German labour shortage set to reach 4.3 million by 2036, study warns

The widening gap

A fresh calculation from the German Economic Institute (IW) shows the labour market hole will be far deeper than earlier forecasts. The difference between workers entering the market and those retiring will reach 4.3 million people in 2036, roughly 1.3 million more than the institute's projection from 2024.

“In the end, a potential of more than four million workers will be missing.”

Two years ago the IW still spoke of a gap of almost three million. The revision follows a bleaker population outlook based on new data from the Federal Statistical Office. The current legislative period is "the last chance to introduce measures" to cushion the blow, the IW says.

2024 estimate3

2026 estimate4.3

2024 estimate

3 million workers

2026 estimate

4.3 million workers

Data from the article text

Demographic headwinds

Germany's population picture has darkened sharply. In 2024 the IW still expected moderate growth until 2040, but by 2045 the population is now forecast to shrink by 2.9 percent to around 81.1 million people. One reason is that net immigration has dropped, partly because of the government's "migration turn" and the weak economy.

The biggest driver, however, is the exit of the baby boomer generation (birth years 1954 to 1969). Currently 14.1 million boomers are still below the statutory retirement age; that number will fall to 7.6 million by 2030 and to zero by 2036. By then only 9.8 million people will reach working age, down from a much larger pool. The labour force potential shrinks from 55 million in 2025 to 51.2 million (-6.9%) in 2036 and further to 50.4 million (-8.3%) in 2045.

2025

55 million people

2036

51.2 million people

2045

50.4 million people

Data from the article text

Eastern Germany hit hardest

The pressure will fall disproportionately on the eastern states. While the population in western Germany may at best remain stable, the east's will continue to decline, the statistical office reports. The working-age population there is set to drop by around 7 percent by 2035, with Saxony-Anhalt and Thuringia seeing even steeper losses. High outward migration of young, well-educated people, especially university students and graduates, deepens the drain.

“The economic catch-up process is no longer a sure thing.”

Policy levers

To offset the demographic crunch the IW urges expanding skilled immigration, raising labour force participation, and increasing per-capita working hours. It also recommends making work more attractive by lowering the tax and social security burden on earnings. The window to act is narrowing; by the time the last boomer cohort reaches retirement age in 2036, the structure of the workforce will have altered permanently.