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The ageing population and the risk to the labor market
For many years there has been the discussion about immigration, usually politically motivated ones. We will not discuss the advantages and disadvantages of a steady stream of immigrants, we will look at the labor market in Germany, and the challenge in many industries where finding suitable personnel has already become difficult.
A well-known German pharmaceutical company recently revealed that they have been having trouble filling spots for chemists and pharmacists for several years now. And that while the company is planning to launch several new several drugs over the coming years, drugs which first need to be fully developed and produced. The pharmaceutical industry, as well as other industries with a very specific product range like specialized machinery or of course services , obviously cannot so easily move their operations where workers might be more plentiful, which is why those areas already are feeling the effects of a changing labor market.
The changes in demographics is a slow process and as such is often referred to as something that will happen in the future, i.e. not yet. According to some projection, in 2050 there will be only 29 million people employed in Germany, down from 45 million today. In addition to that, the population in general is supposed to shrink from 81 million to 65 million people, if you ignore migration effects. In the end it depends on which parameters you use for the statistics. Those numbers do little to show the negative effects that this development is bound to have for society. The ratio of the number of people working and the group of children, students and retired people will shift more and more toward the latter. Also, the statistical number of millions of people out of work does not tell us what qualifications they might have and whether those qualifications are in demand where they live.
Currently, the statistics office expects that the current balance should be kept for another 10 years, if the bottom line immigration of 300 000 people in their working age annually continues. In 2020, the “baby-boomer” generation, those born in the years of high birth rates between 1959 and 1965, will start to retire. Since then (in East Germany the development was slightly delayed) the trend has been toward one child per family. The result is that after 2019, more people will be leaving the labor market than new ones will be joining fresh from the school or university (again, not counting migration).
As a result, jobs openings left by those retiring will be impossible to fill to the extent necessary to keep up a continued economic growth of 1,5-2%. While in the past the increasing rationalization and loss of jobs due to technology and communication networks have been a reason for strive, that development will not be able to counter the counter the loss of labor force in the future.
That is a dangerous development for two reasons: When companies are unable to fill vacancies, economic growth is hindered. Germany is not alone in the world, competing with other companies all over the world, and in the Americas and especially the Asian continent, shrinking and aging populations (with the exception of Japan) aren’t an issue. For example, the average age of the population in India is 25, in China, Vietnam, and Indonesia it’s even lower than that. That is why looking to our European neighbors only for recruiting is not a solution.
Of course, the rules of freedom of movement within the European Union have made it easy to hire from there. However, that often leads to a shortage of badly needed qualified workers in their home countries. One example is doctors from Poland or Romania. Short-term, the current high unemployment in the Mediterranean presents an opportunity for countries in Central- and Northern Europe. Long-term, however, a solution has to be found in form of a modern immigration law. Ideally, the political leaders should listen equally to employers’ associations and labor unions, to allow the debate about immigration to rise above the typical right wing vs. left wing quarrels, and lead to a new immigration system that will provide a win-win situation for the native population as well as those willing to come here from other parts of the world.
If we fail in this, we risk the social harmony which we have come to appreciate since the 1950, because not only the public pension funds could be driven to the edge of collapse. There could be serious unrest, or even a rift in society. Let’s hope action will be taken before it is too late. Individual measures, like moving the retirement age up to 67, no more subsidized early retirement and shorter school and university studies won’t be enough long-term. It will take lot more to keep this country competitive, both within Europe and ultimately the rest of the world.
Herr Daniel Stock d.stock(@)top-jobs-europe.de