German Paradox: Shortage of Skilled Labor

Germany's economic recovery is at risk as business laments the lack of qualified workers—despite 3.8 million unemployed

by Juliane Kinast, Christian Reiermann and Michael Sauga

The German economy has hardly regained its stride, and now businesses are complaining about a lack of well-qualified employees. Voices in both the political and business worlds call for new immigration laws. But should Germany let in more workers when it still has 3.8 million unemployed?

Klaus Kolley's world has turned upside down. The personnel director of ZF Friedrichshafen, an automotive supplier, was used to reading applications from hundreds of engineers and technicians looking for a steady job. Now he almost has to pitch his firm like a salesman to win highly qualified professionals. Kolley needs to hire 250 more engineers, but many of the desks in a new wing of the company's headquarters -- built specifically to accommodate a larger staff -- will remain empty. The candidates just aren't there. "The market," says Kolley, "has practically been swept clean."

Just as their economy kicks into gear, German companies have started to worry about personnel bottlenecks. One in two industrial companies is unable to fill some open positions, says the German Chamber of Commerce and Industry. According to professional and trade associations, there's a shortage of thousands of engineers and computer specialists. Even less-specialized workers like welders are hard to come by, say personnel directors from small businesses to major industrial corporations.

It sounds like a paradox: How can companies report growing numbers of unfilled positions while 3.8 million people are still out of work? The problem is so severe that economic experts worry it may harm the German economic recovery.

Deutsche Bank notes that the phenomenon could hamper growth, and the Wall Street Journal predicts that a lack of qualified workers in Germany will cause production shortfalls worth billions.

The news has set off the usual bickering within the left-right coalition in Berlin. Minister of Education Annette Schavan, a member of the conservative Christian Democratic Union (CDU), wants to ease immigration requirements to attract qualified foreign workers. Two of her colleagues in the cabinet, Interior Minister Wolfgang Schäuble and Minister of Labor Franz Müntefering, a Social Democrat, disagree. "We can't just say: people, we're opening the gates," says Schäuble, aware that he speaks for many of his fellow conservatives.

The key figures in the debate have buried themselves in the usual ideological trenches, unwilling to take political chances only six months before the next state parliamentary elections in the states of Hesse and Lower Saxony. Pessimists warn that opening the borders will make things worse for the unemployed at home. Their opponents counter that those who still haven't found jobs are essentially unemployable.

Both arguments are wrong. Instead of pitting Germans against foreigners, experts favor the sort of double strategy that unions as well as employer associations -- acting in rare unison -- have recently proposed. "A careful opening to new immigration," reads their recent joint statement, "must accompany the ongoing need to implement training and development programs."

'Highly Elevated Demand'

It's increasingly obvious that supply and demand are out of sync in the German labor market. In the second year of its current upswing, Germany may not suffer from a general lack of trained workers -- but there are "isolated bottlenecks in individual industries and regions," conceded Frank-Jürgen Weise, head of the Nuremburg-based Bundesagentur für Arbeit (BA), Germany's labor agency.

According to an internal BA analysis, there are still more than 10 applicants for each job in some engineering professions in the country's north and east. But in the southern states of Bavaria and Baden-Württemberg statisticians are already registering "elevated" or "highly elevated demand for skilled workers" in about 18 percent of professions.

This incongruity will only get worse if the decline in the birth rate continues to bring down the number of high school graduates in the future. According to an analysis by the German Institute for Economic Research, there will be a shortfall of up to 270,000 skilled workers by 2020.