Combating Skills Shortages in Germany with Higher Productivity

The best way to combat the shortage of skilled workers is by boosting productivity. This is a recommendation from Prof. Joachim Ragnitz, Managing Director of ifo Dresden. “When there is a labor shortage, it increases the incentive to make better use of the workers that are still available: by imparting new knowledge, upgrading technical equipment in the workplace, or using labor-saving methods,” writes Ragnitz in an article for the journal ifo Dresden berichtet.

“Politicians should therefore devote much more attention to driving digitalization forward in government and the economy. This increases productivity and can thus help secure prosperity in Germany even with a shrinking workforce,” Ragnitz added.

He pointed out that many see the labor shortage as a threat to prosperity, because they believe unfilled jobs lead directly to a loss of value added. “This is a fatalistic and not very forward-looking view,” he says. If productivity increases to a sufficient extent, losses in total economic value added can be avoided in the event of a labor shortage. “Workers benefit from this via higher wages, and – at least in the long run – businesses become more competitive overall.”