BIBB REPORT Edition 18/12
Shortages on the labour market: Changes in education and employment behaviour will mitigate shortages of skilled workers
New findings from the BIBB-IAB qualifications and occupational-field projections for the period up to the year 2030
Robert Helmrich, Gerd Zika , Michael Kalinowski, Marc Ingo Wolter Weitere Autoren:Peter Bott, Felix Bremser, Thomas Drosdowski, Carsten Hänisch, Markus Hummel, Tobias Maier, Manuel Schandock
Statements regarding an impending shortage of skilled workers or even an overall shortage of labour have become a standard feature in political discussions about the future of the German labour market. Model calculations of the qualifications and occupational-field projections conducted as part of the QuBe project which is being carried out jointly by the Federal Institute for Vocational Education and Training (BIBB) and the Federal Employment Agency's Institute for Employment Research (IAB) show that until the year 2030 there will be shortages in a few occupational fields despite increased employment behaviour, particularly among women and older workers. At macroeconomic level, no serious shortages are to be expected at national level in the coming years.
Labour market marked by demographic change
One of the key questions that the political sector, trade, industry and society are currently asking is: How will the economy and consequently the labour market develop in the future? This question is inextricably linked with the current demographic trend in which the key factors are the development of the birth rate, life expectancy and emigration. Numerous aspects of future trends are already known and also sufficiently documented. The number of people living in Germany will decline in the coming years and the population will also become older (see the 12th Coordinated Population Projection, Federal Statistical Office and the state statistical offices 2009).(01) The number of people who are 65 or older is already larger than the number of people under the age of 15. The average age of the working age population will also rise as baby boomers successively reach retirement age in the coming years. A middle variant of the current population projection assumes that approximately 100,000 more people will immigrate to Germany every year than emigrate from Germany. Following years of sometimes negative net migration, immigration is presently returning to this level and in fact exceeds it by a significant amount.(02)
Parallel to the demographic trend, a further trend? toward higher levels of educational qualification? can be observed. This trend is primarily reflected in the growing share of academic degrees.
The demographic decline in the number of younger workers and the new expansion of the education system that is emerging at tertiary level could lead, in quantitative terms, to a shortage of skilled workers at the intermediate qualification level in some occupational fields. Enterprises will therefore have to prepare more in the future for the fact that they will not always be able to find the perfect fit for their qualified skilled labour needs.
In light of this, in the spring of 2010 the Federal Institute for Vocational Education and Training (BIBB) and the Federal Employment Agency's Institute for Employment Research (IAB), in collaboration with the Fraunhofer Institute for Applied Information Technology (FIT) and the Institute of Economic Structures Research (GWS), published the first model calculations from the BIBB-IAB qualifications and occupational-field projections (QuBe project) (Helmrich, Zika (eds.) 2010). It was determined at that time that a shortage of skilled labour is to be expected, particularly at the intermediate qualification level (formal qualification earned in Germany's 'dual' vocational training system or a full-time vocational school, see also Methodology box: ISCED), which will make itself felt by the end of 2025 at the latest, the end of the projection period used at that time. Looking at the occupation level, health and social occupations and hotel/restaurant and cleaning occupations were identified as the major occupational fields (MOF, see Methodology box: Major Occupational Fields and Occupational Fields) in which a shortage of skilled labour or a shortage of labour is most likely to occur. These findings are based on model calculations conducted on the basis of the BIBB-DEMOS model, the IAB-INFORGE model and the BIBB-FIT model (see Methodology box: QuBe Model) using 2006 and/or 2005 as the base year.
The year 2010 was used as the base year for all model calculations(03) in the update presented here.(04) As a consequence, the latest financial and economic crisis from the year 2009 along with the unexpectedly positive labour market reactions in Germany are also mirrored on the demand side. Looking at the supply projections, it was possible to take into account two essential developments which have stabilised or become stronger in the last few years. To begin with, the employment rate among older workers has risen continuously (see Figure 2). As a result, it has been possible to partially compensate for the demographic decline in the labour supply. At the same time, the number of persons holding qualification to enrol in a university has reached a peak at some 45% of an age cohort in the wake of efforts to meet the 2010 Bologna goals (Federal Statistical Office, 2010). Education behaviour has consequently shifted toward academic qualifications. In terms of the future development, the projection assumes that this increase will not progress any further but will continue at a high level.
Overall labour market trend until 2030
Against this backdrop, BIBB and the IAB present here their second model calculation of the development of the supply of and demand for labour until the year 2030 as a whole and broken down by four qualification levels and 12 major occupational fields (see Methodology box: QuBe Model and Helmrich, Zika (eds.) 2010, regarding the methodological and data questions), provide an analysis of the findings and point out areas for action.
A comparison of the overall labour supply with the overall labour demand shows that the supply of labour will shrink faster than the demand for labour as a result of the demographic trend (see Figure 3). Depending on the assumption used by the model, this decline will proceed at different speeds. Both model calculations for the supply of labour arrive however at generally the same assessment. According to the BIBB-FIT model's projection of the labour supply, Germany's labour supply 0 in quantitative terms 0 will precisely match trade and industry's projected demand(05). This would not however constitute an ideal state because in such a situation in the real world, massive labour shortages would already exist in many areas by then. It is also evident from this figure that the projections generated on the basis of the BIBB-DEMOS model assumed higher activity rates. This pushes back the date on which supply and demand 'intersect' in arithmetic terms by several years. In addition to the economically active population, the IAB's potential labour force concept includes the so-called hidden labour force.(06)
Balance by qualification level
Due to demographic developments, some 19 million economically active persons will leave the labour market during the years between 2010 and 2030 (Table 1). During the same period, only some 15.5 million persons will enter the labour market for the first time (Table 2). Moreover, these new entrants will not be proportionately distributed over all qualification levels. In the intermediate qualification level, approximately 11.5 million economically active persons will leave the labour market while only some seven million enter it. By contrast, the inflow in the academic segment will be greater (4.9 million) than the outflow (3.2 million). All in all, the number of economically active persons will decline to 39.1 million (-9.6%) by the year 2030 (Table 3). In the case of economically active persons with a formal vocational qualification, the decline will be 19.3%. This figure will be 9.3% among graduates from technical colleges, master craftsmen and technicians and 7.6% among economically active persons who have no formal vocational qualification. In contrast, the number of persons holding a university degree will increase by a total of 24.8%. As a result, the share that persons with an academic degree represent out of all gainfully employed persons will increase from 17.3% in 2010 to 23.7% in 2030. At the same time, the share of economically active persons with formal vocational qualification will shrink from 57.7% today to 51.2% in the year 2030.(08)
In the following section, the development of the economically active population will be compared to the demand for gainfully employed persons in the coming years (see Figure 4). The demand for workers who have no formal vocational qualification will decline slightly. The supply of workers who have no formal vocational qualification will also decline but somewhat more slowly. As a result, the existing surplus will increase slightly. This group's job prospects in the labour market will consequently not be any better in the future. However there is the possibility here of generating potential workers for the intermediate skilled labour level via early intervention or skill-upgrading, particularly among new entrants and younger economically active persons
The supply of persons with formal vocational qualification will decline particularly due to the demographic trend and? assuming that there are no changes in behaviour on the demand side? will no longer meet demand toward the end of the projection period. There will be a fast-growing shortage of skilled workers at this qualification level even before this time, primarily because the supply will increasingly not correspond to demand, including in terms of areas of specialisation. Demand for qualified skilled workers will decline only slightly, primarily due to the wage increases that could be achieved in the wake of shortages on the labour market.
In the tertiary field, both supply and demand will continue to grow. Their levels are already very close to one another today. The anticipated demand for university graduates is divided nearly equally between replacement demand and new demand arising from structural changes in the economy. The replacement demand will increase significantly starting at the end of the second decade (i.e., starting 2020) as the baby boomer generation enters retirement and leaves the labour market. The slight surplus of labour with an academic degree stems from the current trend toward more university degrees. This trend has picked up speed in recent years whereas the increase in demand has also continued to grow but not to the same degree.
Adjustment and compensation processes that target the intermediate-level qualification segment are to be expected here. These activities will particularly pertain to bachelor's degrees. However there has not been sufficient empirical information to date about the prospects and destinations of persons who hold a bachelor's degree.
Balance by occupational field
Shortages that enterprises encounter when recruiting personnel are however more likely to be due to concrete, specialised qualifications or skills rather than the applicants' level of education (in this case, the ISCED level). For this reason, the BIBB-IAB qualifications and occupational-field projections additionally examine how well supply and demand match at the level of the 12 BIBB major occupational fields (see Methodology box: Major Occupational Fields and Occupational Fields). The attribute 'occupational field' comprises a bundle of specific activities. In terms of the activities involved, the individual occupations are homogeneous within their particular occupational field and heterogeneous between occupational fields.
Assuming that training behaviour continues to follow the trend seen in recent years, a number of main occupational fields will already exhibit a massive shortage of skilled labour by the year 2030 while others will be marked by a surplus.
This will be due first and foremost to changes in the qualifications of the economically active population, in addition to changes in labour requirements. Tables 1 through 3 show the changes in the qualification structures of the economically active population (as the residual stock, new entrants and total stock). Here a shift toward more university degrees can be discerned. Table 4 shows the residual stock and the new entrants broken down by the 12 major occupational fields.
The degree-based major occupational fields exhibit a more positive development here as well. By contrast, in those major occupational fields with a larger share of skilled workers holding intermediate-level qualification the supply of new entrants cannot keep up with the replacement requirements. It is possible to make a variety of observations when comparing supply and demand:
To start with, the demand for skilled workers(09) from a specific major occupational group can be compared with the supply of those skilled workers who have undergone vocational training for an occupation in the same major occupational group.
However, many gainfully employed persons do not remain in the occupation they trained for (i.e., their initial vocational qualification) but rather switch to an occupation in another major occupational field. There are a variety of reasons for this. Incentives for changing include better job prospects or earnings opportunities, working conditions, career opportunities, or conditions that make it easier to balance the demands of work with the demands of raising a family. Figure 5 shows a breakdown of gainfully employed persons in the individual major occupation groups by level of qualification.
The share of so-called 'stayers' (gainfully employed persons who remain in the occupation they trained for) as compared to the share of external skilled workers (gainfully employed persons who trained for a different occupation than the one in which they are working) in a particular major occupational field is an indicator for occupational flexibility in the labour market. BIBB's so-called flexibility matrix describes the level of occupational flexibility in each major occupational field (Table 5 and Maier et al. 2010). The BIBB flexibility matrix shows who is working in a particular occupation and the occupation they trained for (i.e., their initial vocational qualification) in the 12 BIBB major occupational fields. The focus here is not on revealing the reasons for changing occupations but rather to map the prospects and possible competition between occupational fields that are linked with a particular occupation.
When occupational flexibility is taken into account, these 'occupational migratory movements' lead in some cases to a balance between supply and demand. Occupational flexibility thus represents the actual opportunities and 'occupational migratory options' of gainfully employed persons as well as trade and industry's recruitment prospects on the labour market. It also shows where persons without any formal vocational qualification migrate to 0 in other words, which occupational fields currently benefit from this group.
According to this, when these occupational migrations are disregarded, there are shortages of skilled labour particularly in transport, storage and security occupations (MOF 5), hotel/restaurant and cleaning occupations (MOF 6), office and commercial occupations (MOF 7) and teaching occupations (MOF 12). By contrast, manufacturing, processing and repair/maintenance occupations (MOF 2) and occupations in the mathematics, computer science, natural science and engineering fields (MOF 8) exhibit a slight surplus, as do the health occupations (MOF 11).
When occupational flexibility is taken into account (see Figure 6), a comparison of the supply of and demand for skilled labour in hotel/restaurant and cleaning occupations (MOF 6), health, social and personal care occupations (MOF 11), transport, storage and security occupations (MOF 5), manufacturing, processing and repair/maintenance occupations (MOF 2) and, to a lesser extent, occupations in the operation and servicing of plants and machinery (MOF 3) indicates the threat of a shortage of skilled workers by the year 2030.
A surplus of skilled workers is to be expected in occupations involving the sale and marketing of goods (MOF 4), office and commercial occupations (MOF 7), legal, management and business occupations (MOF 9) and, to a lesser extent, in teaching occupations (MOF 12).
Supply and demand in the other major occupational fields are virtually balanced until 2030, even though a slight surplus or shortage could emerge in one of the two supply models.
This examination of skilled workers does not however take into account the far more than six million gainfully employed persons who have no formal vocational qualification. It can be assumed that this group will perform primarily menial jobs for which formal vocational training is not absolutely necessary. In exceptional cases people in this group will do skilled work. Figure 6 shows the effects had by taking unskilled gainfully employed persons into account. The findings for skilled workers are shown on the left side and the findings for all gainfully employed persons can be seen on the right.
When all gainfully employed persons including persons who have no formal vocational training are taken into account, the results diverge slightly from the results when only skilled workers are examined:
- Surplus supply in 2030: The first group contains major occupational
fields in which the supply is sufficient to meet the projected demand
even up to the year 2030: These major occupational fields are:
- Occupations involving the operation and servicing of plants and machinery (MOF 3)
- Office and commercial occupations (MOF 7)
- Legal, management and business occupations (MOF 9)
- Balanced situation in 2030: The second group encompasses major
occupational fields with a tight labour market. However the projected
supply will still meet demand in purely arithmetical terms. At the same
time however divergent developments could emerge at a level below the
major occupational fields (e.g., highly-specialised engineering
occupations). These are:
- Occupations involving the extraction or production of raw materials (MOF 1)
- Transport, storage and security occupations (MOF 5)
- Technical and scientific occupations (MOF 8)
- Teaching occupations (MOF 12)
- Surplus demand in 2030: The third group consists of major occupational
fields for which projections do not indicate a quantitatively sufficient
supply of labour, in other words, where a shortage of labour could
develop. These include:
- Manufacturing, processing and repair/maintenance occupations (MOF 2)
- Occupations involving the sale and marketing of goods (MOF 4)
- Hotel/restaurant and cleaning occupations (MOF 6)
- Occupations in the media sciences, humanities, social sciences or arts (MOF 10)
- Health, social and personal care occupations (MOF 11)
The second wave of the BIBB-IAB qualifications and occupational-field projections confirmed the general trends observed in the findings from the first wave conducted in 2010. However, with regard to the time dimension, the following differences can be seen not only in the development of qualifications but also in the major occupational fields:
- The first overall shortage will first emerge around the year 2030,
- A slight, constant surplus of academically-trained workers and, at the
same time, growing shortages of skilled workers with an
intermediate-level vocational qualification and
- Alleviation of the shortages in academic occupations and occupations
with high proportions of in-company vocational training. The labour
market for health care occupations will continue to be very tight.
The reasons for this are, firstly, the changed education behaviour of young people which exhibits increased access to academic degrees and, secondly, the higher activity rates seen among older workers and women. The education and labour market measures that have been implemented (see Federal Employment Agency 2011) appear to be having an effect here. It is important to ensure these changes while at the same time monitoring them in order to keep from possibly 'overshooting' the intended effect. Any impending shortages of workers with intermediate-level qualifications should be responded to appropriately. Raising the quota of workers with a university degree should not be the only response.
In reality however, gaps in the labour supply and labour surpluses will not occur in this way. Shortages which do not appear at higher aggregate levels could emerge at regional level or at levels below the major occupational fields presented here. In addition, anticipatory adjustments on the part of enterprises on the demand side and youth's changing training and occupational options on the supply side as well as possible policy measures could alleviate gaps or surpluses.
The less specialised the labour requirement is, the easier it is to adjust to labour shortages. This is because in such cases long-term training is not required. In this respect, the enormous labour requirements in the major occupational group Hotel/Restaurant and Cleaning Service Occupations appears not to be very problematic because large shares of the people working in this segment are workers who do not have formal vocational qualification, are still in school or undergoing vocational training or are part-time workers.
The picture is just the opposite in occupational fields where the proportion of highly-qualified workers is high and the level of occupational flexibility is low. This is because anticipatory adjustments in these cases require lengthy training.
These developments will surely not occur exactly in this way because society and individuals are continually evolving and do not stick to predefined paths. It is nonetheless advisable to draw attention to future imbalances on the labour market that are already looming today, in other words, to point out precisely those fields where such adjustments will occur in response to emerging developments. Consequently the failure of the projected results to materialise is not necessarily undesirable.
Looking at measures to counter impending shortages of skilled workers, two aspects are usually cited: immigration and training/ employment behaviour.
By itself, increased immigration cannot stop the decline in the labour supply. At best, it can slow it down (see Fuchs et al. 2011). For example, when an immigration balance of 200,000 rather than 100,000 is assumed, Germany's population would still decline by some 2.5 million by the year 2030 (base scenario: -4.2 million). Correspondingly, the potential labour force would also continue to shrink significantly until 2030 (-3.9 million).
In terms of worker qualification levels, potential exists in connection with the level of participation in in-company vocational training. Potential is particularly to be found in occupations for which only a limited amount of vocational training has been provided to date (see Krekel, Helmrich (2010)).
Not only higher labour force participation rates but also the available volume of work is a variable. This aspect was also taken into account when calculating the BIBB-IAB qualifications and occupational-field projections. It will be examined in a forthcoming IAB Brief Report on the findings of the second wave of the BIBB-IAB qualifications and occupational-field projections.
The potential labour force comprises all workers who are theoretically available in the employment market. The potential labour force consists of gainfully employed persons and unemployed persons as defined by the concept of the International Labour Organization (ILO) and the hidden labour force. The hidden labour force consists of persons who would work but 0 in contrast to unemployed persons 0 are not currently seeking employment. The hidden labour force therefore includes parts of the non-active Population.
Economically active persons on the other hand comprise that part of the potential labour market (FUCHS 2009) which consists of persons who are gainfully employed or who are actively seeking employment and are directly available in the employment market. In other words: Economically active persons are gainfully employed persons and unemployed persons as defined by the ILO concept. Statistical data can be collected on this part of the potential labour force.
Gainfully employed persons include all persons who, as an employee (worker, salaried employee, civil servant, marginal part-time worker, soldier), self-employed person or unpaid family worker, perform work that is aimed at economic gain regardless of the extent or scope of the work.
The term 'worker' refers to all persons who are able to work, irrespective of their formal qualifications. On the supply side, workers are gainfully employed persons or the potential labour force, depending on the concept used. On the demand side, workers are identical with the realised demand or gainfully employed persons.
Skilled workers comprise not only persons with recognised academic training but also persons who have completed a recognised vocational training programme that lasts at least two years.
Methodology box: ISCED
The qualification levels were subdivided into four groups on the basis of the International Standard Classification of Education (ISCED, see ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT 1999).
Methodology box: Major Occupational Fields (MOF) and Occupational Fields (OF)
The data from the microcensus following the Klassifikation der Berufe (KldB 1992 - Classification of Occupations; the KldB 2010 was not relevant for the microcensuses used here) for the current occupation was used for the projections of future labour demand and supply. Starting 2005, data for the occupation originally trained for was also incorporated into the projections. The level of detail in the information contained in the microcensus regarding the current occupation or regarding the area of specialisation of the individual's initial or continuing vocational training based on the classification of occupations is however too close-meshed for long-term qualifications and labour-market projections. Projections that encompass developments on the labour market over a period of up to 15 years cannot be realised at the level of individual occupations on a scientifically rigorous basis. For this reason, 369 (3-digit) occupational orders from the KldB 1992 were condensed into 54 occupational fields (see Tiemann et al. 2008). Thus, occupational fields subsume a large number of individual occupations. Trends seen in an occupational field do not have to be evident in the individual occupations but only in the aggregate.
When the BIBB occupational fields were defined, the (2-digit) occupational groups were examined to determine similarities between the activities carried out in the (3-digit) occupational orders they contained and then bundled accordingly. Using this method, it was subsequently possible to define 54 occupational fields for the qualifications and labour-market projections, and particularly for analysing changes of occupation and occupational flexibility (switching from the occupation originally trained for to the current occupation). These 54 occupational fields can be further aggregated into 12 major occupational fields and three primary occupational fields with respect to an assessment of overarching trends. The following chart provides an overview of the groupings that were created on the basis of the major areas of activity:
Methodology box: QuBe Project
The BIBB-IAB qualifications and occupational-field projections (HELMRICH, ZIKA 2010) are coordinated supply and demand projections that are based on jointly-defined occupational fields and generated data. The microcensus 0 a set of official representative statistics issued by the Federal Statistical Office regarding the population and the labour market 0 provided the base data. One per cent of all households in Germany participate in the microcensus every year. For the QuBe project these statistics were adapted to the parameters of the national accounting system (see BOTT et al. 2010). A uniform occupational field system was developed by the Federal Institute for Vocational Education and Training (BIBB) for differentiating occupations (see TIEMANN et al. 2009).
With the IAB-INFORGE model, the IAB developed a projection of the realised labour requirements (in other words, vacancies were not taken into account) broken down by 59 sectors of economic activity. The IAB then disaggregated it according to four qualification levels (see Methodology box: ISCED) and 54 occupational fields (see Methodology box: Major Occupational Fields und Occupational Fields) on the basis of the occupational field system and the corresponding data from the microcensus which BIBB had processed. The INFORGE model is a highly-disaggregated econometric forecasting model for the Federal Republic of Germany. Detailed descriptions of the INFORGE model can be found in: SCHNUR, ZIKA (Ed.) (2009), MEYER, LUTZ, SCHNUR, ZIKA (2007) and HUMMEL et al. (2010).
On the other hand, projections for the supply of labour were generated with the BIBB-FIT model of the Fraunhofer Institute for Applied Information Technology (Fraunhofer FIT) (Kalinowski; Quinke 2010) and with the BIBB-DEMOS model (see DROSDOWSKI; WOLTER 2010) which was developed by the Institute of Economic Structures Research (GWS) and exhibits points of intersection with the INFORGE model. These projections also distinguish between four qualification levels and 54 occupational fields.
All the projections are based on the year 2010 and extend to 2030. Using juxtaposition, both the occupation that the individual trained for and the specific level of occupational flexibility on the supply side are examined.
Two different projection systems were used on the supply side to show how models respond to changes in influencing factors. For the purpose of variety in the models used, projections were developed with a transition model (BIBB-FIT) and with a cohort model (BIBB-DEMOS). As a consequence, it is possible to show methodological uncertainties and offer starting points for validating the findings.
Further information is available at http://www.qube-projekt.de/
- 1 In this connection, the development of birth rates, life expectancy and migration count as key factors in the demographic trend.
- 2 Following the introduction of the personal tax identification number, numerous entries were removed ex officio from the registers of local residents. It is not possible to statistically determine the extent to which the registers of local residents were corrected. The actual number of persons who emigrated from Germany in the years 2008 to 2010 is therefore unclear, see Press Release No. 482 from 22 December 2011 from the Federal Statistical Office. (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/DE/Presse/pm/2011/12/PD11__482__12711,templateId=renderPrint.psml)
- 3 At present, only data from the microcensuses up to the year 2008 could be used for the detailed tables behind these calculations, particularly for the supply side. These data were however extrapolated on the basis of benchmark figures that are available to the year 2010.
- 4 The middle variant (1-W1) of the 12th population projection was assumed for the demographic development.
- 5 An IAB Brief Report on the projection of the labour demand and the assumptions used to calculate it will be published soon.
- 6 Regarding the concept of the 'hidden labour force' and the potential labour force, see Fuchs, Weber 2005.
- 7 Compared to other studies (e.g., Prognos 2011), this study included more recent figures, retirement at 67 and also currently unemployed persons in its analyses. The development of the activity rates is modelled differently in the examination of the potential labour force / the projections of the labour supply, particularly with regard to the effects of the step-wise raising of the statutory retirement age to 67 by the year 2029. Regarding the assumptions, see Fuchs et al. 2011; Kalinowski, Quinke 2010 and Drosdowski, Wolter 2010.
- 8 The findings from the BIBB-DEMOS model deviate somewhat from this in the total amounts (see Figure 4) due to different assumptions regarding the development of the activity rates.
- 9 Regarding the definition of skilled workers and workers, see Bott, Helmrich, Zika 2011.
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Berufsfeldprojektionen des BIBB auf Basis der Klassifikation der Berufe 1992.
Wissenschaftliche Diskussionspapiere des Bundesinstituts für Berufsbildung, Heft 105.
Weitere Informationen und Literaturhinweise sind verfügbar unter www.qube-projekt.de
Imprint BIBB REPORT
Volume 6, Edition 18, April 2012
ISSN Internet: 1866-7279
ISSN Print: 1865-0821
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