Insight
The biggest Brexit boon for Germany? Migration by Christian Odendahl and John Springford 11 December 2017
Germany’s economy desperately needs qualified immigrants to fill 780,000 jobs. Brexit will help it to do so. Germany has little to gain from Brexit. The British economy is a large export market for German businesses. Britain, like Germany, is a big net payer into the EU budget. And the EU – Germany’s most important geopolitical project – will lose one of its largest, most outward-looking and (somewhat) richer member-states. It is true that Frankfurt will benefit as City of London financial institutions move operations into the EU. But the biggest gain for Germany will come if European migrants choose to work there, mitigating its growing shortage of workers, instead of in Britain. Germany’s population is not just ageing but old. The median age is now 47 (compared with 40 in the UK and 38 in the US). But demographic change has only recently started to bite economically. The cohort born around 1945 is – for obvious reasons – the smallest in the German population (see Chart 1). These are the people who retired around 2010. Unlike in other countries, the cohorts retiring now are just the start of the ‘baby boomers’. At the same time, Germany is enjoying a growth spurt. German companies are running at 86.7 per cent of total capacity, a fairly high value by historical standards. Economic sentiment is at record highs, with the widely-followed ‘IFO Index’ at its highest level since 1969, according to calculations by Frederik Ducrozet of Pictet. This boom is likely to last: monetary policy continues to be set to stimulate the eurozone as a whole, where inflation is lower and unemployment higher than in Germany. And the next German government will have a €30-60 billion surplus to spend, adding further economic stimulus. The inevitable result of booming businesses and retiring baby boomers is an increasing shortage of workers with the right skills. In the European Commission’s regular economic survey, almost 20 per cent of firms say that a shortage of labour is currently limiting their production – the highest value ever recorded (see Chart 2). Job openings, of which there are currently a record 780,000, have also been difficult to fill in some key professions, such as engineering, software and healthcare (see Chart 3). CER INSIGHT: The biggest Brexit boon for Germany? Migration 11 DECEMBER 2017
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