Central Europe is Plagued with a Shortage of Skilled Workers; German Workforce to Shrink by 8.3 million by 2040

Despite the continuous decline in European unemployment, the challenge of finding and retaining skilled workers is escalating for employers across Europe. This issue has reached a critical level in Europe’s largest economy, Germany, facing a severe shortage of qualified workers. The scale of this problem will only grow in the future.

According to data presented by Stocklytics.com, the number of skilled workers in Germany is expected to drop by 23.3 million by 2040, showing a massive 8.3 million plunge in two decades.  

Shortage of Skilled Workers is the Second-Largest Business Risk for German Companies

According to a German Economic Institute report, the shortage of skilled workers will significantly impact Central Europe’s industry over the next fifteen years. By 2025, the region will be grappling with a tight labor market, seeing job vacancy rates rising and unemployment falling to historic lows. By the end of 2040, the situation will worsen as more workers retire. As Europe’s largest economy, Germany has been especially hit by this plaguing problem.

The country has been experiencing a shortage of skilled workers across various sectors, driven by an aging population, low birth rates, and increasing demand for highly qualified professionals, eventually becoming the second-largest business risk for German companies.

According to the report, the number of skilled workers in Germany is expected to drop by 1.6 million between 2020 and 2025. While this figure is enormous, the following years will bring an even bigger decline.  By 2035, the German labor market is expected to lack another 4.3 million skilled workers, with their total number falling to 25.7. Looking 16 years ahead, the problem will become even more severe. By 2040, Germany is expected to have only 23.3 million skilled workers, or 26% less than in 2020. This massive decline will cause the total German workforce to shrink by 5.5 million by 2040 despite an increase in the number of high-degree employees.

The survey also revealed this trend is similar across Central Europe, with many other markets facing the same problem due to a declining working-age population, low birth rates, and emigration to Western Europe.

Skilled Workforce Shortage is a Long-Term Challenge for the European Economy

These shocking figures prove that labor and skills shortages are a long-term challenge for the European economy.  While the most recent ones have been driven by economic conditions related to the end of the COVID-19 pandemic, the Old Continent is also facing a future where over a quarter of its population will be past retirement age.

At the same time, education and training systems have not focused on the skills needed to replace retiring workers or meet labor demand in growing industries, like information technology and artificial intelligence. Solving these issues is essential to tackle staff shortages and secure Europe’s international competitiveness.