By Dr Christoph Andre Metzler
The German Economy has been a stabilizing factor in Europe for the last decades. But what is the cause of the German success model? David Audretsch and Erik Lehman (2015) list seven possible reasons – one of them the ability of German culture and institutions to face change in dynamic situations and find flexible solutions to profit from it. This attitude has helped Germany in the past, such as in the global financial crisis in 2007-2008, and might prove to be an asset in the future.
A current and central challenge of the German labor market is an ongoing process of change due to the retirement of skilled labor, which will continue to increase in the next few years. This loss of expertise cannot equally be replaced by the number of young professionals available (Geis-Thoene, 2021). Most employees in Germany are aware of the favorable conditions they enjoy. A recent representative study found that only five percent of the German workforce fear losing their job and being unable to easily find a comparable new opportunity (Schäfer, 2024). The expanding shortage of skilled workers could endanger several industries, like transport and logistics or construction, in the long run. Therefore, enabling each available individual, including disadvantaged persons, to participate in the labor market is crucial (Arndt, Tiedemann & Werner, 2024).
Two groups will be discussed within this article. First, there is the older generation already on the labor market, either employed or looking for a job. Second, the younger generation aiming to enter the labor market.
Due to the demographic reasons discussed, it is important to uphold the employability of older individuals until the legal retirement age. There is a connection between being recognized as a disabled individual and being older in Germany. This association is partly a result of physical deterioration, e.g. cancer, associated with age (Metzler & Werner, 2017) and partly due to workplace accommodations that have not always kept pace with the needs of an aging workforce. Improving workplace accessibility could help affected older individuals to remain active and productive in the workforce for longer.
One example is the consequences of digitalization. Only 33.5 of all companies, that have employed people with disabilities in the last five years, consider accessibility when implementing new software, such as an online collaboration tool (Metzler, Jansen & Kurtenacker, 2020). Therefore, disabled professionals might experience restrictions when dealing with new programs or new versions of existing programs, which could negatively affect their employability. On the other hand, digitalization may also offer new opportunities for people with disabilities in the labor market. For example, working from home could provide more flexibility to integrate medical appointments, like taking part in therapy, into their daily workflow. In fact, 29.8% of companies, that have employed people with disabilities in the last five years, believe in new opportunities for them within their organization due to digitalization (Metzler, Jansen & Kurtenacker, 2020).
Even without a disability, adapting to digital, and to a certain extent ecological, changes in the German economy might be challenging for the older workforce. Competencies required in many professions are evolving rapidly, necessitating further training and skill development for many. Burstedde et al. (2023) illustrate this phenomenon using the automotive industry, a key industry within Germany, as an example. According to their findings, 80.3% of all enterprises within this industry report a demand for further training of their workforce concerning soft skills, and 81.9% express the same need regarding technical skills. However, the amount of further training currently provided does not meet these requirements. Several barriers exist, such as staff shortages and insufficient time allocated for further training. Consequently, the retraining process itself will be a long-term endeavor, even without considering the needs of disadvantaged individuals. But then again, it will be important to offer learning opportunities for all individuals in German society. And one of these groups within German society are migrants. And in this context, ongoing digital and ecological changes are not the only challenges.
The number of individuals born abroad but living in Germany increased from 12,2 million in 2007 to 15,9 million in 2019. Some arrived through regular migration as skilled labor, while others came as refugees due to humanitarian reasons. Effectively integrating these individuals into the workforce could help mitigate the impact of retiring skilled labor in some core industries like transportation and IT, and thereby contribute to the continued success of the German economy. However, the integration process, especially of refugees, can be costly, partly due to missing (formal) qualifications (Geis-Thoene, 2022). Even if migrants have obtained academic or vocational degrees in their home countries, issues may arise because not all these degrees are recognized by German authorities. This discrepancy is due to differences in competencies compared to equivalent German degrees (Werner et al., 2022). While recognition of foreign qualifications and additional training are possible, as well as supported by the German government, the process itself can be time-consuming. Affected migrants could still find jobs in their field of expertise but might experience disadvantages in their payment or career options.
Looking at younger individuals, in Germany, there are essentially two primary pathways to gain a degree suitable for joining a certain profession after completing school: attending an (applied) university to earn an academic degree or earning a degree as an apprentice in the vocational system. The vocational system is largely structured around a dual education model of training in vocational schools and local companies. This education model combines theoretical knowledge and hands-on experience. In both learning environments, individuals are instructed by professionals with the necessary soft skills and expert knowledge, such as teachers and vocational trainers. Both groups have their own challenges in supporting youths in times of digital transformation, but both face an increasing demand in further training due to digitalization as Seyda & Risius (2021) state based on the results of a quantitative survey of both groups. This demand includes skills to handle new technologies, e.g. machines or software, in their specific working environment on their own, but it also includes skills to teach these new technologies to their apprentices.
But digital skills are not the only skills apprentices need to learn to perform in times of change. A quantitative survey performed by Risius & Seyda (2023) illustrated that over 90 percent of all vocational trainers strengthen the ability of their apprentices to be open about their mistakes and learn from them. This is a sign that in times of change professionals will have to regularly reflect on their actions and try to improve them. Additionally, around 78% of all vocational trainers try to encourage the apprentices to meet decisions in the work context quickly and safely, thus giving younger workers more responsibilities. Finally, around 77% of all vocational trainers give apprentices support to challenge the current state and find new solutions to existing problems, making apprentices agents of change. Consequently, soft skills will not vanish as a basis for employability in Germany in times of digitalization.
As discussed, embracing change is essential for the German economy, and one potential solution is to strengthen various approaches to build or secure the employability of different groups. However, the need for adaptation extends beyond the German economy. And finding humane solutions in a century of ongoing change is a universal necessity.
With the continuing advancement in artificial intelligence, the competencies required in many professions will most likely continue to evolve. AI will most likely not substitute but enhance the activities of many professionals (Hammermann et al., 2023). This development could increase the amount of further training needed in the medium and the long run, evoking an additional demand of professionals specializing in doing so. It also could strengthen the demand for organizations and individuals that help to specifically address the specific needs of disadvantaged persons, such as the disabled or migrants. Not only individuals might profit from further assistance. Another secret to Germany´s success are strong small and medium enterprises (SME) with less than 250 employees often found in rural regions. Those companies are often highly specialized and hidden champions (Audretsch & Lehman, 2015). However, SME also have disadvantages in resources compared to large enterprises, e.g. they are less likely to have a specific strategy for digitalization (Risius & Seyda, 2023) and less likely to use digital technology to support their employees with disabilities (Metzler, Jansen & Kurtenacker, 2020). Hence, specific initiatives to support the digital transformation within SMEs are vital.
The challenge discussed – an over disproportionate of older individuals at the end of their working life – is not limited to Germany. Furthermore, the situation could also turn out to be a resource in the end if managed carefully. Experienced individuals could help train young individuals entering the labor market, especially concerning soft skills, as well as providing firm specific knowledge and comradeship to migrants joining the German labor market. This mentorship could potentially bridge the generational gap, providing a most valuable transfer of competencies. Therefore, those individuals who are nearing the end of their employability may partially ensure the employability of the next generation.
References
Audretsch, D. B. and Lehmann, E. (2015)´The Seven Secrets of Germany: Economic Resilience in an Era of Global Turbulence´, Oxford University Press, Marston
Arndt, F., Tiedemann, J. and Werner, D. (2024)´Ältere Beschäftigte am Arbeitsmarkt – wertvolle Erfahrung stärker als Potenzial nutzen´, study within the project „Research Unit on Securing Skilled Labour“, in cooperation with the German Federal Ministry for Economic Affairs and Climate Action, Cologne
Burstedde, A., Risius, P., Tiedemann, J. and Werner, D. (2023)´Weiterbildungsbedarfe der Automobilbranche in der Transformation. Befragungsergebnisse aus dem IW-Zukunftspanel´, study for the Expert Group Transformation of the Automotive Industry commissioned by the German Federal Ministry for Economic Affairs and Climate Action, IW-Report, Nr. 56, Cologne
Geis-Thoene, W., (2021)´Mögliche Entwicklungen des Fachkräfteangebots bis zum Jahr 2040. Eine Betrachtung der zentralen Determinanten und Vorausberechnung´, IW-Report, Nr. 11, Cologne
Geis-Thoene, W. (2022)´Die Bedeutung der Zuwanderung für den wirtschaftlichen Erfolg Deutschlands´, IW-Analyse, Nr. 151, Cologne
Hammermann, A., Monsef, R. P. and Stettes, O. (2023) ´KI und der Arbeitsmarkt. Eine Analyse der Beschäftigungseffekte´, IW-Report, Nr. 55, Cologne
Metzler, C. and Werner, D. (2017)´Die Erwerbssituation von Menschen mit Behinderung´, IW-Trends, Nr. 4, Cologne
Metzler, C., Jansen, A. and Kurtenacker, A. (2020)´Betriebliche Inklusion von Menschen mit Behinderung in Zeiten der Digitalisierung´, IW-Report, Nr. 7, Cologne
Risius, P. and Seyda, S. (2023)´Lehr- und Lernkultur 4.0: Digitale Kompetenzen aufbauen und Wissen innovativ vermitteln´, study within the project „Netzwerk Q4.0“, Cologne
Schäfer, H. (2024)´Wer zählt sich zu den Verlierern am Arbeitsmarkt?´, IW-Kurzbericht, Nr. 48, Berlin
Seyda, S. and Risius, P. (2021)´Unterstützungsbedarfe des Bildungspersonals: Wie gelingt der digitale Wandel der Ausbildung?´, study within the project „Netzwerk Q4.0“, Cologne
Werner, D. &, Jansen, A., Pierenkemper, S., Hickmann, H. & Garb, M. (2022)´Integration durch berufliche Anerkennung für Geflüchtete aus der Ukraine´, IW-Report, Nr. 25, Cologne
