In a special report published ahead of the federal election on February 23, the German Institute for Economic Research (DIW) has warned that economic stagnation is inevitable unless the country welcomes migrant workers.

DIW: German economic growth rate will sink without migration

Over the next four years, Germany's rate of economic growth is expected to decline to 0,4 percent per year, and will hit 0 percent by 2029 unless the country welcomes more migrant workers to help fill its record-high labour shortage, according to the DIW. For comparison, the average growth rate sat at 1,2 percent per year between 2015 and 2023.

“Due to a demographic shift and baby boomers leaving the labour market, the German economy faces an increasing skilled and general worker shortage,” the DIW explained. 

The institute predicts 4,7 million existing employees will leave the German labour force between 2024 and 2028. The country doesn’t currently have the people it needs to fill those imminent vacancies. Unless these jobs are filled, the German economy will be “significantly curtailed”. 

“The German economy needs a significant influx of labour for long-term growth,” DIW economist Angelina Hackmann told SPIEGEL. Hackmann warned that unless measures are taken to make hires from abroad, the German economy’s growth potential will fall to 0 within the next two years.

DIW puts forward two solutions for German worker shortage

In response, the DIW suggested two broad measures which could be taken to cushion the blow of Germany’s worker shortage.

The first is that women should work more regularly and into older age. The institute suggested that the German government introduce policies to improve access to affordable childcare, reform the law which gives married couples tax breaks (Ehegattensplitting) and create more incentives for women to work into older age.

However, the “growth potential of Germany’s existing population is limited and cannot stabilise production potential alone,” the DIW warned, “The recruitment of foreign labour is therefore of great importance”. 

The DIW pointed out that while the outgoing SPD-Greens-FDP traffic light coalition was responsible for passing a new law in 2023 which hopes to encourage migrants to come and work in Germany (the Fachkräfteeinwanderungsgesetz), it is still too early to judge whether the law had been successful in achieving its goal.

However, the Fachkräfteeinwanderungsgesetz alone is insufficient, the DIW suggests. The institute said that too many hurdles remain when it comes to visa delays and the slow processes for having professional qualifications recognised. What's more, new arrivals aren’t given sufficient support in job seeking and learning German.

What are German parties’ labour migration policies in the 2025 election?

Just less than a month out from Germany’s federal election, the country’s main parties have presented their immigration policies. How do they compare with the DIW's suggestions?

The Christian Democratic Union / Christian Social Union (CDU / CSU) alliance, which is currently polling first with 30 percent of the vote (as of January 24), recommends the introduction of a “Work and Stay Agency” for foreign professional recruitment, but is also pushing to deport Syrian and Afghan nationals who are already German residents and generally increase the financial requirements for a residence permit.

Germany’s far-right Alternative für Deutschland (AfD) is currently polling second with 20 percent of the vote. However, since Germany’s major political parties have agreed not to form a coalition with the AfD, it is unlikely that they will enter government during this election period. AfD policies on work and migration include scrapping Bürgergeld for Ukrainian refugees, increasing German language requirements for working in German healthcare (currently B2 / C1) and generally “reducing migration to the absolute minimum”. 

The Social Democratic Party (SPD) are currently polling at 17 percent and is likely to be the CDU / CSU’s coalition partner. In response to the worker shortage, the SPD argues that Germany should “invest in qualification” and “increase the potential of people in our country”, encourage the “continued migration of skilled workers”, further develop Fachkräfteeinwanderungsgesetz and create a “Job-Turbo” system to integrate refugees into the German workforce.

The Greens (Die Grünen), currently polling at 14 percent, are calling on Germany to recognise itself as a “migration country” with a “true culture of welcoming”. “We must ensure that the best-skilled workers can and want to come to us easily, with simplified migration procedures,” the party’s manifesto reads.

The Free Democratic Party (FDP) is currently polling with 4 percent of the vote and may not pass the 5 percent hurdle required to enter parliament. While former traffic-light coalition Finance Minister Christian Lindner (FDP) led the government’s decision to halve federal funding for German integration courses, his party is calling for “easier integration into the German labour market” especially for “non-academic migrant workers”. 

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