ifo Institute: Labor Shortage Will Severely Slow Growth in Germany in the Future
Germany’s economy will grow much more slowly over the next 15 years than in the past. The reason for this is the worsening shortage of labor resulting from demographic change. These are the results of a recent study conducted by the ifo Institute for the Bertelsmann Stiftung.
“The structurally weak Laender of Saarland, Saxony-Anhalt, and Mecklenburg-Western Pomerania are likely to perform particularly badly,” says Joachim Ragnitz, managing director of the ifo Institute’s Dresden Branch. “We expect the city states of Berlin and Hamburg as well as Baden-Wuerttemberg and Bavaria to be at the forefront of economic growth between now and 2035. Regional differences in economic strength and living standards will thus increase significantly in the coming years,” Ragnitz adds. “It’s time to let go of the idea that regional differences in prosperity can be reduced in the foreseeable future. This means the gap between eastern and western Germany will not close any further.”
Robert Lehmann, one of the authors of the study, continues: “Even if the eastern German Laender merely wanted to catch up with the structurally weak western German Laender, they would need to achieve productivity increases that for some of them would be two to three times higher than in the past ten years. This is not really a realistic proposition. In the long term, they would also need to focus policy much more strongly on strengthening growth, in particular through increased innovation. Whether politics can muster the strength for this, however, is questionable.”
Average Annual Economic Growth of German Federal States 2018–2035
| Federal state | Gross domestic product in % |
| Saarland | -0,2 |
| Saxony-Anhalt | -0,2 |
| Mecklenburg-Western Pomerania | -0,1 |
| North Rhine-Westphalia | 0,3 |
| Thuringia | 0,3 |
| Brandenburg | 0,5 |
| Bremen | 0,5 |
| Schleswig-Holstein | 0,5 |
| Rhineland-Palatinate | 0,6 |
| Hesse | 0,7 |
| Lower Saxony | 0,7 |
| Saxony | 0,7 |
| Baden-Württemberg | 0,9 |
| Hamburg | 0,9 |
| Bavaria | 1,1 |
| Berlin | 1,1 |
| Western Germany | 0,7 |
| Eastern Germany (including Berlin) | 0,6 |
| Germany | 0,7 |
Source: ifo Institute calculations and projections. The detailed projection calculations have been published as Gillmann et al. (2019): “Growth and Productivity 2035: Innovation and Productivity Gaps at State Level,” Produktivität für Inklusives Wachstum 03, Bertelsmann Stiftung, Guetersloh 2019.
© ifo Institute
