“Bright Minds Only”? How can labour migration solve the German skill shortage?

Hannes Wehnhardt is a master student in Economics and Management of Government and International Organisations at Bocconi University in Milan and an exchange student at the School of Transnational Governance of the European University Institute. A German by nationality, Hannes is interested into labour migration policies, skill shortage, and structural adjustment processes in the Federal Republic of Germany. This blogpost is part of our forum on the transnational governance of migration. The views and opinions expressed in this post are the author’s own.

In 2020, a total of 131 German professional categories lamented a scarcity of qualified labour with a particularly pronounced skill shortage in health and medical care, crafting, and engineering. This skill shortage has roots in demographic change, Germany’s knowledge-based economy, and workers’ occupational immobility. Its overall costs to German society are quantified at €30bn per year – yet may further rise because of the COVID-19 pandemic-induced labour market turmoil. Beyond skills, the retiring baby boomers, coupled with lower birth rates and higher life expectancy, threaten Germany’s international competitiveness and its inter-generational contract-based social welfare system. In this blogpost I argue that labour migration to Germany may contribute to relieving the current skill shortage and that current policies could be strengthened through targeted attraction in the short-term, refocussed employer-migrant relations in the medium-term, and enhanced student retainment in the long-term.

Labour migration policies in Germany

Between 2009 and 2019 labour migration to Germany almost quadrupled. This trend was accommodated through a pragmatic and progressively liberalising migration policy: The government expanded the recognition of foreign qualifications, adopted the EU Blue Card initiative, and facilitated intra-corporate transfers. On paper, the German labour market policy welcomes bright minds, meaning highly skilled and highly qualified migrants only; in practice, however, the policy remains unsuccessful in skill attraction, employer satisfaction, and student retention. Therefrom, the 2021 Skilled Immigration Act launched the “Make it in Germany” information platform, elevated vocational qualifications, and instituted the Service Centre for Professional Recognition (ZSBA), yet fails to address employer-migration relations and the retainment of international talent. Referring back to skill shortages, labour migration may substantially alleviate the 1.3 million vacancies in German social and medical care by 2030. Similarly, strong labour migration may contribute to a stabilisation of Germany’s old-age-dependency ratio, industrial productivity, and public pension funds.

Three policy recommendations 

Building on the problem conceptualisation and contextualisation provided above, the following section outlines three time-scaled policy recommendations to the Federal Ministry of Labour and Social Affairs (BMAS). 

Short-term recommendation: targeted attraction

Firstly, the BMAS could consider launching an image campaign to attract high-skilled workers from outside the EU, most notably from demographically and educationally powerful economies such as China, Brazil, and India. This supply-push intervention could provide for i) information dissemination by articulating German labour market needs and recent regulatory changes, and ii) skill attraction by framing Germany’s economic appeal and welcome culture, as successfully anticipated in state-level labour market campaigns. Pursuant to the Skills Immigration Act, the campaign could specifically advertise the uniform recognisability of university and professional education, the broad recognition of foreign vocational qualifications, and occupational training opportunities in Germany.

Herein, the BMAS could develop the image campaign in collaboration with the German Labour Office, Embassies, the Chambers of Industry and Commerce, and potential employers. For instance, communication specialists within the new ZSBA should orchestrate targeted media releases, policy champions, and focussed events, whilst BMAS’ budgetary resources and employer contributions secure financial viability of the campaign. Surveys among labour migrants, employers and labour economists could further monitor the effectiveness of the image campaign in providing for a strong, long-term value-added to entrepreneurship, innovation power and international competitiveness of the German economy. Finally, the image campaign would contribute to refocussing the German migration policy debate from refugees to skilled labour migrants.

Medium-term recommendation: refocussed employer-migrant relations

Secondly, the BMAS could institute a Service Centre for High-Skilled Employment, which helps employers to connect with highly qualified labour migrants. In the past, the BMAS has overseen the distribution of surveys among German employers, wherein 43% considered skill shortages as high business risk. Indeed, labour migration management competences were divided across the Federal Employment Agency and the Chambers of Industry and Commerce, both lacking a specialization in linking employers to high-skilled labour migrants. Now, the BMAS could capitalise on its labour market insight to institute an employer-focussed service centre.

Task-wise, the Service Centre for High-Skilled Employment could be entrusted with three objectives: Foremost, the Centre could diminish occupational misalliances through an employer-migrant match-making service. Next, the Centre could provide for technical guidance through employer convenings, online resources, executive training, and e-learning courses. Finally, the Centre could monitor employer needs through a virtual dashboard and bring identified problems onto the German political agenda. Implementation-wise, respective civil servants could be trained in consultancy, marketing, and statistics to pre-empt skill gaps and administrative overload. In addition, the BMAS could engage employer associations and the Chambers of Industry and Commerce at an early planning stage to circumvent inter-institutional competence conflicts. Notwithstanding its financial costs, the Service Centre would bundle national competences on managed high-skilled labour migration. Moreover, this demand-side intervention complements the pre-existent ZSBA, whilst providing for legal clarity to German employers.

Long-term recommendation: enhanced student retainment

Thirdly, the BMAS could introduce an international students engagement package to retain talented graduates within the German labour market. Whilst the 2017 “Gesetz zur Umsetzung aufenthaltsrechtlicher Richtlinien der Europäischen Union zur Arbeitsmigration” liberalised residence and work conditions for international students, their in-course integration into the German labour market and connectivity to German employers remain limited, as evidenced by comparatively low student attraction and retention rates. Therefrom, the engagement package could adapt German university curricula to labour market demands, most notably through curricular internships and mandatory language courses.

Herein, the BMAS could leverage its institutional liaison with the state-owned Goethe Institute and its competence leadership in cultural integration and language education. As exemplified in Poland, the package could further establish university-specific career centres, which facilitate vocational orientation, student-employer relations, and market familiarity for international students. Benefits-wise, the package not only provides for brain gains, but also spills over to talented German students who are retained in the domestic labour market through mandatory vocational orientation during their studies. Moreover, the international students engagement package accommodates Germany’s growing tertiary sector and knowledge-based economy. Similarly, international students engagement entails positive spillover effects – beyond economics – in terms of language skills, cultural enrichment, and societal integration. To ensure political feasibility, the BMAS should coordinate the package with state governments, as the German legal system classifies education policy as a state competence. Further necessary stakeholder engagement pertains to employers, student unions, industry associations, and universities.

Conclusion

In this blogpost I argued that labour migration can contribute to relieving Germany’s skill shortage. Yet, labour migration is not a silver bullet against skill shortages but should be accompanied by domestic age- and family-friendly employment reforms. Moreover, reforms of skill-driven labour migration need to take into account the difficulty of forecasting of labour market trends and popular concerns about its cultural impacts. Aware of these challenges, I have suggested three concrete measures through which labour migration could address Germany’s skill shortage: a targeted image campaign, the setting up of a centre for employer-migrant relations, and enhanced measures for the retainment of international students.