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An immigration act: Why doesn't Germany have one?

“Nearing full employment, Germany considers immigration act.” Not very long ago, such a headline would have been unthinkable. Today, an immigration bill is at the heart of the policy changes proposed by business groups across the country, including Germany’s largest Chamber of Commerce in Munich. What happened?

Germany is on its sixth year of an economic boom. Despite some headwinds, like the growing insecurities about Brexit or looming conflicts over trade tariffs, the order books of German companies are overflowing.

IHK President Eberhard Sasse / Credit: Wolf Heider-Sawall / IHK    

Strong investment, low interest rates and high consumer spending are boosting the German economy even further. As a result, unemployment is still shrinking and has shrunk by nearly 50 percent since 2005, when joblessness reached a post-reunification high of 4.9 million people. In Bavaria, one of Germany’s strongest regions, unemployment has dropped to 3.2 percent, a figure that many economists consider very close to full employment.

The flipside of low unemployment is a fast-growing shortage of skilled workers. More than 200,000 jobs in Bavaria cannot be filled because the labor supply has run dry, as a survey by the Bavarian Chambers of Commerce revealed last year. The economic cost of the skills gap just in Bavaria is 17 billion euros per year. Immigrants are already extremely important for the health of the economy.

Since 2012, the share of non-German workers in the Greater Munich has grown from 13.3 to 18.1 per cent. Without immigrants, job growth would be much slower as they fill almost half of all new jobs. So far, most are EU citizens from Romania, Croatia or Poland who are exercising their right to free movement within Europe. People from countries outside the EU only play a marginal role.

An immigration act is very important because Germany needs a tool to expand and effectively regulate access to its job market. The current system is based on an extremely limited list of professions with officially recognized shortages. It is inflexible and it doesn’t work.

We are proposing two basic channels of immigration. Germany can readily admit immigrants with job offers in the country without having to set up disproportionate barriers. On the other hand, the country will also benefit from a score-based model. These immigrants can apply for a temporary green card and have their applications rated according to criteria like age, professional skills and language proficiency. Quotas could be revised at regularly to take into account changes in population and economic growth.

So far, the federal government in Berlin has announced very few proposals that would improve the situation for German businesses. Most times, politicians make companies suffer for their success. One example is that the government is committed to introducing a one-sided law that gives employees the right to temporary, part-time work while guaranteeing them a full-time job anytime they wish.

The proposal comes after the previous government introduced generous early retirement benefits, which were availed of by more than half a million pensioners and depleted the work force further. Given the challenging demographic projections, German companies are starting to wonder who will fill all these future jobs in a booming economy. An immigration law is inevitable because it is the only sensible solution to the situation.

IHK Munich has 380,000 member companies and is Germany’s largest chamber of commerce. While Upper Bavaria is home to a diversified mix of industries, such as high-tech companies, financial services ‎and media firms, Munich hosts seven of the 30 DAX-listed companies, as well as many so called “hidden champions” of the famous mittelstand, or the SMEs, mostly family-run, that have established themselves as global market leaders.

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Germany 2018, Pt. 2 was prepared for and originally printed in Forbes Asia magazine.

PDF of the printed report

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