The German economy is in dire need of immigrant labor. A study by the German Federal Employment Agency (BA) estimates that Germany will need to attract 400,000 net immigrants to its labor market by 2050 to sustain its current growth levels. The problem is that Germany’s traditional source countries for immigrant labor in southern and eastern Europe face the same demographic shifts as Germany, meaning their populations have also been aging.
Most countries with booming demographics are developing countries, for which labor migration bears potential for development. Studies estimate that only 60% of people in developing countries are likely to find jobs above the poverty threshold. For these countries, emigration alleviates the pressure on their ailing job markets. This is accomplished with the new skills and knowledge brought by returned workers as well as remittances that often make up large shares of the developing countries’ national GDPs.
Germany has already laid most of the groundwork needed to attract missing workforce: a broadened legal framework, strong political commitment, technical expertise, and public awareness. But how can it move up the next gear? How can we scale up a decade of piloting? Where do responsibilities lie between government actors and the private sector? And where will the immigrants of tomorrow come from?
This blog seeks to address at least some of these questions. Parts of the answers lie with the need for Germany to strengthen cooperation with new and future source countries through labor migration partnerships.
In Germany, two main roadblocks stand in the way of prospective migrant workers.
First, learning German poses a significant challenge. German is not widely taught in schools due to its limited perceived global practicality. Language training is costly and takes on average 12-18 months of full-time training to reach the desired B2 level to be attractive to German employers. Most employers currently pay for the language cost at the match-making stage before the worker embarks on the language training journey, which creates a lot of “investment” risk. Finding sustainable solutions to bridge this payment/timing gap will increase attractiveness and make hiring of foreign workers easier.
Second, the uncertainty of visa procedures may discourage potential candidates. Visa policy is often a sensitive topic, but there are ways to increase the predictability and visibility of visa applications and processes for candidates and employers. For example, it can be accomplished through facilitated schemes for specific skills levels, occupations, or nationalities, such as the Australian Pacific Labor Migration (PALM) scheme and innovations in the US H2A scheme with Mexico and Guatemala. Another option is to change the visa design. Recent Spanish reforms have proposed a 4-year circular visa program to increase predictability and security for employers and migrant workers. The issue particularly with circular schemes, however, is the power they give to recruiting agencies in origin and employers in destination countries, creating a potential for exploitative behaviors. To address these power imbalances between stakeholders, ethical circular schemes should come with proper vetting of employers, responsible recruitment agencies, and the ability for migrants to change employers within their sector or occupation. The systems should also provide proper feedback channels for the workers to evaluate employers.
The next set of challenges await immigrants upon arrival. Integration is often complicated, especially for those who have yet to master the German language. Skills recognition is another issue given that requirements for the same professions vary by states. Sectors with difficult working conditions and unattractive remuneration, such as health and aged care, also struggle to retain migrant workers who turn to less burdensome professions. Additionally, employers are not always prepared to welcome international workers and manage multi-cultural and multi-language teams, especially in smaller cities and rural areas. Discrimination and racism are a reality that pushes some migrant workers to cut short their stay in Germany and move onward to another destination. While the issue of integration of migrant workforce is at the core of Germany’s minister for integration, it should also be addressed in unison with the private sector and employers across job sectors.
On top of that, many introduced pilot programs have been set up in a way that is difficult to scale and finance in a sustainable way. Over the past 10 years, Germany has piloted several projects through skills and labor mobility partnerships. These pilot projects have been key to push forward innovative models and identify challenges and bottlenecks. But pilots score poorly when it comes to the actual numbers of migrant workers they have channeled into Germany. As comprehensive as they are, these schemes tend to be very costly if not properly scaled. This raises the question of a fair sharing of costs between private and public actors. Employers, who already bear the risk of hiring candidates unfit for the job, are understandably wary of taking on additional financial expenses. At the same time, the government alone cannot subsidize labor migration but should act as an intermediary for private employers that are often not experienced with hiring foreign workers. Results-based financing (RBF) models, in which payments are connected to pre-agreed and verified measurable performance targets, may provide a solution to this issue, helping the government, employers and ultimately the workers to ease off the burden.
Cooperation outside; coordination within
It is clear that labor migration partnerships rely on strong cooperation with sending countries at the technical as well as political level. At technical level, the cooperation should achieve some degree of coherence on training requirements and skill recognition. At the political level, partnerships are sustained by their perceived added value – a determinant that may change over time and with successive governments.
As many of the traditional sending countries age, it is time to build new and strengthen existing partnerships with the emerging source countries. As an example, although most skilled workers come to Germany from India, Germany’s visibility and attractiveness as a destination country pales in India in comparison to other global competitors.
To gain visibility abroad, Germany needs to increase the coordination across responsible ministries and build a coherent messaging – from the Foreign Office to Development and International Cooperation, Home Office, Labor and Social Affairs, Health, and the Chancellery. Ultimately, effective labor migration will require strong cross-sectorial partnerships among a variety of stakeholders – from relevant ministries to states and communities, private employers, and host communities – asking for enhanced communication, coordination, and coherence.
Lots of new developments are currently taking place in Germany when it comes to improving the processes and attractiveness of Germany as a destination country. But Germany needs to do more to overcome the hurdles of language and attractiveness, focusing on its ‘unique selling points’, for instance by communicating about the non-monetary benefits it offers and that are too often not spelled out to migrant workers: health and retirement benefits, family reunification, speedy access to citizenship, and others. Within the EU, Germany is leading a solitary race for labor migration. This alone should give Germany an edge to attract more labor migrants.
This blog is based on outcomes of a discussion among representatives from German ministries, development organizations and the private sector hosted by the German Council on Foreign Relations (DGAP) and Labor Mobility Partnerships (LaMP) in October 2022.