In the late 1990s and early 2000s, Germany’s labour market was in such a poor state that the country was described as ’the sick man of Europe’. Today, by contrast, the labour market is in such a good state that commentators around the world talk of the “German job miracle”. The reasons for this remarkable turnaround are of interest to policy-makers and analysts beyond Germany’s own borders. The purpose of this series of articles is to set out the main features of the German labour market from an international perspective. It will cover the history and development of the German labour market, along with some of the major challenges facing Germany today. It will then map out the structure of the labour market; Germany’s requirements for skilled labour; unemployment and out-of-work benefits; and a range of active labour market policies which are used to support strong employment in Germany.

  • In the early 2000s, Germany still had one of the highest unemployment rates in the European Union. Today, hardly any other EU country has such low unemployment figures. Germany has essentially been able to significantly reduce its structural base of unemployment.
  • The recovery of the German labour market is also apparent in other success-features: the employment rate for adults of working age has peaked; moreover, youth unemployment remains at a very low level compared to the rest of Europe.
  • In particular, older workers – a group which is increasing in number as the population ages – are profiting from higher employment levels. The employment rate for older workers has grown much more markedly in Germany than in other countries. Long-term unemployment has also decreased in parallel with a strengthening of the labour market, although to a lower extent than unemployment in general.
  • However, along with successes, this trend-reversal in the German labour market also reveals weaknesses. These become particularly apparent through international comparison. Once people in Germany become unemployed, they are at a higher risk of remaining out of work for a longer period of time than in other countries. Furthermore, people in unstable and low-paid jobs find it difficult to progress into better employment alternatives.
  • Germany is not an island of bliss. Precisely because of its export-orientated economy, Germany cannot cut itself off from global developments. From a current perspective, risks exist in particular in relation to increasing tensions in Eastern Europe; humanitarian crises across the Middle East and Africa; and electoral upheavals which are changing western political faultlines.
  • Germany is still some way off from having a perfectly resilient labour-market. This is felt above all by newcomers to workforce – in particular young people, who still do not enjoy the same high employment levels as the rest of the population. In southern Europe the very high unemployment rates amongst young people pose a threat of destabilisation and social erosion which could also have repercussions for Germany.
  • Finally, a specific challenge is posed by the very high number of people who are at present fleeing from their home countries to Germany. Integrating them into the labour market will at best succeed in the mid- to long term. It is therefore anticipated that unemployment rates will increase in the short term. From a long-term perspective, however, this wave of new arrivals presents Germany with opportunities for strengthening its supply of labour.