KfW-ifo Skilled Labour Barometer: Skills shortage in Germany rises well above pre-crisis level

• In October, 43% of businesses reported disruptions to business operations due to a lack of skilled personnel
• All economic sectors and business size classes are affected
• Skilled labour shortage in manufacturing highest since unification
• Skills shortage threatens to derail economic recovery

According to the current KfW-ifo Skilled Labour Barometer, the skills shortage is becoming increasingly severe, disrupting operations at 43% of all business in October 2021. SMEs and large enterprises are equally affected (43.2% and 42.5%). Compared with October 2020, when companies were primarily preoccupied with crisis management, the share of companies affected by skills shortages nearly doubled (23% in October 2020). Thus, the lack of qualified personnel is now a much more common barrier to production than before the outbreak of the COVID-19 pandemic (28.6% at the beginning of 2020).

In October all economic sectors reported problems, but most of all the services sector, where half of all businesses (48%) lamented a lack of skilled workers. In the manufacturing sector, skills shortages are affecting one in three businesses, rising more than threefold from 11% in October 2020 to 37% in October 2021. That is also the highest level among industrial enterprises since unification. In retail trade, 37% of businesses currently experience disruptions from skills shortages, and in the construction sector the rate is 35%.

A closer look at the individual sectors reveals that the skills shortage was most pronounced in the hospitality sector, with 72% of businesses affected in October. This is followed by land transport (rail and road transport of passengers and freight) including transport in long-distance pipelines, where 64% of businesses lament the lack of skilled personnel. More than half of information technology service providers are also affected. The causes for the particularly pronounced skills shortages in these sectors differ. In the hospitality and catering sector many employees went to look for work in other industries because of the extended lockdown phases and income losses they incurred from short-time work during the coronavirus crisis. However, the relatively low pay has likely paid a role here as well, as it has in land transport. The situation is different in information technology services, where well above-average gross monthly salaries are paid. Here the skills shortage is the result of strong growth in demand for IT services.

“The current KfW-ifo Skilled Labour Barometer shows that the German economy is dealing with more than just material shortages and supply bottlenecks. The skills shortage is hampering businesses to a far greater extent than before the crisis”, summarised Dr Fritzi Köhler-Geib, Chief Economist of KfW. “The lack of skilled personnel is threatening the further recovery and growth in the coming years. What direction the skills shortage takes will crucially depend on whether and to what extent the participation of Germans in the labour force and skilled migration grows again and to what extent skilled personnel can be qualified in line with demand through training and education.”

The KfW-ifo Skilled Labour Barometer is published twice a year in early summer and in autumn. The current edition is available at:
KfW-ifo Skilled Labour Barometer

Construction and interpretation of the KfW-ifo Skilled Labour Barometer

In order to measure the KfW-ifo Skilled Labour Barometer, KfW Research evaluates the ifo economic surveys which are used to calculate, among other things, the well-known ifo Business Climate Index. The Skilled Labour Barometer reports on the share of enterprises in Germany that report adverse impacts on business operations from a shortage of skilled workers. Each quarter about 9,000 enterprises from trade and industry, construction, wholesale, retail and services (without the banking and insurance sectors or the state) are polled on their business situation, among them some 7,500 SMEs. In addition to providing an overall indicator for the skills shortage in the German economy and indicators for various sectors and regions, the barometer also enables a company size-specific data evaluation separated into SME and large enterprises. Enterprises are generally classed as small to medium-sized if they employ a workforce of not more than 500 and record an annual turnover not exceeding EUR 50 million. For a more accurate analysis, however, these quantitative distinctions have to be drawn more narrowly for retail trade (maximum annual turnover of EUR 12.5 million), the building and the construction industry (up to 200 employees) and services (maximum annual turnover of EUR 25 million). All enterprises that exceed at least one of these thresholds are classed as large-scale enterprises.