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Labor and Income

The labor market situation of recent years shows: High employment and low unemployment are possible with the right policies and in a flourishing economy.

About the topic

The German labor market has been in a state of flux in recent years: Due to structural change and digitization, jobs have been lost in some sectors, for example in mining or industry, but at the same time many new jobs have been created in the digital world of work. However, despite recent successes, millions of people are still looking for a job, although skilled workers are becoming scarce as a result of demographic change. Going forward, therefore, the goal remains to increase labor force participation, promote occupational mobility, make it easier for people to get into jobs, and keep the shortage of skilled workers at bay for the economy.

Meanwhile, the demands on employees are changing rapidly. Digitalization and internationalization are shaping the labor economics. Aging and heterogeneous workforces pose difficult tasks for HR policy. Companies are well equipped if they succeed in balancing the different requirements.

Employees' earnings, i.e. wages and salaries, can be freely negotiated with their employers - in some cases, the leeway is limited by collective agreements. Wage policy also determines how many skilled workers employers can retain. Overall, wages have risen steadily over the past few years, which has led to an increase in prosperity.

German Economic Institute (IW) German Economic Institute (IW)

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Männlicher Programmierer, der zu Hause in seinem Heimbüro arbeitet
Andrea Hammermann / Roschan Monsef / Oliver Stettes IW-Trends No. 4 22. January 2025

More Productive with AI?: How Companies and Employees Assess its Effects on Productivity

Almost one third of all employees in Germany have had at least one new artificial intelligence (AI) application introduced at their workplace since 2022. AI is most commonly used for automatic data processing and text recognition.

IW

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Proliferation of works councils and the desire for interest representation
Oliver Stettes IW-Report No. 1 19. January 2025

Proliferation of works councils and the desire for interest representation

Works councils exist in 7 per cent of the German establishments with five and more employees. The coverage rate has fallen significantly in the long run. Non-existence of works councils is, however, not equivalent to a lack of participation by the employees.  ...

IW

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Employment Dynamics in the Low-wage Sector
Holger Schäfer IW-Trends No. 4 4. December 2024

Employment Dynamics in the Low-wage Sector

In 2021 around 13 per cent of the working-age population, or 19 per cent of those in dependent employment, were receiving a low wage, showing that this pay segment is continuing to decline.

IW

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Employment shortly before and after retirement
Andrea Hammermann / Jochen Pimpertz / Oliver Stettes Expertise 11. November 2024

Employment shortly before and after retirement

As a result of demographic trends, around a quarter of all employees in the mechanical engineering sector are expected to retire in the next ten years. This corresponds to more than 296,000 people.

IW

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Dr. Christina Anger

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Helena Bach

Economist for Wage Policy and Collective Bargaining

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Christoph Schröder

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Oliver Stettes

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Senior Researcher for Industrial Relations

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An Analysis of the Microcensus
IW-Trends No. 1 11. February 2025

Non-German-Speaking and Bilingual Children in Germany: An Analysis of the Microcensus

Wido Geis-Thöne

The author’s analysis of children and juveniles under the age of 18 in the German microcensus shows that in 2021 around 801,000, or 5.8 per cent of all the age group, did not speak German at home.

IW

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How Companies and Employees Assess its Effects on Productivity
IW-Trends No. 4 22. January 2025

More Productive with AI?: How Companies and Employees Assess its Effects on Productivity

Andrea Hammermann / Roschan Monsef / Oliver Stettes

Almost one third of all employees in Germany have had at least one new artificial intelligence (AI) application introduced at their workplace since 2022. AI is most commonly used for automatic data processing and text recognition.

IW

Read study
Proliferation of works councils and the desire for interest representation
IW-Report No. 1 19. January 2025

Proliferation of works councils and the desire for interest representation

Oliver Stettes

Works councils exist in 7 per cent of the German establishments with five and more employees. The coverage rate has fallen significantly in the long run. Non-existence of works councils is, however, not equivalent to a lack of participation by the employees.

IW

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What the Microcensus Tells us about its Occurrence and Consequences
IW-Trends No. 4 14. January 2025

Growing up in Educationally Disadvantaged Families: What the Microcensus Tells us about its Occurrence and Consequences

Wido Geis-Thöne

In recent years, more and more children in Germany have been growing up in educationally disadvantaged environments.

IW

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Employment Dynamics in the Low-wage Sector
IW-Trends No. 4 4. December 2024

Employment Dynamics in the Low-wage Sector

Holger Schäfer

In 2021 around 13 per cent of the working-age population, or 19 per cent of those in dependent employment, were receiving a low wage, showing that this pay segment is continuing to decline.

IW

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