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Subjunctive: KfW: Immigration alone does not help against the shortage of skilled workers

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First the Corona crisis, then the consequences of the Ukraine war – the climate has become rough for the German economy. However, experts see a particularly big challenge in another area.

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According to the state development bank KfW, Germany is at risk of a turning point due to the shortage of skilled workers. “The foundation for further growth in prosperity is crumbling,” said a study published on Monday. “The issue of the shortage of skilled workers has been known for a long time, and last year it took on a new quality,” explained KfW Chief Economist Fritzi Köhler-Geib. Be it because craftsmen can only help later, or because your favorite restaurant has restricted its opening hours due to a lack of staff.

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Craft President Jörg Dittrich also warned of the consequences of the shortage of skilled workers. The German Economic Institute (IW) rated the decline in first-year students in mathematics, computer science, natural sciences and technology (MINT) in 2021 as alarming.

KfW: Turning several adjusting screws

According to KfW, the lack of skilled workers is already hampering the business activities of every second company. In addition, labor productivity per employed person has grown by only 0.3 percent annually since 2012. If productivity growth remains so weak and the decline in the domestic supply of skilled workers intensifies, this will mean a turning point: “In this decade Germany will enter an era of persistently stagnating, possibly creepingly shrinking prosperity.” The “Frankfurter Allgemeine Zeitung” had previously reported on the study.

According to KfW’s assessment, several adjustments need to be made. The supply of labor must be increased through the immigration of qualified foreign workers. Work must become more productive, for example by promoting innovation. A higher labor force participation rate among older employees and women is also necessary.

Affordable offers for care and childcare required

On their own, none of these measures would be sufficient. But overall, they could do a lot. “If, for example, we only counted on immigration to compensate for aging, then we would need immigration of over a million per year by 2030,” explained Köhler-Geib.

From their point of view, what is needed is the expansion of affordable childcare and nursing services, the recognition of foreign degrees and qualifications and support in learning German. “With a view to productivity, the promotion of investments in innovation and digitization is central, more young people in MINT subjects and ultimately the further anchoring of lifelong learning in Germany,” said Köhler-Geib.

According to the Federal Statistical Office, the number of first-year students in STEM subjects fell by around 6.7 percent to around 307,000 in 2021. The number of foreign first-year students fell as a result of the corona pandemic. At the same time, however, the proportion of those who opted for MINT subjects in the first semester fell to 37.7 percent. In 2015 it was 40.5 percent. “The declining number of students in the MINT professions endangers innovative strength in Germany and thus competitiveness and sustainable prosperity,” warned Axel Plünnecke, economist at the German Economic Institute (IW).

What if the baby boomers retire?

Craft President Jörg Dittrich also warned of the consequences of the shortage of skilled workers. This will reach a critical level in the coming years when the baby boomers retire. “There is a risk that certain services can then no longer be offered in the trades. We absolutely have to prevent this situation from occurring through a joint effort by politicians and tradesmen,” said Dittrich.

However, the Bundesbank assesses the current economic situation in Germany better than it did a few weeks ago. “Overall, the most recent data releases were better than assumed in the December projection,” said the central bank’s monthly report published on Monday. The Bundesbank referred to a preliminary assessment by the Federal Statistical Office, according to which economic output roughly stagnated in the final quarter of 2022. Many economists had expected a decline in gross domestic product (GDP) compared to the previous quarter.

The Bundesbank economists wrote that high inflation and uncertainty with a view to the Ukraine war weighed on the economy in the fourth quarter. However, the situation on the energy markets has eased noticeably compared to the summer. The delivery bottlenecks in industry and construction have become less important. In addition, there would be government relief packages such as the electricity and gas price brake.

KfW study

Source: Stern

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