Labour Mobility Study

Labour Mobility - Country Report - Germany

Timo Baas and Herbert Brücker

in: Labour Mobility - Country Reports
Labour Mobility Study ,

free download

Germany and the possible implications of a free movement of workers. We moreover assess the economic conditions for absorbing additional labour supply. The German economy experienced an economic downturn in the business cycle in the beginning of this decade which was accompanied by increasing unemployment. As a consequence of the economic conditions and the transitional restrictions for the free movement of workers, immigration from the new member states has been very modest in Germany. Migrants from the NMS are better educated than other foreigner groups, but the average education is slightly below that of the native population. However, the unemployment rates of the migrants from the NMS in Germany are relatively high.

The economic conditions in Germany have substantially improved in 2006 and 2007. The unemployment rate has declined from its post-war peak of 10.6 per cent in 2005 to 7.3 per cent in 20081. In 2009, the economic outlook is gloomy; obstacles for the economy remain due to the ongoing financial market crises, cautious consumers, and an economic downturn by Germany's main trading partners.

However, the empirical literature finds that the effects of immigration on wage and employment are small in Germany. A 1.0 per cent increase of the labour force through immigration reduces wages by 0.1 per cent and increases the unemployment rate by 0.1 percentage points according to most studies. This finding is confirmed by a CGE simulation we present in this report. Thus, it is unlikely that immigration from the new member states will affect labour markets in Germany to a large extent. Nevertheless, the high unemployment rate among the immigrant population from the NMS is reason for concern labour market policies have to address, irrespective of the time when the free movement of workers is introduced in Germany.


Countries covered: Germany

Research Areas: Labour, Migration and Income Distribution