Skilled Labor Shortage is Germany’s New Major Problem

The country lacks 570,000 highly skilled workers. If they were available, German companies would have earned 49 billion euros more this year

Galina Kolev-Schaefer

“Workshops without mechanics, construction sites without electricians, and nursing homes without caregivers: there is a shortage of skilled workers across Germany. As a result, the German economy is losing a lot of money. Without the shortage of skilled labor, companies could have earned 49 billion euros more at full capacity this year.” This is the conclusion reached by the authors of a new and alarming study by the German Economic Institute (IW) entitled “Skills shortage: economy loses 49 billion euros.”

According to the survey, in 2023, in all sectors of the German economy specialists failed to fill 570 thousand vacant jobs. This despite the fact that “the total number of workers in Germany reached 45.9 million last year, a never-before-seen figure.” However, there is a shortage of skilled workers in all sectors. “For companies,” the report’s authors emphasized, “this means that their productive capacity is declining.” Meaning that German companies could produce more, but skilled labor is in short supply. The authors of the study, economists Alexander Burstedde and Galina Kolev-Schaefer, used the Global Economic Model by Oxford Economics to calculate the financial “hole” in the form of lost production. That is, “the estimated costs relate only to production losses, not to indirect losses caused by shortages of skilled labor, including worker stress caused by overtime or losses caused by innovative technologies introduced into the competition.”

Finally, as so-called “baby boomers,” i.e., workers born between the 1950s and 1960s, retire in the coming years, the skills gap will only widen in the future. According to calculations by the German Institute, the cost of Germany’s labor shortage will actually rise to 74 billion euros as early as 2027.

In fact, the problem does not only affect Germany, but most EU countries. In this context, the competition between Germany and its “rivals,” primarily France, is becoming increasingly fierce. Tomorrow (May 13), French President Emmanuel Macron will welcome the seventh annual Choose France summit at the Palace of Versailles, attended by investors and CEOs of companies and multinational corporations. According to the Elysee Palace, this edition should announce a “record” inflow of foreign direct investment (FDI) into the French economy. At the previous Forum in 2023, agreements totaling 13 billion euros were signed. According to Ernst&Young, “in 2023, France became the top European country for foreign investment for the fifth consecutive year,” ahead of Britain and a beleaguered Germany.

To download the report from Pluralia’s website (PDF in German), follow the link