Why Is Talent Fleeing Germany?

Summary

Germany, known for its economic prowess, faces a significant challenge in attracting skilled labor despite its wealth and high living standards. With a shrinking and aging population, Germany's inability to draw highly qualified foreign workers could threaten its economic miracle. The country has implemented various immigration reforms to boost skilled immigration but still struggles with bureaucratic hurdles, language barriers, and cultural integration issues.

Takeaways

• 🇩🇪 Germany is known for high productivity, quality products, and economic success, but faces a major problem: difficulty in attracting skilled labor.
• 📉 Germany's population is shrinking, with an aging workforce, making it harder to maintain its current productivity levels.
• 🔄 Although immigration has helped offset population decline, Germany struggles to attract enough skilled immigrants, especially compared to other countries like Canada and the UK.
• 🧑‍💼 Despite reforms, bureaucracy and complex immigration processes discourage many skilled workers from moving to Germany.
• 👷 Germany's economy needs at least 400,000 new workers annually to keep the workforce stable, but the current talent pool is insufficient.
• 🧑‍🏫 The country's workforce shortage is particularly acute in skilled jobs, with 1.5 million vacancies in mid-2022.
• 🚫 Cultural barriers, high costs of living, taxes, and language issues deter skilled workers from staying in Germany long-term.
• 📝 The recent 2020 and 2023 reforms aim to simplify skilled immigration and reduce administrative hurdles, but their impact remains uncertain.
• 📊 Europe's aging population limits the supply of skilled labor for German industries, as many countries have seen significant outflows of talent.
• 🚪 If current trends continue, more than 200,000 jobs could remain unfilled by 2026, impacting Germany's economic growth and productivity.

Q & A

What is Germany's reputation in terms of economic performance and quality of products?

Germany is renowned for its economic strength and the high quality of its products. It is often associated with efficiency and precision, leading to a reputation where 'if it’s German, it's good'.

What is the potential serious problem Germany is facing despite its economic success?

Germany is struggling to attract skilled labor, which is a significant issue considering its aging population and the need for a robust workforce to maintain its economic growth.

Why does Germany not rank highly as a destination for highly skilled foreign workers?

Germany does not seem to be an attractive destination for highly skilled workers compared to other countries like the UK, the Netherlands, Canada, Australia, or the US, possibly due to language barriers, lifestyle preferences, and the bureaucratic complexity of its immigration system.

How does Germany's demographic situation impact its labor market?

Germany's population is expected to shrink, leading to an aging population and a reduced labor force. This demographic change exacerbates the challenge of attracting and retaining skilled workers.

What measures has Germany taken in the past to boost immigration and address its labor needs?

Germany introduced its first immigration law in 2005, offering state-funded language classes and cultural introductions to new immigrants, and allocated significant funds to attract talent.

How has the competition within the European Union affected Germany's ability to attract labor?

The free mobility of people and workers within the EU has increased competition for labor, making it more challenging for Germany to attract and retain skilled workers, especially when other EU countries offer more attractive incentives.

What changes did Germany make to its immigration laws between 2018 and 2020 to attract skilled workers?

Germany simplified the immigration process for professionals from outside the EU, allowing immigrants to arrive without a contract and accepting vocational training as proof of qualification, in addition to university degrees.

How has the COVID-19 pandemic impacted Germany's immigration and labor market?

The pandemic significantly reduced the number of immigrants arriving in Germany, both skilled and unskilled, exacerbating the labor shortage and increasing the pressure on the German economy.

What are the three major problems Germany faces in attracting and retaining skilled workers?

Germany faces issues with the limited pool of skilled workers in Europe, a complex and bureaucratic immigration system, and cultural integration challenges, including language barriers and lifestyle adjustments.

What recent reforms has Germany implemented to improve its attractiveness to skilled immigrants?

Germany has introduced an 'opportunity card' system based on a points-based assessment of language skills, professional experience, and connections to Germany. It also allows immigrants with adequate work experience and education to work in Germany even if their qualifications are not recognized, and provides a one-year stay for job seekers with academic degrees or professional certificates.

Outlines

00:00

🌐 Germany's Economic Success and Labor Attraction Challenge

Germany, known for its economic prowess and high-quality products, faces a significant challenge in attracting skilled labor despite its wealth and strong economy. The country has experienced an economic miracle but struggles to be a top choice for highly skilled workers compared to other developed nations like the UK, the Netherlands, Canada, Australia, or the US. Germany's population is projected to shrink, leading to an aging workforce and a decreased labor pool, which could impact its economic growth. The government is taking measures to address this issue, but the country's attractiveness to foreign professionals remains relatively low.

05:04

📉 Declining Immigration and the Search for Talent

Germany's efforts to attract young talent and maintain demographic expansion are critical to prevent economic and social security crises. Despite early initiatives like the 2005 immigration law, which provided resources for language and cultural integration, the influx of immigrants has fluctuated. The country has seen periods of increased immigration, but since 2013, the attraction of professionals has waned. Germany's competition with other EU countries for labor and the complexity of its immigration system have contributed to its less than desirable status for skilled workers. The pandemic further exacerbated the issue, halting immigration and emphasizing the need for labor market reforms.

10:05

🧩 The Three Pillars of Talent Drain in Germany

Germany's talent drain can be attributed to three main issues: the limited pool of skilled workers in Europe due to demographic shifts, the complexity of the German immigration bureaucracy involving multiple ministries, and cultural barriers including language integration. The country's reliance on European talent is diminishing as other nations also face labor shortages. Efforts to simplify immigration processes for non-EU professionals have been made, but the bureaucratic hurdles remain high, particularly for SMEs. Cultural integration challenges, including language learning and family reunification, further contribute to the brain drain, with many skilled workers choosing to leave Germany.

15:06

🔄 Revamping Germany's Immigration Policies to Attract Talent

In response to the looming labor shortage and the need to maintain its economic growth, Germany is considering new immigration reforms. These include the introduction of an 'opportunity card' based on a points system and amendments to the Qualified Immigration Law to allow professionals with adequate work experience and education to work in Germany, even if their qualifications are not recognized locally. The new measures aim to make it easier for skilled workers to enter the labor market and stay in the country while seeking long-term employment. The success of these reforms will be crucial in determining Germany's ability to attract and retain the talent necessary to support its economy.

Keywords

💡Economic Miracle

The 'Economic Miracle' refers to the rapid economic recovery and growth that Germany experienced after World War II. This term is used in the video to highlight Germany's historical success in rebuilding its economy, which is a backdrop to the current challenges it faces with skilled labor shortages. The video suggests that despite this past success, Germany now grapples with attracting and retaining skilled workers, which could threaten future economic prosperity.

💡Skilled Labor

Skilled labor refers to workers who possess a high level of expertise in a particular field, often acquired through education and training. In the context of the video, Germany's inability to attract skilled labor is presented as a significant problem. The video discusses how this shortage could undermine the country's productivity and economic growth, especially as the working-age population shrinks.

💡Demographic Aging

Demographic aging is a trend where the median age of a population increases over time, typically due to declining birth rates and increasing life expectancy. The video uses this concept to explain the shrinking and aging of Germany's population, which leads to a reduced labor force and increased pressure on social services. This demographic shift is central to the challenges Germany faces in attracting skilled immigrants to replenish its workforce.

💡Immigration Law

Immigration law pertains to the policies and regulations governing the entry, residence, and integration of foreigners in a country. The video references Germany's first immigration law in 2005 and subsequent reforms, indicating the country's efforts to make its immigration system more attractive for skilled workers. These laws are crucial in the video's narrative as they represent Germany's response to its labor market challenges.

💡Brain Drain

Brain drain describes the emigration of educated and skilled individuals from their home country to another, often more developed country, in search of better opportunities. The video suggests that Germany is not only struggling to attract new skilled workers but also facing a brain drain, as many of its existing skilled workers are leaving for other countries. This phenomenon is a significant concern as it can lead to a loss of human capital and innovation.

💡Labor Market

The labor market refers to the system through which labor is supplied and demanded. In the video, the German labor market is depicted as facing a critical shortage of skilled workers, particularly in specific 'bottleneck' occupations where job vacancies cannot be filled by available workers. This situation is exacerbated by demographic aging and the reduced吸引力 of Germany as a destination for skilled immigrants.

💡EU Expansion

EU expansion refers to the process of admitting new member states into the European Union. The video mentions that the initial influx of workers following EU expansions has waned, and Germany must now look beyond Europe for skilled labor. This highlights a shift in Germany's immigration strategy and the need to attract talent from a more diverse range of countries.

💡Bureaucracy

Bureaucracy in this context refers to the complex administrative system and procedures involved in managing public affairs. The video points out that Germany's bureaucratic immigration system, involving multiple ministries and agencies, acts as a significant barrier to attracting skilled workers. Simplifying this bureaucracy is presented as a key challenge for Germany to overcome in order to improve its appeal to foreign professionals.

💡Cultural Integration

Cultural integration is the process by which individuals or groups from different cultural backgrounds become part of a larger, unified culture. The video discusses how language barriers, housing costs, and cultural clashes contribute to the difficulty skilled workers face in integrating into German society. These challenges are highlighted as significant factors that discourage skilled workers from choosing or staying in Germany.

💡Workforce Stability

Workforce stability refers to the consistency and reliability of a country's labor force. The video suggests that Germany needs a stable influx of new workers, particularly skilled immigrants, to maintain its workforce and support economic growth. The current decline in immigration and the aging population threaten this stability, prompting the need for policy reforms to attract and retain talent.

Highlights

Germany is known for its economic strength, high productivity, and quality products.

Despite its wealth, Germany struggles to attract skilled labor, ranking lower than comparable countries.

Germany's population is projected to shrink, leading to a potential labor shortage.

The country's demographic challenges are exacerbated by an aging population and a lack of talent retention.

Germany's early response to demographic decline in the 1970s included boosting immigration.

The introduction of Germany's first immigration law in 2005 aimed to attract and integrate skilled workers.

Despite efforts, Germany faces competition from other EU countries for labor, affecting its ability to attract talent.

Germany's immigration policies have been criticized for being less attractive compared to other countries.

Recent reforms to Germany's immigration law aimed to simplify the process for skilled workers from outside the EU.

The COVID-19 pandemic significantly impacted immigration to Germany, exacerbating labor shortages.

Germany is experiencing a 'brain drain', with many skilled workers leaving the country.

Germany's complex bureaucratic immigration system is a major barrier for companies looking to recruit skilled workers.

Cultural factors, including language barriers and integration challenges, contribute to Germany's struggle to retain talent.

New legislation in 2023 allows foreign workers with adequate experience to work in Germany even if their qualifications are not recognized.

The 'opportunity card' system is introduced to attract qualified foreigners based on a points system.

Germany's future economic growth is at risk if the skilled labor shortage is not addressed.

Transcripts

Germany is not only a very wealthy country, it's also a country famous for running like

clockwork and for producing things of very high quality.

[That at least is the reputation, if it’s German, it's good].

The fact is that over recent decades Germany experienced one of the most significant economic

miracles in history.

We have already told you about it both here on VisualPolitik and on our sister channel

VisualEconomik.

Today, Germany is synonymous with high productivity, thriving companies and highly skilled workers.

However, it has one problem, a potentially very serious problem that we have not yet

told you about: its inability to attract skilled labor.

Have you ever considered going to work in Germany?

I'm sure many of you have, but I'm sure many more of you have thought about the UK, the

Netherlands, Canada, Australia or the US first.

Despite being a very rich country, with many jobs and what appears to be the opportunity

to build great careers, Germany does not seem to be an attractive place for highly skilled

workers.

It ranks much worse than the rest of its comparable countries.

It does not reach the extreme of Japan...

But it is an anomaly.

An anomaly that would always be a problem, but even more so when your working-age population

is shrinking.

So the question is, why on earth is Germany such an unattractive destination for highly

qualified foreigners?

What could this mean for what has traditionally been considered the driver of Europe?

What is the government doing to remedy this situation?

Well, in this video we are going to answer all these questions.

And who knows, maybe by the end of it you will consider moving there...

Or maybe not.

Let's get started.

VisualPolitik viewers, Germany is a top 10 country.

And by that I mean that it is almost always among the top 10 countries when we look at

practically any index of well-being and development: GDP per capita, education levels, productivity

levels, access to basic services, etc., etcetera.

But its state-of-the-art factories, its modern educational classrooms and its more than enviable

annual investment in techno-industrial development would be meaningless if there were no teachers,

engineers, doctors, workers and professionals to put this immense productive apparatus into

operation.

And the problem...

We can start to see the problem perfectly in this graph:

According to official UN figures, the German population will start to shrink as of 2023.

From a total population of around 83 million people that it has at present, the forecast

is for the 80 million mark to be breached by 2047 and to dip into the 70 millions by

the last decade of this century.

It is not as dramatic a contraction as is expected in countries such as Japan or South

Korea, but it is still economically relevant.

This data basically means not only less population, but also an aging population and, therefore,

much less available labor.

Logically, this is all in response to changes in birth patterns, but there is something

else that can also increase the economic impact of this decline: the lack of talent retention.

Yes, Germany receives a lot of immigration, that's for sure.

It’s likely many of you have heard that.

However, there is a problem in this story: every time a highly skilled German worker

retires, it is not easy to replace him or her, because as we will see, in Germany there

is no surplus of immigration, but above all there is no surplus of skilled immigration.

So the question is: Who could say no to the German giant?

Why are other destinations preferred?

These are the questions we have to find answers to.

In order to do so, the first thing of all has to be to understand how we got here.

THE FIRST DEMOGRAPHIC CHIMES

This is not an isolated case, most developed countries – and also other not so developed

countries such as China and Russia – are experiencing an accelerated process of demographic

aging.

And, take note, because this process not only reduces the available labor force, but also

considerably increases public spending:

Think about it, pensions, health care, dependence...

The fact is that Germany understood the problem, and guess what?

It started to do its homework very early, no less than half a century ago.

You see, in the 1970s there was a turning point in Germany, its native population began

to shrink.

That is, the country entered a phase of negative population growth.

As you can see, since the 1970s the number of deaths has exceeded the number of births

every year.

To compensate for this, Germany started to boost immigration.

As you can see, the number of immigrants arriving each year is generally greater than the native

loss of inhabitants.

This has allowed the country to maintain its population growth over the years.

Everything depends on the arrival of new immigrants.

And if you look at the graph you will see how at the beginning of the 21st century the

first alarm was sounded: the arrival of immigrants plummeted.

At the beginning of the 21st century, almost all of Europe was growing and growing faster

than Germany.

Germany was far from being the only flower in an ever-expanding garden of prosperity...

And that, naturally, had consequences.

Competition slowed down the influx of new labor into German industries.

The question is, what did they do?

The truth is that the Germans took it very, very seriously.

The government knew how important it was to attract young talent and maintain demographic

expansion in order to prevent the economy and the Social Security system from going

into crisis.

So to achieve their goals, in addition to actively promoting immigration, they also

did things like this, check it out.

(1 January 2005: Germany's first immigration law goes into effect.

Starting next year, new immigrants will be entitled to participate in state-funded German

language classes and receive an introduction to the country's legal system, culture and

history.

The government has earmarked more than 200 million euros for the scheme.

– DW)

The measures worked, and the net number of immigrants arriving in the country each year

almost tripled.

From 73,000 in 2004, the number increased to 212,000 in 2008.

And not only that.

By 2016, one of the historical ceilings in terms of immigrant population was hit: 432,000

non-Germans moved to live in this country.

Of course, Germany is part of the European Union, so what does that mean?

That the country is subject to free mobility of people and workers.

Any of the EU members can become a rival country for labor.

A growing competition that Germany does not seem to have been able to manage very well.

"DANKE" BUT NO "DANKE")

From 2013 onwards, the influx of immigrants to Germany started to slow down again.

And even worse, according to OECD reports the country was becoming less and less attractive

for the arrival of professionals.

Because, and this is important, not all people are equal.

Logically, from an economic point of view, qualifications count.

And that is why the OECD issued this warning.

Look at this.

(4 February 2013: Labor migration: Germany is open to graduates, but immigration is difficult

for medium-skilled workers).

And why did the OECD say this?

Basically because of this.

Pay attention to the data.

("Germany is one of the OECD countries with the lowest barriers to immigration for highly

skilled workers.

However, the number of immigrant workers from outside the EU and the European Free Trade

Area (EFTA) it receives is 25,000 per year, about 0.02% of the population (...) The rate

of skilled immigrant workers received by Australia, Denmark, Canada and the United Kingdom is

five to ten times higher."

– OECD German Labor Market Report.

2013)

In other words, it was supposedly relatively easy to emigrate to Germany, but even so,

skilled workers preferred – and still prefer – other destinations.

Whether because of the language, the standards or the lifestyle, the fact is that Germany

is not a popular destination.

Of course, that's not the whole story.

A survey conducted by the Swiss-based International Institute for Management Development found

that German employers' perception of the ease of recruiting international talent was rather

poor.

In other words, the OECD report did not accurately reflect the entire reality.

It seems that red tape has been a problem for a decade now.

In some ways, legislation to attract skilled immigration dating back to 2005 was becoming

obsolete compared to the incentives on the table in neighboring countries.

Therefore, between 2018 and 2020, the German parliament started to make several changes

to the Act.

Changes to make it easier for professionals from outside the European Union.

For example, it was made easier for immigrants to arrive without a contract.

However, just then, the pandemic completely changed the picture.

It brought the arrival of new immigrants to a screeching halt.

Immigrants of all kinds: skilled and unskilled.

And that, in the long run, only aggravated the problems.

Since 2013, the Federal Labor Agency itself has been monitoring what the authorities refer

to as "bottleneck" occupations.

That is, areas of the labor market where job vacancies cannot be filled by available workers.

In 2020 this situation cooled down, but since then the trend has returned.

More and more areas of the German economy are unable to get the skilled workers they

need.

In fact, this indicator is expected to break records in 2023.

The post-pandemic economic upturn coupled with the growing demographic aging is pushing

the German labor market into an increasingly critical context:

While the demand for workers continues to grow, the number of immigrants arriving each

year has decreased.

Not to mention the number of skilled immigrants.

To give you an idea of what we are talking about, according to estimates by the German

Economic Institute in Cologne, by mid-2022 there were already 1.5 million vacancies in

this country.

A figure that is expected to grow strongly over the next few years.

The situation has reached such an extent that some commercial areas have had to start providing

their services on a reduced basis.

And this is, in fact, what explains news stories like this:

(25 June 2022: Germany will use temporary foreign workers to ease staff shortages at

German airports.

Photos of travelers standing in long lines at security checkpoints at Düsseldorf airport

earlier this week showed the extent of the shortage.

– Reuters)

In other words, the German economy is in urgent need of labor of all kinds.

According to estimates by the German Institute for Labor Market and Employment Research,

at least 400,000 new arrivals are needed each year to keep the workforce stable.

That's already a problem.

But, VisualPolitik viewers, the free skilled labor thing...

That's already almost an endangered species in this country.

According to a survey conducted in December 2022, 7 out of 10 companies are short of skilled

labor.

Not only that, but Germany is now facing another problem:

It's no longer that few skilled workers are arriving, it's that many of the ones they

did have are leaving.

In other words, the country is suffering a brain drain.

And that, that is something that endangers the formidable industry that fuels Europe's

greatest economic engine.

But...

Let's go back to the question we asked at the beginning: How on earth is it possible

that there are almost no professionals who want to live and work in one of the most developed

countries in the world?

Where is the problem?

Well...

Listen up!

THE THREE PILLARS OF THE TALENT DRAIN)

If we try to go straight to the heart of the matter, we could say that Germany faces three

major problems.

Each of them linked to the others.

For example, first of all...

The stock of human capital from Europe cannot be expected to last forever!

And why do I say this?

Well, you see, according to official figures, Serbia has lost 9% of its inhabitants in the

last three decades, North Macedonia 10%, Bosnia and Herzegovina 24% and Albania 37%.

And something very similar could be said about Poland and the Baltic republics, among others.

All these countries have lost a large proportion of their best-educated and most qualified

young people.

And, let’s not forget, Europe is a very aging continent, so the pool of skilled workers

available for German companies to recruit is limited.

Basically, the pool of skilled workers is no longer large enough.

Along these lines, many experts believe that the "initial effect" of the EU expansions

has already come to an end.

Perhaps Ukraine was the only exception, but this country has also already suffered a huge

exodus of skilled workers, particularly of young people.

For this reason, many analysts point out that the search for talent must look beyond continental

borders.

And do you know what?

This is exactly what led the 2020 reform of the Skilled Immigration Act to introduce more

facilities for skilled immigrants from third countries.

For example, university degrees were no longer required, but vocational training was also

accepted as proof of qualification.

A demand that German employers have been making for some time.

Why?

Just take a look at this graph.

Of course, this was not the only measure.

Some administrative formalities were also reduced, but the main stumbling block was

not solved.

Which is none other than this.

The bureaucratic German immigration system is extremely complex: at least 7 ministries

are involved in the process, without taking into account second-tier government agencies

and local governments.

To give just one example, the approval of a qualified professional would involve:

the Federal Ministry of Economic Affairs and Climate Action,

the Ministry of Labor and Social Affairs, the Ministry of Education and Research,

the Ministry of Food and Agriculture, the Ministry of Health,

the Ministry of the Interior and Community and the Ministry of Economic Cooperation and

Development – so pretty straightforward!

This obviously poses a major disincentive for German companies.

In 2022, only 17% of the companies surveyed by the Bertels-mann Foundation recruited skilled

workers from abroad.

And while large companies can hire consultancies and law firms to speed up the process, SMEs

face an almost insurmountable barrier.

That is, in a way, the 2020 eligibility extension was a step in the right direction to start

attracting professionals from outside the European Union, however, it did not prepare

the bureaucracy for such a challenge:

Mobility within the common European block is much simpler, but when you start incorporating

professionals from other regions, the documentation and requirements multiply.

It is infinitely more difficult and costly to incorporate a Thai or Uruguayan worker

than a Polish one.

This is the second problem.

And finally, the third major stumbling block has to do with a much more complex factor:

the cultural one...

If only because of the language.

In August 2022, the German Federal Employment Agency turned its attention to this issue.

And do you know what it found?

That most workers who arrive in Germany without knowing German do not even bother to try to

learn it.

Why?

Because they are thinking of leaving.

Language integration problems, problems in obtaining permanent residence, housing costs,

cost of living and taxes, problems in reuniting the family in the country and the clash with

the local culture are the most frequent arguments given by skilled workers who decide to leave

Germany.

This is something we have already told you about on VisualEconomik.

To make matters worse, the immigration legislation clashes with a new type of work that is practically

ignored: freelancers.

Well, these three problems seem to explain why Germany is not as attractive a country

as it apparently should be.

The question is, is there a way out?

What are German politicians doing?

Well, we are going to take a look at that right now.

RETAKING THE "JOB APPEAL"

Estimates by the German Ministry of Labor suggest that, if this situation is not reversed

by 2026, more than 200,000 jobs currently filled will become vacant.

A situation that could have a very negative impact on companies, productivity and the

country's economic growth.

Therefore, in October 2022, the issue will be at the top of the public agenda:

(22 October 2022: How Germany plans to attract qualified foreigners.

Reforms include the introduction of a so-called "opportunity card" that will entitle people

to seek work in Germany following a point system based on language skills, professional

experience and connection to Germany, among other criteria).

And finally, on 29 March, the Qualified Immigration Law was amended again,

(29 March 2023: Foreigners with adequate work experience and education in their home country

will be allowed to work in Germany, even if those professional qualifications are not

recognized in Germany.

In addition, they will be allowed to work up to 20 hours per week while looking for

long-term employment.

Finally, it will be possible for persons in possession of academic degrees or professional

certificates to remain in Germany for up to one year while seeking employment.

– DW)

Will this new reform work?

Only time will tell.

The question now is:

Would you consider living in Germany?

Would you like to?

How do you think this country can boost the arrival of new talent?

Leave us your answer in the comments and let's open a debate.

And now, if you found this video interesting, don't forget to give it a like and subscribe

to VisualPolitik if you haven't already done so.

All the best and see you next time.