By December 6, 2015 just under 1 million new migrants had been registered in Germany since the beginning of 2015. The assumption of the authorities is that approximately the same number is likely to arrive in 2016. This very substantial number of migrants arriving in a very short period of time with very limited resources is posing a major social and logistical problem in Germany.   Politically the current coalition government is resisting fundamentally changing its generally positive policy towards migration in spite of a growing awareness in the population of the extreme difficulty in integrating these refugees.

Although the current level of migration has not reached the scale of the inward migration following the end of the Second World War, the majority of migrants today do not speak German and while many have a good education and significant skills, many of the skills are not those required in a modern industrial economy.  However they do have one very positive characteristic; they are overwhelmingly young.

Although recently the birth rate (children per woman in childbearing age) has started to rise again, it is still nowhere near the population replacement level. In addition any significant rise in the birth rate will not have a positive impact on the labour supply before 2035.  The latest population projections with a low-level of inward migration suggest that in 2030 45% of the population will be over 65 or under 20 years of age: in 2060 this is likely to rise to 49%, with 13% over 80.

The current demographic situation is already putting a great strain on the labour market, with labour shortages affecting all branches but especially manufacturing and medical and social care provision. Employers can respond by helping employees to upgrade their skills, by increasing capital investment both domestically and abroad and, more globally, some further increase in female activity rates can be expected in coming years.  However none of these measures are likely to prevent labour shortages from both limiting growth in the economy and from pushing up costs as employers compete for limited resources.   Suddenly the situation is being changed by the arrival of 1 million migrants, with probably the same number next year, many of whom appear to qualify as refugees and a proportion of whom seem keen on remaining in Germany for the medium term future at least.

Unlike in the neighbouring countries to Syria which have absorbed millions of Syrian refugees who are living in camps presumably waiting to return home, Germany is intent on integrating as many of the refugees as possible. Although the German response has been motivated by a deep sense of caring for refugees, in the longer term one of the principal keys to success will be the ability of the German labour market to absorb the new arrivals most of whom will seek employment.  The cost of supporting refugees from the German budgets before they find employment is significant but not extremely difficult, but for refugees to stay receiving roughly the same state allocation as German long-term unemployed would be socially explosive But the integration of refugees into the labour market may be more complex and take longer than many in Germany imagine.

Not all of the migrants of course who have arrived in 2015 will seek work.  Some are mothers with young children, others are unaccompanied minors.  Above all not all of the migrants will be granted asylum and be able to stay in Germany.  In the first nine months of 2015, around 97,000 asylum claims were made by people from the Western Balkans countries which are now considered ‘safe countries’ and therefore their nationals no longer qualify to be recognised as refugees.  These migrants are being sent home at a significant rate although many will no doubt succeed in remaining in Germany.

For those migrants whose claim for asylum is eventually recognised by the state, the first problem is the time it takes from their arrival in Germany to the granting of asylum, during which period refugees cannot work. Although these delays are being reduced gradually, the whole process still takes several months.  Once granted asylum the refugees can look for work, however, even although labour shortages in Germany are quite severe, integration into the labour market depends on an ability to speak German and qualifications to fit the jobs which are offered.

Whereas German is a general problem, the level of education and qualifications vary across the different nationalities involved. Although the statistics are somewhat unreliable, the Federal Office for Migration estimates that 30% of Syrian refugees have third level education and 25% completed high school.  Across all refugees (including Syrians), the respective figures are 17% and 18%.  It is of course also not obvious that the qualifications gathered abroad meet what is demanded on the German labour market. So while the integration of Syrian refugees into the labour market may prove to be possible, that of other refugees may well take a very long time and a great deal of training. 

The German government is investing significant amounts of money into both language training and training to meet the needs of the German labour market.   However there is a major resource problem in the availability of teachers and trainers dealing with a difficult cohort of refugees, who are very diverse in their education and training needs.

The possibility (and the worry of the German trade unions) that refugees may be able to enter the low pay areas of the German economy is far less likely since the introduction of the general minimum wage of €8.50 an hour at the beginning of 2015. Many will no doubt find employment illegally in the economy, but this opens the way for refugees to be pressurised into unacceptable work practices and extremely low incomes. In their 2015 report, the German Council of Economic Experts suggested the introduction of a degree of flexibility into the minimum wage legislation at least for a limited period.

Data from past migration suggest that five years after the arrival of migrant groups, the employment rate amongst migrants reaches approximately 50% of that of the population as a whole. So in the best of circumstances Germany is facing in the short-term a substantial cost for education and training and for social benefits to recognised asylum seekers.

However in the longer term the refugees may make a significant difference to the skilled labour force in a country which is facing an extremely difficult demographic transition following several decades of low birth rates. Two unknowns will affect the ultimate outcome: for how many years will the flow of refugees continue at current levels and how many of the refugees will want to return to their home countries if peace should be restored there.

Prof Alan Mayhew

Jean Monnet Professor & Professorial Fellow (Politics)

A.Mayhew@sussex.ac.uk