The German labor force is generally highly skilled, well-educated, and productive. The labor market remained resilient during the economic and financial crisis and was stronger in 2015 than ever before. Employment in Germany has continued to rise for the tenth consecutive year and reached an all-time high of 43 million in 2015, an increase of 330,000 (or 0.8 percent) from 2014.
Simultaneously, unemployment has fallen by more than two million since 2005, and reached in 2015 the lowest level since German reunification (1990). In 2015, less than 2.8 million people were registered unemployed, and the jobless rate was 6.4 percent, according to official national data from the German Federal Employment Agency. Using internationally comparable data from the European Union, Germany has 4.6 percent unemployment, the lowest rate among all European Union member states (European Union average: 9.4 percent, EUROSTAT). Although the unemployment rate gap between federal states in eastern Germany versus western Germany has narrowed considerably in recent years, the average unemployment rate in the eastern states (9.2%) still significantly exceeded that of the western states (5.7 percent) in 2015.
Germany’s national youth unemployment rate was 5.3 percent in 2015 - even lower than the rate in the overall population. The German vocational training system has gained international interest as a key factor in Germany’s highly skilled workforce and its low youth unemployment rate. Germany’s so-called “dual vocational training,” a combination of theoretical courses taught at schools and practical application in the workplace, teaches and develops many of the skills employers need. Each year there are more than 500,000 apprenticeship positions available in more than 330 recognized training professions in all sectors of the economy and public administration. Around 50 percent of students in every age group choose to start an apprenticeship. The government is promoting apprenticeship opportunities, in partnership with industry, through the “National Pact to Promote Training and Young Skilled Workers.”
An element of growing concern for German business is a shrinking labor force due to an aging population, especially with respect to skilled labor. Official forecasts at the behest of the Federal Ministry of Labor and Social Affairs predict that the current working age population will shrink by almost 3 million between 2010 and 2030 resulting in an overall shortage of labor. Labor bottlenecks are already a reality in certain industries, occupations and regions. According to the Federal Employment Agency, doctors, medical and geriatric nurses and mechanical, automotive and electrical engineers as well as IT professionals are in short supply. The government has begun to enhance its efforts to ensure an adequate labor supply by improving programs to integrate women, elderly, young people as well as foreign nationals into the labor market. The government has also facilitated the immigration of qualified workers.
The net migration rate of foreigners (total number of immigrants minus the number of emigrants) rose from a 2008 low of 10,700 to 1.14 million in 2015, an increase of almost 50 percent compared to the previous year. Whereas in recent years the majority of immigrants came from other EU member states choosing Germany due to its positive labor market situation, the majority of arrivals in 2015 were refugees/asylum-seekers.
Labor Relations
The cooperation and partnership of labor unions and employer associations is considered a fundamental principal of the German social market economy and has contributed to the country’s resilience during the economic and financial crisis.
German labor unions are generally constructive in their interaction with employers. As job security for members was long a core objective for German labor unions, they showed restraint in collective bargaining in weak economic times. In the last few years, Germany experienced a considerable rise in the number of labor actions, however, as unions became more insistent that employees should benefit from Germany’s strong economic recovery. According to the Institute of Economic and Social Research (WSI), about 2 million workdays were lost in 2015, the highest amount since 1992, and more than three times as many as in the previous year. All workers have the right to strike, except for civil servants (including teachers and police) and staff in sensitive or essential positions, such as members of the armed forces.
The constitution, federal legislation, and government regulations contain provisions designed to protect the right of employees to form and join independent unions of their choice. The overwhelming majority of unionized workers are members of one of the eight largest unions - largely grouped by industry or service sector - which are affiliates of the German Trade Union Confederation (Deutscher Gewerkschaftsbund, DGB). Several smaller unions exist outside the DGB. Overall trade union membership has, however, been in decline over the last several years. In 2013, less than 18 percent of the workforce belonged to unions. Since peaking at around 12 million members shortly after German reunification, total DGB union membership has dropped to 6.1 million. In contrast however, IG Metall, the largest German labor union with 2.3 million members, the influential service sector union Ver.di (2.04 million members), educational union GEW and the police labor union GDP all reported membership gains in 2015.
The constitution and enabling legislation protect the right to collective bargaining, and agreements are legally binding to the parties. Collective bargaining agreements in 2014 covered approximately 58 percent of all employees, 60 percent of the labor force in the western part of the country and approximately 47 percent in the East. On average, collective bargaining agreements in Germany were valid for 21.1 months in 2015.
Collective bargaining agreements concluded in 2015 provided nominal pay increases of 2.7 percent in 2015. Collective bargaining resulted in an overall real wage gain of 2.4 percent in 2015 compared to an inflation rate of 0.3 percent. Labor unions have achieved wage increases that were above the inflation rate since 2009.
Labor costs increased by 2.6 percent in 2015. With an average labor cost of €31.80 per hour, Germany remained eighth among the 28 EU-members states (EU average: €28.90). Since the introduction of the European common currency, the increases of the unit labor cost in Germany remained significantly below EU average.
In January 2015, Germany’s first statutory country-wide minimum wage of €8.50 ($10.62) per hour entered into force. The new law exempts young people under the age of 18 and the long-term unemployed within their first six months at a new job. Sectors with existing collective agreements that set minimum wages below the new statutory minimum wage have until January 2017 to transition.
As of January 2016, sector-wide binding minimum wages set by collective bargaining agreements were in place in 19 sectors, e.g. in construction (including electrical trades, painting, scaffolding, and roofers), waste management, hair-dressing, the meat industry, and temporary employment agencies. These sectoral minimum wages ranged from €7.90 per hour in agriculture and forestry (in eastern Germany) to €14.45 per hour for skilled construction work. In January 2016, there were only four sectors with lower sectoral minimum wages than the statutory minimum.
By law, workers can elect a works council in any private company employing at least five people. The rights of the works council include the right to be informed, to be consulted, and to participate in company decisions. Works councils often help labor and management to settle problems before they become disputes and disrupt work. In addition, “co-determination” laws give the workforce in medium-sized or large companies (corporations, limited liability companies, partnerships limited by shares, co-operatives, and mutual insurance companies) significant voting representation on the firms’ supervisory boards. This co-determination in the supervisory board extends to all company activities.
