This review of Germany’s labour migration policy is the second of a series conducted by the OECD Secretariat as a follow-up to the 2009 High Level Policy Forum on International Migration. The rationale for this initiative was the recent growth in labour migration observed in many countries and the likelihood that recourse to labour migration would increase in the context of demographic ageing. Prior to the 2008-09 economic crisis many countries had made substantial changes to labour migration policies with a view to facilitating recruitment from abroad. With the introduction of these changes, more prominence was accorded to the question of their effectiveness and more broadly, to the objectives of labour migration policy in general. Although the economic crisis put a damper on labour migration movements, it did not stop them entirely, and interest in labour migration policy is unlikely to diminish in the near future.

Labour migration is identified as one means, among several, to help meet future labour demand and skill shortages caused by a shrinking German working-age population. Recent reforms have put Germany among the OECD countries with the fewest restrictions on labour migration for highly skilled occupations. Permanent inflows of managed labour migration have risen recently, but relative to other countries and to the size of the German labour market continue to be low. Permanent inflows for employment from within the European Union, albeit much larger than managed labour migration flows, are also low in spite of significant growth since 2010. Temporary inflows are among the largest in the OECD, but are almost entirely intra-European. This review addresses the question of whether the German labour migration policy ensures that international recruitment helps meet those needs in the labour market which cannot be met locally. It examines key issues in the design of the German labour migration system, explores obstacles to labour migration on the demand and supply side, and identifies areas where Germany can reinforce its strengths in attracting the workers it needs.

Since 2005, German policy for admission of foreign workers has gradually lowered obstacles to entry for highly skilled labour and at present there are few legal barriers to recruitment for employment in highly skilled occupations. The framework for labour migration in Germany – which still presents itself in essence as a list of specific exemptions to a recruitment ban – now grants admission to most workers with a job offer in a universitylevel occupation. Recruitment of those with post-secondary occupations below the university level is also possible within the existing system, although with far more restrictions. The rejection rate for applications by highly skilled workers is low in absolute terms and in international comparison.

Labour migration policy in Germany has undergone gradual but accelerating reforms over the past decade. The main stimulus for this instrumental reform of labour migration policy has been demographic change and the emergence of shortages in skilled occupations. These changes are already having an impact on the labour market which is expected to increase over the next decade.

Employment levels in Germany are high in comparison to other countries, reflecting a currently favourable labour market and recent success in increasing participation of older workers, women and immigrants, although this varies across German states. The apprenticeship system plays a fundamental role in the labour force. Germany is also one of the fastest ageing countries in the OECD, with the working-age population starting to decline sharply. Labour shortages are visible in rising numbers of vacancies, including apprenticeships in some key trades. Shortages vary by occupation, with the health sector apparently the most affected. Shortages are reported in high- and medium-skilled occupations and expected to increase across both. In this context, labour migration is seen as one element in a broader strategy to address skills shortages.

Germany is among the OECD countries with the lowest permanent labour migration flows relative to its population, despite increases since 2009. Inflows from within the European Union for employment are four to five times higher that labour migration from outside the European Union, yet combined permanent inflows for employment are still low relative to other countries. Labour migrants are mostly high-skilled, but only a fraction of recent labour migrants have remained in Germany. In May 2011 Germany opened its labour market completely to the 2004 EU-accession countries, further facilitating free mobility migration, which has been steadily increasing since 2010. Germany satisfies part of its labour needs – especially for seasonal work – through the largest temporary labour migration programme in the OECD, although this comprises entirely European workers.

Labour migration policy in Germany was long associated with the guestworker programmes of the 1950s and 1960s. A general recruitment ban closed this era in 1973, with exceptions to this ban accumulating for skilled and highly skilled workers but also seasonal and certain short-term workers. In the 2000s, opportunities to recruit for skilled employment expanded, with a programme for IT workers in the early 2000s and a growing list of eligible occupations following a new Immigration Act in 2005. The contract offered must meet certain criteria and while highly skilled workers are admitted without major obstacles, there are few options to recruit for medium-skilled occupations. Changes in 2012 simplified the procedure and improved conditions for many skilled workers, introducing an EU Blue Card exempting many applicants from a labour market test.

This chapter reviews how policy choices affect access to, and use of, the labour migration channel, and whether the current policy is capable of meeting current and emerging needs. Germany applies a wide range of criteria in evaluating applicants, many of which overlap, but which allow, in principle, most qualified jobs to be filled by applicants with recognised tertiary qualifications. Processing is complex due to the many actors involved, and although it has been simplified recently for many categories of applicant, it lacks transparency for applicants and employers. Nonetheless, compared with other OECD countries, it is rapid and inexpensive. The system imposes numerous criteria by occupation and salary. A labour market test has been blamed for discouraging application, yet it has usually been quick and rarely leads to refusal. Salary thresholds introduced with the EU Blue Card may unintentionally penalise younger workers and women. Some mechanisms, such as the shortage list, could be used for opening channels to medium-skilled migrants, for which few options currently exist. Language, the main skill required by employers, is not a feature in admission of labour migrants, although it does affect their later residence pathway.