account second-tier government agencies
and local governments.
To give just one example, the approval of a qualified professional would involve:
the Federal Ministry of Economic Affairs and Climate Action,
the Ministry of Labor and Social Affairs, the Ministry of Education and Research,
the Ministry of Food and Agriculture, the Ministry of Health,
the Ministry of the Interior and Community and the Ministry of Economic Cooperation and
Development – so pretty straightforward!
This obviously poses a major disincentive for German companies.
In 2022, only 17% of the companies surveyed by the Bertels-mann Foundation recruited skilled
workers from abroad.
And while large companies can hire consultancies and law firms to speed up the process, SMEs
face an almost insurmountable barrier.
That is, in a way, the 2020 eligibility extension was a step in the right direction to start
attracting professionals from outside the European Union, however, it did not prepare
the bureaucracy for such a challenge:
Mobility within the common European block is much simpler, but when you start incorporating
professionals from other regions, the documentation and requirements multiply.
It is infinitely more difficult and costly to incorporate a Thai or Uruguayan worker
than a Polish one.
This is the second problem.
And finally, the third major stumbling block has to do with a much more complex factor:
the cultural one...
If only because of the language.
In August 2022, the German Federal Employment Agency turned its attention to this issue.
And do you know what it found?
That most workers who arrive in Germany without knowing German do not even bother to try to
learn it.
Why?
Because they are thinking of leaving.
Language integration problems, problems in obtaining permanent residence, housing costs,
cost of living and taxes, problems in reuniting the family in the country and the clash with
the local culture are the most frequent arguments given by skilled workers who decide to leave
Germany.
This is something we have already told you about on VisualEconomik.
To make matters worse, the immigration legislation clashes with a new type of work that is practically
ignored: freelancers.
Well, these three problems seem to explain why Germany is not as attractive a country
as it apparently should be.
The question is, is there a way out?
What are German politicians doing?
Well, we are going to take a look at that right now.
RETAKING THE "JOB APPEAL"
Estimates by the German Ministry of Labor suggest that, if this situation is not reversed
by 2026, more than 200,000 jobs currently filled will become vacant.
A situation that could have a very negative impact on companies, productivity and the
country's economic growth.
Therefore, in October 2022, the issue will be at the top of the public agenda:
(22 October 2022: How Germany plans to attract qualified foreigners.
Reforms include the introduction of a so-called "opportunity card" that will entitle people
to seek work in Germany following a point system based on language skills, professional
experience and connection to Germany, among other criteria).
And finally, on 29 March, the Qualified Immigration Law was amended again,
(29 March 2023: Foreigners with adequate work experience and education in their home country
will be allowed to work in Germany, even if those professional qualifications are not
recognized in Germany.
In addition, they will be allowed to work up to 20 hours per week while looking for
long-term employment.
Finally, it will be possible for persons in possession of academic degrees or professional
certificates to remain in Germany for up to one year while seeking employment.
– DW)
Will this new reform work?
Only time will tell.
The question now is:
Would you consider living in Germany?
Would you like to?
How do you think this country can boost the arrival of new talent?
Leave us your answer in the comments and let's open a debate.
And now, if you found this video interesting, don't forget to give it a like and subscribe
to VisualPolitik if you haven't already done so.
All the best and see you next time.