Business World

Sunday 21 September 2014

What can Germany do to tackle growing demographic crisis?

Sarah Stack

Published 30/07/2014 | 02:30

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Germany is on the cusp of a demographic time bomb with fewer people being born to drive its economy.

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Despite having one of the most robust economies in the world, it also has the lowest birth rate in Europe and the oldest population.

Economists estimate that Germany stands to lose more than a million qualified engineers, mathematicians, computer technicians and scientists by the end of the decade, leaving the country to face a looming talent crisis.

Without a fresh influx of highly-educated, highly-skilled newcomers, demographic trends stand to endanger the industrial and engineering future of a country whose economy is built not only on national icons such as Volkswagen and Siemens, but also on thousands of small and medium-sized businesses responsible for much of Germany's technical innovation. The country needs immigrants.

"Immigration is important for companies which are drawing on new technologies, like IT, and companies which need skilled, very, very smart people," said Christian Dustmann, the director of University College London's Centre for Research and Analysis of Migration.

"Germany has not been very successful in attracting a workforce that is highly skilled."

Germany had 8.4 births per 1,000 of the population in 2012.The EU average is 10.4. Ireland had the highest at 15.6, but is still heading for a pensions time-bomb with 1.5 million senior citizens by 2040.

In a bid to beat the crisis, German universities are expanding programmes to attract more top students from China, Russia, India and elsewhere.

Twenty years ago in TU Munich, the city's university of technology, the greatest foreign contingent was from neighbouring Austria. Now it's the 1,100 Chinese in the 38,000-strong student body.

Yet many of these foreign students, initially attracted to Germany's engineering tradition, turn down jobs for opportunities closer to home - some with family businesses.

Despite the number of international students growing to almost 24,000 from China and 10,000 from Russia, it is doing so more slowly than in other OECD member states.

Meanwhile the US is attracting the top scientists in the developed world, including from Germany.

Language barriers and attitudes to hiring from outside the country are also getting in the way of being able to build an educated workforce.

The dearth of talent is a particular dilemma for the Mittelstand, the small and medium-size enterprises which account for 52pc of Germany's economic output. With almost two-thirds in industrial and manufacturing fields, a shortage of qualified employees is costing those companies €31bn in annual lost revenue, according Ernst & Young.

The Mittelstand is also key to sustaining the innovation which has made Germany a bigger net exporter than the US. (Bloomberg)

Irish Independent

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