Higher Wages Help Overcome the Shortage of Skilled Workers in Germany
To mitigate the shortage of skilled workers, ifo President Clemens Fuest proposes more competition for workers, and associated improvements in wages and working conditions in Germany. “These measures can currently play a part in solving the shortage of skilled workers,” he explains in an article coauthored with Simon Jäger of the IZA Institute of Labor Economics. “But precisely because a demographically induced shortage of labor is brewing, it is crucial to come up with a competitive response to the shortage,” the two authors write.
Legislators could remove barriers to competition and review short-time work, which may discourage job changes. “Above all, however, it is up to the collective bargaining parties themselves to counteract the shortage by raising wages in areas where there is a shortage of labor,” they write.
Fuest and Jäger add that this does not mean reforms of the immigration system, childcare, or spousal splitting should be put on the back burner. But more competition leads to workers increasingly being deployed where they are more productive, and wages and working conditions improve, especially where they were too low from a market perspective. Insofar as employees with low incomes benefit disproportionately, inequality also decreases.
Publication
ifo Viewpoint 243: Higher Wages May Help Overcome the Shortage of Skilled Workers!
There is currently intense debate in many countries about a shortage of skilled workers. For instance in Germany, despite record employment figures, according to surveys by the ifo Institute, close to 50 percent of companies say they are constrained by a shortage of skilled workers ¬– also an all-time high. From an economic perspective, there is a simple answer to shortages: higher prices.
ifo Viewpoints
In the ifo Viewpoints, ifo President Clemens Fuest comments on current economic policy issues. The ifo Viewpoints are published as guest contributions in various leading media outlets.
