November 2012

IZA Policy Paper No. 48: How Could Germany Escape the Demographic Trap?

Christoph Kahlenberg, Alexander Spermann

updated short version published as "Die Demografiestrategie der Bundesregierung – ein Weg zu mehr Wohlstand?" in: Wirtschaftsdienst, 2013, 93, 165-169

Demographic change is perceived as a threat for wealth rather than a challenge in Germany. The debate on skilled labor shortage is a proof for this view. The paper surveys the most important German studies on skilled labor shortage. Meanwhile, a consensus on solutions has emerged in academia. Increasing the participation rates of elderly, women and facilitating qualified immigration as well as improving productivity are the mainstream recommendations. The paper provides descriptive statistical evidence that temporary agency work could contribute to solve the skilled labor shortage problem via these four channels. However, it is far from clear that productivity increases are the most important and most sustainable way out of the demographic trap. Against this background the government's demographic strategy is assessed. It turns out that the government has not a coherent strategy yet to solve the demographic issues ahead.