The biggest challenge for Europe's largest economy will be growth constraints due to a workforce shortage, German Economy Minister Robert Habeck said on Wednesday after Berlin slashed its outlook for this year.
With some 700,000 vacancies currently unfilled, Germany's economic growth potential has fallen to 0.7% from around 2% in 1980s and is set to fall further to 0.5% if the country fails to resolve this problem, Habeck said.
"We lack hands and minds," Habeck said at news conference presenting the government's 2024 economic report, adding that unfilled vacancies were set to rise due to an ageing population.
Official estimates suggest Germany's ageing society will be short seven million skilled workers by 2035.
"It is no longer just about skilled workers," he added.
Offering financial incentives for people who would like to work longer and more flexibly in old age was one solution proposed in the government's report.
Reconsidering unemployment welfare benefits for some recipients was another way to tackle the problem, Habeck said.
More than half of Germans believe work is not worthwhile after the government's planned increase in welfare payments and child benefits, a survey showed in September.
Some 2.6 million people aged between 20 and 30 in Germany have no professional qualification, Habeck said.
Welfare and aggressive labour market reforms introduced some 20 years ago were credited with elevating Germany to an internationally envied level of competitiveness after recessions in 2003 and 2004.
But Germany won't be able to bridge the workforce gap without migration, Habeck said, adding the country needs to become immigration friendly with quick visa procedures, more language courses and digital access to German companies from abroad.
Berlin has introduced several laws to make the country more attractive for migrant workers, such as shortening foreigners' paths to citizenship, speeding up the issuance of visas and recognising foreign qualifications in the job market.
Not everyone is Germany is happy with the prospect of more immigration, however. Support for the nationalist Alternative for Germany (AfD) party has reached a record high and it polls as the second most popular party nationally.
