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The (Lack of) Unemployment in Germany

It has become clear over the recent years that Germany is currently the greatest European economic powerhouse. One of the only issues that the country faces today is actually the lack of workforce. Interestingly, this is not a problem of education or qualification, as is with other European countries. Currently, there is a lack of workers from the lowest paying categories of employment all the way up to decision making executives.

The source of the issue can easily be identified when taking a look at the fertility rate in Germany, which was recently at its all time low. Today, the fertility rate is at its highest level in decades. This, of course, stems from cultural differences between native Germans and those who immigrated into the country over the last decade.

However, when we look at this recent influx of people into Germany, the figures at first glance just do not make sense. The number of people with an immigrant background in Germany is estimated at 18,5 million in 2016, amounting to more than 8% of Germany's total population. Considering that most of these are non-German speaking and, to a certain extent, untrained, we would expect to see a rise in unemployment in Germany in recent years.

Looking at the numbers, however, we can see that harmonized unemployment is at its all-time lowest: 3,6%! As a recruiter who has considerable issues placing non-german speaking candidates, I wondered how the unemployment could remain at such a low level. The answer seems to be in the methodology behind calculating unemployment rates. Namely, this relates to the refugees and immigrants who are currently attending language and integration courses. They are currently not listed in the unemployment statistics, and will not be for at least five more years.

If we define unemployment as the number of people who would like to have a job, but currently do not have one (i.e. not accounting for discouraged workers), we can assume that the unemployment rate in Germany would be much higher. At this point, it is hard to assume what the exact figure would be, but most economists assume that the unemployment rate will marginally rise in 2018.

In the end, one might ask themselves if this means that Germany will, in the future, be dealing with a high rate of unemployment. There is no easy answer. However, looking at past experiences of other countries, this issue will probably only be relevant in a very short term. After the initial sudden influx of workers, the economy will have to adjust. Then, one of the simplest rules of economics will kick in: existing jobs create new jobs.

All things considered, although today's ''hidden'' unemployment will reveal itself in years to come, it will not have a negative effect on the German economy in the long run. One could only wish for more transparency from the German Unemployment Office at this point. Other than that, it will be smooth sailing for the German economy from here on.

Author: Matej Strelar

Contact: mstrelar@s-gsg.com