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A warm welcome to the June issue of PerchPeek’s Germany Market Monthly update!
Here’s where you’ll find the hottest updates around employee relocation and international talent strategy, insights from our experts on housing and cost-of-living news affecting your staff, the latest trends in global mobility, and tips and tricks on ways to support your teams.
A fly-by summary
● Germany is set to lose 1 in 10 people from its workforce by 2060 unless urgent action is taken to increase immigration from outside the EU, according to a new report
● Soaring energy prices have pushed Germany into a recession; consumer and food inflation have fallen slightly but remain at some of the highest levels in the G7
● Citizenship reform: A new law designed to help more migrants obtain German citizenship and in a shorter time will be voted on in the Bundestag this summer
● Germany is grappling with one of the highest food inflation rates in the developed world, up 16.8% versus last year - here’s how to help employees save money on groceries
According to a new study by the Institute for Employment Research (IAB), Germany is poised to experience a significant decline of 11.7% - or 1 in 10 people - in its workforce by 2060. Here’s what this means for Talent Acquisition and People Leaders, and why it’s necessary to increase efforts to hire from abroad in order to fill skills gaps and buck this trend!
This projection is based on population demographic shifts like birth, retirement and migration rates. Germany’s birth rate is actually projected to increase from 1.5 to 1.7 children per mother over the next 40 years. However, the report states this won’t be enough to offset the increase in the country’s population ageing, which is the major driver behind this workforce projection.
The increasing median age of German citizens and residents means a dwindling pool of people in their working years, which poses challenges in sustaining economic growth and meeting labour demands. This IAB projection equates to a loss of 7 million people of working age.
In light of this stark figure, IAB economist Enzo Weber has strongly advised that the country must look beyond the EU and offer immigrants a path into the labour market. In his words:
“The hurdles [into work] must be reduced, but at the same time more must be done to ensure that immigrants gain a foothold in the labour market and find long-term prospects in Germany."
PerchPeek insights
This report from the IAB is the latest to call out the risks to the German economy if swift action is not taken to bolster the workforce. It’s a serious situation - in our last issue we reported that the current skills shortage is estimated to be costing Germany €86 billion per year!
There are a number of government initiatives in progress to reform the work visa system, such as the new points-based Chancenkarte, to help bring skilled talent to Germany more easily.
For Talent Acquisition leaders, it’s important to stay on top of developments in immigration reform, and to offer a comprehensive relocation policy that covers immigration needs as well as making the move as comfortable as possible. It’ll be attractive to prospective candidates and will ensure a smoother process, helping them hit the ground running!
Here’s PerchPeek’s summary of cost of living updates in Germany, and how these changes affect people - crucial knowledge for HR and People Leaders supporting employees!
In light of the German economy shrinking by -0.3% in the first quarter of 2023, its second consecutive contraction, the country has entered a technical recession. It’s the only country in the G7 to do so, as other countries such as the UK managed to narrowly escape this outcome.
While all G7 countries have been impacted by the surge in gas prices as a consequence of the Russian invasion of Ukraine, Germany is particularly dependent on these supplies and so has been particularly vulnerable to price hikes and their effect on economic growth.
Germany has also been struggling with the most extreme food price inflation in the G7 for most of the last year; over the last few months, food prices have been up around +20% YoY. As of April, this has fallen slightly and the UK has taken the unenviable top spot of highest food inflation in the G7, but this of course is still a huge increase for German households.
Inflation in figures
● In April, Germany’s consumer inflation rate fell to 7.2%, its lowest since August 2022
● This is of course still high, especially when comparing to nations such as the US (4.9%)
● In March, food inflation in Germany hit a whopping 21.1% versus the previous year
● This decreased to 16.8% in April; comparatively, the UK is at 19.0%
PerchPeek advice for People teams
These figures show clearly that the cost of living crisis continues to affect Germany residents.
● For compensation teams, it’s crucial to review and update packages to ensure they’re realistic versus the high cost of living, both for new starters and existing employees.
● It’s also important to stay in-the-know on these trends and how they impact wider economic growth, and the potential effect on talent acquisition and retention efforts.
● Read on for PerchPeek’s tips on how to help your employees economise on food!
One of the developments of the government’s efforts to bring more skilled workers to Germany, following the introduction of the Skilled Immigration Act in 2020, is a new law to make it easier for more residents in Germany to obtain citizenship, and in a shorter time. Here’s PerchPeek’s summary of the key details, and what this means for HR Leaders supporting relocating staff.
Following a Bundestag debate back in December 2022, the drafting is in the final stages, with the important details ‘as good as settled’ and will be voted on in parliament this summer.
What will change under the new law?
● Citizenship possible after shorter residence period - Under the new law, German citizenship will be possible after five years of residence, rather than eight, or even three years in certain circumstances (e.g. good German language skills, voluntary work)
● Dual citizenship - The new law will allow non-EU citizens to hold dual citizenship with their new German passport, whereas previously this was only possible for EU citizens
● Children of migrants can gain citizenship more easily - Children who are born in Germany to non-German parents can be granted German citizenship after one of their parents has been a resident for five years, as opposed to eight (which is significant when you consider that 18% of the current population were born outside Germany)
It’s worth noting recent trends around German citizenship:
● Over 168,000 people from 171 different countries gained German citizenship in 2022
● This is a +28% increase on 2021, and the highest in the last 20 years
PerchPeek insights
This is a hot topic for HR professionals, as these changes will have a big impact on attracting talent from outside the EU. For a worker, legally being able to settle in Germany more easily, without having to renounce their existing citizenship, would be an attractive proposition.
It’ll therefore be crucial for companies to have appropriate relocation policies in place to be best prepared for recruitment drives from outside the EU. Which, given the current skills shortages we’ve mentioned, is something that’s very much needed to boost the German workforce!
Across most of the Western world, food prices have been soaring, and as we mentioned earlier, Germany has been one of the worst affected countries. Food prices have increased by over +20% YoY over the last few months, and remain extremely elevated at +16.8% vs April 2022.
Some economists are hopeful that food inflation will keep falling in 2023, but it’ll take time before any savings trickle down to the consumer. In the meantime, households in Germany are really feeling the pinch - actual grocery prices are a staggering 28.6% higher than they were in 2021!
PerchPeek top tips
Here’s how to help your relocating employees save money on food and other essentials:
PerchPeek’s top five low-cost supermarket chains
● Aldi Nord - Discount supermarkets located in the northern half of Germany
● Aldi Süd - As you might have guessed, discount supermarkets in the southern half!
● Lidl - Another well-known discount supermarket chain with locations nationwide
● Netto - The discount brand of big supermarket chain Edeka
● Penny - The discount brand of big supermarket chain REWE
Cost-saving tips and tricks
● If shopping in Edeka or REWE, employees should look out for their house brands to save some cash; Edeka’s brand is ‘Gut und Günstig’, and REWE’s is simply named ‘ja!’
● Wholesale club METRO is free to join and can help shoppers build up savings by buying in bulk (of course, this is a more suitable option for those living outside major cities).
● While not discount supermarkets, employees should be able to find great deals at hypermarkets Kaufland and Real (similar to Walmart or Target in North America).
● To save cash and prevent food waste, employees can check out apps like ResQ Club, Too Good To Go and Olio to purchase food that's about to expire and be thrown out.
● Advise employees to buy produce currently in season, and check out the many budget meal recipes on sites like Chefkoch.de, Lecker.de and DasKochrezept.de.
We hope you enjoyed this month’s update!
If you have any feedback, comments or questions about what's happening in your location, feel free to reach out via the form at the bottom of this page.
Thanks for reading, and see you next month!
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