Eastern Germany Hit Harder by the Skills Shortage

Companies in eastern Germany are more affected by the shortage of skilled workers than in the rest of the country. This is confirmed by new results from the ifo Business Survey of 9,000 companies throughout Germany, 1,700 of which are based in former East Germany. In the first quarter of 2024, 42.1% of companies in eastern Germany stated that their business was affected by a lack of skilled personnel; the figure for Germany as a whole was 36.3%.

The difference was most pronounced in manufacturing, where the proportion of companies in eastern Germany affected by a shortage of skilled workers in the first quarter of 2024 was more than 16 percentage points higher than the average for Germany as a whole.

In the service sector and in trade, the difference was 5.9 and 2.6 percentage points, respectively. Only in construction did respondents in eastern Germany appear to be less affected than in Germany as a whole.

Two effects are primarily responsible for this difference: First, the companies surveyed in eastern Germany were more confident about both their business situation and their expectations than in a nationwide comparison. The stronger economy is leading to higher demand for labor. Second, the labor supply in eastern Germany is declining faster than elsewhere: “For many years now, demographic change has been making itself felt much more strongly on the labor markets in eastern Germany,” explains Ernst Glöckner from the ifo Institute’s Dresden Branch.

The gap between the eastern German and nationwide results has widened in recent years. In terms of the economy as a whole, both groups peaked in the third quarter of 2022, when around half of companies across Germany and in the eastern federal states stated that they were suffering from a shortage of qualified workers. Since then, the proportion of those affected among the eastern German companies surveyed has fallen less sharply than the comparable figure for Germany as a whole.