KfW-ifo Skilled Labour Barometer: Skills shortage eased in spring of 2023 but remains high

• 42.2% of German firms complain about a lack of skilled workers
• Services businesses are experiencing the worst shortage
• Eastern German enterprises are hit hardest

According to the current KfW-ifo Skilled Labour Barometer, 42.2% of companies in Germany reported in April 2023 that a shortage of skilled workers was hampering their business activity. That was a drop from the 45.7% last spring and looks like good news, but only at first glance. The skills shortage has eased significantly as a result of the economic downturn but remains very high in a historical comparison. Since the year 2021 it has worsened considerably despite the COVID-19 crisis and the severe economic fallout from Russia’s invasion of Ukraine.

Overall, large enterprises are affected more often than small and medium-sized businesses (44.0% vs. 41.3%). Services industries are hit hardest, at 47.4%, while manufacturers have much fewer problems, with 35.1% reporting difficulties recruiting suitable skilled workers. A closer look at the individual sectors reveals that the hardest hit companies include law firms, tax accountancies and auditing firms, 74.7% of which saw their business impaired by a shortage of skilled labour. More than 50% of architecture and engineering firms as well as transport and storage companies, travel agencies and tour operators, facility management and gardening providers and manufacturers of data processing devices, electronic and optical equipment were impacted.

There are also significant regional differences. Enterprises in eastern Germany are by far most severely hampered by skills shortages, at 47.8%, while businesses in the state of Hesse, Rhineland Palatinate and Saarland are much less affected, at 35.4%. This reflects the fact that Germany’s eastern states are particularly impacted by demographic decline and ageing.

“Even if the share of businesses whose operations are impaired by skills shortages has decreased as a result of the economic slowdown, the fact remains that skills shortages continue to hinder a large portion of business activity in Germany - both in absolute terms and in a historical comparison”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “At this stage, it can be expected that the business cycle will gradually recover from the price shock in the further course of this year. This also means that skills shortages should increase again towards the end of the year if the recovery continues. Addressing the skilled labour shortage with measures aimed at increasing productivity, mobilising people who are fit to work in Germany and promoting skilled migration remain urgent tasks.”

The KfW-ifo Skilled Labour Barometer is published twice a year in early summer and in autumn. The current edition is available at:

KfW-ifo Skilled Labour Barometer

Construction and interpretation of the KfW-ifo Skilled Labour Barometer

In order to measure the KfW-ifo Skilled Labour Barometer, KfW Research evaluates the ifo economic surveys which are used to calculate, among other things, the well-known ifo Business Climate Index. The Skilled Labour Barometer reports on the share of enterprises in Germany that report adverse impacts on business operations from a shortage of skilled workers. Each quarter about 9,000 enterprises from trade and industry, construction, wholesale, retail and services (without the banking and insurance sectors or the state) are polled on their business situation, among them some 7,500 SMEs. In addition to providing an overall indicator for the skills shortage in the German economy and indicators for various sectors and regions, the barometer also enables a company size-specific data evaluation separated into SMEs and large enterprises. Enterprises are generally classed as small to medium-sized if they employ a workforce of not more than 500 and record an annual turnover not exceeding EUR 50 million. For a more accurate analysis, however, these quantitative distinctions have to be drawn more narrowly for retail trade (maximum annual turnover of EUR 12.5 million), the building and the construction industry (up to 200 employees) and services (maximum annual turnover of EUR 25 million). All enterprises that exceed at least one of these thresholds are classed as large-scale enterprises.