Author: Dieter Bräuninger (+49) 69 910-31708
May 30, 2012
The market for skilled workers in Germany has dried up. There are, however, signs that the situation will ease. The new Blue Card facilitates entry requirements for workers from non-EU countries. Immigration from southern Europe is also increasing. The German economy is not the only beneficiary.
For the German economy, which is particularly reliant on skilled workers, there have been two pieces of good news recently. Firstly, the upper house of the German Parliament passed the law governing the new Blue Card. This means that from summer onwards skilled workers from non-EU countries will have easier access to the German labour market. Secondly, the Federal Statistical Office reported increased immigration to Germany, especially also from those southern European EMU states hit by the sovereign debt crisis. The further opening-up of the labour market to workers from third countries and increased migration within the EU can reduce the risk of the German economy being blown off the growth course by a skill shortage.
Skilled workers are in short supply in Germany – at the moment largely due to the buoyant economy. However, demographic change is also becoming increasingly apparent. In April there was a shortage of around 210,000 so-called MINT specialists, i.e. mathematicians, engineers, scientists and IT specialists, in the German economy, according to the IW (Cologne Institute for Economic Research). There is also a serious shortage of doctors, particularly in hospitals. Some observers see the problem as cyclical rather than structural, although the shape and size of the current skill shortage is disputed, it is clear, however, that the shortfall will worsen in future. This is already indicated by the demographically-related increasing scarcity of supply. Over the next few years, for example, about 40,000 engineers (excluding IT specialists) are set to retire each year. The number of university graduates will therefore be less and less able to keep pace with this. When the baby boomers leave the workforce in the coming decade Germany’s domestic supply of labour will slump further. On top of this, if Germany wants to continue playing in the global economic premier league that is increasingly shaped by aspiring emerging markets, it will have to rely more than ever on innovations to be successful. There will be correspondingly high demand for scientists, engineers, technicians and other well-qualified personnel. It is also clear that in an ageing society the demand for doctors and nursing personnel will rise.
The Blue Card scheme initiated by the EU is thus a step in the right direction. It primarily grants skilled migrants the right to reside and work for three years. The prerequisite for obtaining this right of entry is the confirmed offer of a job with an annual salary of at least EUR 44,000. Previously the salary had to be at least EUR 66,000. Migrants who have been employed for 33 months and have made pension contributions during this period can in future claim for a permanent residence permit. In addition, the salary threshold for highly skilled persons, who immediately receive a permanent right of residence, will be reduced to EUR 48,000.
The easing of entry requirements offers the prospect of striking a better balance between supply and demand in the market for skilled personnel. Of course Germany should also position itself well in the global contest for highly skilled personnel. Germany entered this contest at an only relatively late stage, and it has to contend with disadvantages such as a significant language barrier and a high burden of taxes and duties. Migration from non-EU countries is therefore likely to gain significance only gradually. It is right that legal changes have now also improved the work and residence opportunities for foreign graduates leaving German universities, since these highly qualified people are already living in Germany after all. It would, however, also make sense to replace the migration law – which is complicated and remains too restrictive in some respects – with a modern points system. Core criteria such as qualifications and language skills would then be the decisive factors for the granting of permanent work and residence permits.
For the time being Germany can also bank on migration from its southern European partner states. In this regard, current data from the Federal Statistical Office point towards a new trend as a consequence of the sovereign debt crisis. Migration from countries hard hit by the crisis skyrocketed last year. The numbers of migrants from Greece and Spain rose by 90% and over 50% respectively. This is striking, even though the absolute figures of around 16,800 and 11,600 migrants were much lower than during the great wave of immigration in the 1960s. In line with this current data there are reports from the Goethe-Institut that record numbers of people took German courses and examinations in 2011. The increase in these figures in the southern European countries was particularly pronounced. This suggests that there is increased interest in working in Germany.
Market equalisation forces are thus starting to take effect, which may help to relieve tensions in the eurozone* Whereas in Spain and Greece the unemployment rate is well above 20% and in both countries there are even more than 50% of young people under 25 who are jobless, the buoyant demand for labour in Germany is receding only gradually. In Germany the unemployment rate is stable at a low 5.6% and for the young the jobless rate is 7.9%.
The migration especially of young southern Europeans can help to prevent bottlenecks in the German labour market. This will stimulate the forces of growth in Germany. Sustained economic growth in Germany, however, also serves the interests of the southern European countries. They can basically export more goods and services to Germany, the faster the Germany economy grows. Moreover, the countries can expect their citizens who are working in Germany to send remittances back home – to support their relatives for instance – and thereby boost the depressed demand in their own country. The main beneficiaries of the mobility, however, are the migrants. They escape high unemployment and for a time an uncertain future. They not only secure work and income for themselves, but also prevent their qualifications from becoming devalued. This shows that the eurozone needs internal migration, because there are no flexible exchange rates as an instrument for evening out different paths of price competitiveness, and the wages in heavily regulated labour markets – especially in Spain and Greece – are likely to react sufficiently only gradually.
Those who criticise emigration as a brain drain that damages the southern European countries are wrong in their assessment. Such concerns were also expressed about the EU accession of central and eastern European countries. Developments in Poland, for example, show that these concerns were unfounded. Similarly, nothing would be gained today by the southern Europeans remaining immobile. On the contrary. Without migration there would probably be virtually no let-up for unemployment at this time – with the corresponding consequences for the already strained public finances in southern Europe. Given the high unemployment and the major adjustments to be carried out there is also no prospect of skill shortages becoming an issue there for quite some time. Of course, emigration must not be a substitute for the structural reforms that need to be made, if there is to be a lasting improvement in the economic outlook for southern Europe.
*See Bräuninger, Dieter and Christine Majowski (2011). Labour mobility in the euro area. Deutsche Bank Research, EU Monitor 85.
Author: Dieter Bräuninger (+49) 69 910-31708
© Copyright 2016. Deutsche Bank AG, Deutsche Bank Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”.
The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, licensed to carry on banking business and to provide financial services under the supervision of the European Central Bank (ECB) and the German Federal Financial Supervisory Authority (BaFin). In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG, London Branch, a member of the London Stock Exchange, authorized by UK’s Prudential Regulation Authority (PRA) and subject to limited regulation by the UK’s Financial Conduct Authority (FCA) (under number 150018) and by the PRA. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Inc. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product.