KfW Research: KfW-ifo Skilled Labour Barometer

Skills shortage eases as a result of Germany's economic downturn but remains a challenge

• Level remains historically high
• Skilled labour shortages hamper business activities of 39% of enterprises in Germany
• Services sector is disproportionately affected

The shortage of skilled labour in Germany has eased as a result of the economic downturn. According to the KfW-ifo Skilled Labour Barometer, 39% of businesses reported disruptions to their operations from a shortage of skilled workers in October 2023. That was 4 percentage points fewer than in the last survey in July of this year and 11 percentage points fewer than in July 2022, when the skills shortage reached the highest level since the survey was started. Despite this sharp drop, the skills shortage remains on a very high level in a historic comparison and thus continues to pose a challenge for businesses.

Small and medium-sized and large enterprises are equally affected, with each size class reporting a share of 39%. There are significant regional differences. Enterprises in eastern Germany were by far most likely to be affected by skills shortages, at 44%, while businesses in northern Germany were least affected, at 33%.

The skills shortage has eased considerably as a result of the economic downturn, especially in the manufacturing sector, with 29% of manufacturers currently complaining about a lack of skilled workers (July 2023: 35%, July 2022: 45%). That was the lowest rate reported by any of the main economic sectors. It was the highest in the services sector, at 45%. In commerce, 33% of businesses reported a shortage of skilled workers, with retailers much more affected than wholesalers (39% vs. 28%). In the main construction industry, 29% of enterprises saw their operations disrupted by a shortage of skilled labour.

A deeper look into the sectors reveals that a particularly large proportion of law firms, tax consultancies and auditing firms are currently experiencing skills shortages. It reached the highest level thus far recorded, with 77% of businesses affected. Among businesses operating in land-based transport (roads, railways), the rate of 64% reporting shortages is also well above the average. More than 50% were affected in catering and hospitality, architecture and engineering firms as well as facility management and gardening services. At the same time, skilled labour shortages decreased in the textile industry (11%), the chemical industry (16%), furniture manufacturing (20%) and automotive engineering (26%).

“The share of businesses that saw their operations impaired by skills shortages fell below the 40% mark again for the first time in two years as a result of the economic downturn”,

said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

“But if the economy recovers as predicted next year, it will increase again. After all, the structural trend is continuing. More and more baby boomers are retiring, and smaller cohorts of young workers are entering the labour market. The number of employable people will begin to shrink in 2025 and usher in a new phase of skills shortages. The reduced supply of labour can limit economic growth to well below 1% in the longer term. However, the private sector, the state and people of working age have it in their hands to change this. What is required are decisive and rapid responses that pull out all the stops. We need to increase the labour market participation of female and older workers and skilled migration from countries outside the EU. In addition, the private and public sector must increase labour productivity more strongly in order to substitute missing workers with digitalisation and automation.”

The current KfW-ifo Skilled Labour Barometer can be downloaded from:
KfW-ifo Skilled Labour Barometer | KfW