Shortage of skilled workers: Why higher wages are no solution

The debate about the causes of Germany's shortage of skilled workers is not new. Opinions are controversial. According to the German Economic Institute (IW), people tend to search for simple solutions for complex problems. In short, the debate often says that there is no shortage of skilled workers, that employers just have to dig deeper into their pockets for wages and salaries to fill these positions. This view can even be found in some German economic research institutes.

The institute has been researching the shortage of skilled workers for decades. With the IW skilled labour database, the Institute has extensive current figures that prove the growing staffing problem of companies. The data are based on the unemployment and job statistics of the Federal Employment Agency (BA) and take into account about 1300 occupational categories. 

They show: Last year there were on average about 1 339 000 vacancies for qualified skilled workers nationwide, but only 968 000 qualified unemployed. In purely arithmetical terms, the labour market is therefore lacking at least 371 000 skilled workers. The situation is aggravated by the fact that supply and demand very often do not match regionally. 

260 000 more people retire in 2023 than younger people take their place 

According to the Institute, higher wages alone will not change this situation. They can neither ensure that needed qualifications are created in the short term, nor change working conditions and framework conditions on the labour market in the medium term so that sufficient mobility is created. Instead, higher wages would make services and goods more expensive in the short term in sectors where the shortage of skilled workers is particularly great. This would have drastic consequences, as the leeway for companies has shrunk considerably in recent years. 

The Corona pandemic and rising prices as a result of the war have pushed up costs considerably, especially in industry, which is strongly affected by the shortage of skilled workers and energy costs. In addition, there is the threat of a wage-price spiral that will drive up inflation in Germany.

Skilled immigration and attractive jobs 

"Basically, shortage occupations have to become more attractive," says IW economist and study author Alexander Burstedde. "Many professions, especially in the skilled trades, must become a real alternative for young people. This includes flexible working hours and the possibility to combine work and private life well." 

However, the domestic potential is not enough, says Burstedde: "We need to promote skilled immigration and work more, not less, in the future. This also requires more reliable childcare. This is the only way to tackle important projects for the future, the only way to achieve goals in digitalisation and the fight against climate change."