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For decades, the German labor market looked like the “superman” of the labor markets.

Around the globe, and not least in Europe, many nations have repeatedly had to struggle with a decline in employment and high unemployment figures.

But nothing seemed to throw the Germans off course.

Year after year hundreds of thousands of new jobs were created in the Federal Republic of Germany, which provided people with income.

But now, it seems, the German super job market has had its encounter with kryptonite, the only substance that can harm the superhero.

The Corona recession cost almost half a million people to earn a living in Germany last year.

This emerges from preliminary figures presented by the Federal Statistical Office in Wiesbaden.

For Germany it is the first decline in employment in a decade and a half.

In their evaluation, the Wiesbaden statisticians point out that not even the financial crisis of 2009 was able to slow down the increase in employment in Germany over the course of the year.

It is already clear: Covid-19 had far more serious consequences for employees in this country than the bank failures and capital market turbulence twelve years ago.

Source: WORLD infographic

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However, economists do not believe that Corona is the greatest challenge facing the German labor market.

It is possible that the pandemic only brutally anticipated a development that sooner or later had to set in anyway.

The focus is on the question of whether the highly productive industries in Germany will still succeed in recruiting enough young people to help shape future industries and generate future growth.

On the surface, the kryptonite of the German labor market is called: pandemic.

The break-in was triggered by the coronavirus and, above all, the various government infection protection measures that put the economy and the labor market into an artificial coma.

In the ten years before the virus crisis, an average of 400,000 new jobs were added annually, be they jobs subject to social security contributions or self-employed.

Short-time work cannot guarantee jobs in the long term

The big question, however, is not how many jobs the corona crisis destroyed in the short term, but how long it will continue to have an effect as a job killer.

Optimists point out that the employment situation in Germany at least did not deteriorate further in winter.

The unemployment rate was most recently below six percent and thus below the pandemic high of 6.4 percent that the Federal Employment Agency reported in August.

After the corona shock, which resulted in layoffs and business closures on a large scale in spring and summer, employment was even able to recover somewhat in autumn.

Source: WORLD infographic

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The seriousness of the situation is lessened or masked by the fact that numerous companies make use of the option of short-time work.

This instrument prevents employees from slipping into unemployment in the short term. Whether their jobs can be kept in the long term is another matter.

According to estimates by the Munich Ifo Institute, almost two million people across Germany were still on short-time work at the end of 2020.

In the retail trade, more than six percent of all employees subject to social security contributions worked shortened, in the largely disused hospitality industry it was even 39 percent.

However, short-time working remained a widespread phenomenon not only in sectors that are particularly hard hit by the second lockdown.

In Germany's industry, 583,000 people were still affected in December, more than eight percent of all employees.

These results are based on reports from around 7,000 companies that the Ifo Institute surveyed in December.

Here, too, the question arises whether there are structural reasons beyond the pandemic that are responsible for it.

But not only the high level of short-time work shows that there may not be a quick return to the golden age of the job boom.

Another, even more powerful, factor is countering the recovery in employment in Germany.

"Even without the corona crisis, the increase in employment would probably have come to an end soon," state the Wiesbaden statisticians.

This has to do with the fact that, due to aging, there will soon be fewer people of working age.

In 2020, the number of people in the labor force stagnated, after having mostly increased in previous years.

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But aging cannot be compensated for by increasing the number of women in the labor force, for example, or by immigration of foreign workers.

The statisticians' projections make it clear what challenges Germany is facing.

During this decade, large numbers of the baby boomers born after the war between 1955 and 1970 will be leaving the labor force.

"Without net immigration, the number of people in the labor force will fall to just under 28.2 to 30.6 million by 2060, depending on employment behavior," says a study by the Wiesbaden statisticians.

For comparison: In 2020 there were 46.5 million people of working age in Germany.

So there is a risk of a considerable decline.

“Demographic headwind” on the labor market

In East Germany, the number of economically active people is already shrinking, and there is also a risk of the greatest slump in the future.

According to the forecasts, between 12 and 28 percent fewer people of working age could live in the east in 2060 than today.

For the west, the researchers predict a decline of between three and 22 percent.

This range seems huge.

It is so big because it is difficult to predict how the labor force participation of older people will develop, i.e. how many people of retirement age will want to take up regular work in the future.

Source: WORLD infographic

In any case, the new generation alone will not be nearly enough to fill the gaps when the baby boomers retire.

It is also difficult to assess the extent to which the aging of the workforce is affecting productivity development and economic growth.

But the latter is the prerequisite for pension and other social coffers to be filled with ever new billions.

"In the 2020 years, the German labor market will feel a demographic headwind," says Felix Hüfner, economist and labor market expert at the major Swiss bank UBS.

It cannot even be said that older workers are less productive per se.

The difficult question, however, is whether the skills and knowledge of the elderly match the needs of changing industries.

Engineers who are experts in internal combustion engines can be confronted with the fact that the automotive industry is now more likely to need knowledge in the field of electromobility.

Such matching problems are in principle not unsolvable as long as companies and employees are willing to undertake lifelong learning.

So it is perhaps more than a coincidence that even flagship industries such as the automotive industry still show relatively high numbers of short-time working, although the global economy and also the export economy had already recovered in the second half of 2020.

Seen in this light, the corona crisis on the labor market is perhaps only the harbinger of a far greater shock that Germany will face in the 2020s.

For the German job wonder, demography is the real kryptonite.