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Labor Paradox in Germany: Where Have the Skilled Workers Gone?

By Juliane Kinast, 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?

Germany needs more well-trained engineers. Should it find them abroad?
DDP

Germany needs more well-trained engineers. Should it find them abroad?

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.

Closing the gap would require a coordinated effort by politicians, the business world and government agencies. But there is little evidence of any cooperation so far. Instead, the various parties involved are pointing fingers and handing the problems back to the people on the front lines of the crisis.

They are people like Ulrich Bach, a personnel manager at Munich-based automotive supplier Knorr-Bremse. Standing at his company's booth at a recent job fair at Berlin's employment agency, Bach said it was disappointing that fewer electricians and engineering technicians came to the fair than expected. A 50-year-old engineer from the eastern state of Brandenburg stops at Bach's booth and, in a halting voice, tells his professional, post-reunification career sob story.

Only a few months ago Bach would have said that the man didn't stand a chance of finding a job. But now he invites him to an interview and insists that there has been a fundamental shift in attitudes in personnel departments. "The barriers against older workers are gone," he says.

The engineer can hardly believe his ears. The recovery came too quickly; it caught many Germans by surprise. Many firms, just recently, were still letting specialists go -- when signs of potential bottlenecks were just starting to emerge.

Stuttgart-based automaker DaimlerChrysler, for example, laid off almost 10,000 workers last year, including significant numbers of engineers and technicians. Now the skilled former employees are sitting at home with generous severance packages and, as a senior executive at the labor administration complains, "could not be tempted to take their jobs back, even with lucrative offers."

Poorly Educated Germans?

The education system may be partly at fault for the increasingly acute labor shortage. Companies complained for years that more and more graduates leave school without enough resources for their on-the-job training programs. Such companies often find themselves teaching trainees some of the things that were missed in school -- from spelling and grammar to simple statistics to working with percentages.

This additional education during on-the-job training is expensive for companies. Trainees spend valuable time learning what they should have learned in school when they could be acquiring skills and knowledge in their new profession. Qualification levels decline as a result.

Engineers are wanted in Germany.
DDP

Engineers are wanted in Germany.

Companies also complain about deficiencies and poor performance among university graduates. The number of high school graduates interested in becoming engineers or scientists is declining -- a problematic state of affairs in a country that earns some of its affluence from the export of first-rate technology. On the bright side, university enrollment in engineering sciences is creeping upwards.

Tightly interwoven with these training problems is Germany's immigration policy, which has been a failure for years. The country hasn't managed to provide hundreds of thousands of children of foreigners the same educational opportunities as German children. The roughly 80,000 school dropouts each year in Germany includes an abnormally high proportion of children of immigrants, and very few go on to any sort of higher education. The consequences are fatal: These kids have even less opportunity than most children of German parents.

In spite of Germany's poor immigration record, many members of the business community -- including Minister of Economics and Technology Michael Glos, a member of the CDU's sister party, the Christian Social Union (CSU) -- want to see more immigration to keep the economy from stalling. Gros proposes "that we offer the specialists we will need in the future the appropriate conditions that will enable them to work in Germany." Glos's experts have told him that the lack of skilled workers could be a problem. They lack exact figures, but they're convinced that economic growth would be noticeably higher if all jobs for skilled workers were filled.

Foreign specialists would do more than just pay taxes in Germany. By spending their incomes locally, they would create new employment opportunities for the less qualified unemployed. Glos and his team therefore want to reduce barriers to immigration.

A foreign "specialist" now has to show a salary of €85,500 to receive a work permit. Glos and his team want to cut that threshold in half. This would allow Germany to draw skilled workers and technicians, not just university graduates.

Re-training the Old and Experienced

Labor Minister Müntefering takes the opposite view. He's opposed to any loosening of the immigration threshold for new employees as long as unemployment remains high. Before new outsiders come in, says Münterfering, local labor reserves should be tapped.

Müntefering argues that these reserves are substantial. Older skilled workers who were weeded out by employers until recently can still be reactivated, especially if they can receive training for new types of jobs. The German Labor Agency offers generous subsidies for such retraining programs. Opponents of new immigration believe the companies' complaints are a pretense -- a jobless German computer expert, they charge, is less attractive to German companies than a cheaper new worker from India.

Officially, Interior Minister Schäuble -- the man in charge of immigration -- favors a compromise model. He wants to let in new workers only for a limited time, and offers a moral reason for the cautious approach: "We must be careful that the wealthy nations do not draw away the highly qualified people from the poor countries."

Schäuble also notes that employees from the 14 member states of the old European Union can immigrate to Germany at any time, and can accept any job. "These people have complete freedom of movement when it comes to employment," say Interior Ministry officials.

In any case, it's long been clear that Germany will have to modernize its immigration laws. As a rich nation, Germany now competes with classic immigration countries like the United States and Great Britain, which treat immigrants more generously. Overall tolerance of foreigners who come in to work, start families and become citizens is also higher in those countries than in Germany.

But while German politicians argue over the correct approach, the economy takes steps to solve the problem by itself. Companies use advertising and financial incentives to hunt down skilled workers, almost as in the days of the New Economy. Electronics giant Siemens, for example, hopes to fill about 600 jobs in its power plant division. It has resorted to offering a finder's fee -- any employee who successfully recruits a new employee receives a bonus of €3,000. The policy has already shown some success.

Another neglected demographic in Germany, incidentally, may also benefit from the new demand for skilled labor -- women. A Wiesbaden-based industrial-gas corporation called Linde has introduced a mentoring program in which experienced engineers help young women. Siemens, too, launched its "Young Ladies' Network of Technology" a few years ago, and its first graduates are already finding work in the rejuvenated German economy.

Translated from the German by Christopher Sultan

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