Replacement migration from a labour market perspective: how many migrants from non-EU countries does Germany need to stop the decline of its workforce?

Johann Fuchs, Institute for Employment Research (IAB)
Alexander Kubis, Institute for Employment Research (IAB)
Lutz Schneider, University of Applied Sciences and Arts Coburg

Caused by demographic trends, the German labour force is expected to undergo a dramatic development. The mean age will certainly rise and the number of workers will most probably decline in the long run. The German labour market could be confronted with a labour shortage, especially for qualified workers. It can be shown that even a rather strong increase in the labour force participation rate will not fully compensate for the demographic effect. Moreover we can demonstrate by two scenarios, which assume extreme developments of the activity rates of women and the elderly, that in the long run the demographic effects beats labour participation. Therefore, we study the effect of migration on the development of the German labour force. Based on a deterministic population projection model with a separate treatment of foreigners, our scenarios show that – in combination with high labour participation rates – a net inflow of 500.000 migrants per year would be necessary to keep the potential labour force at the current level. A further analysis indicates that the present high immigration from EU member countries will run out almost completely in the long run. Insofar immigration from non-EU countries will become more important. As a side-effect of high immigration flows, the ageing of the population (and the labour force) would be dampened, although not stopped by far.