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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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European Minimum Wage Directive and Strengthening Collective Bargaining Coverage
Expertise 25. August 2026 Hagen Lesch / Lennart Eckle / Sandra Vogel

European Minimum Wage Directive and Strengthening Collective Bargaining Coverage

The EU Minimum Wage Directive recommends that EU Member States achieve a collective bargaining coverage of 80 per cent to ensure adequate minimum wages.

Hagen Lesch / Lennart Eckle / Sandra Vogel IW

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Collective bargaining coverage and functional income distribution in international comparison
IW-Report No. 35 23. July 2026 Christoph Schröder

Collective bargaining coverage and functional income distribution in international comparison

The study examines whether a high level of collective bargaining coverage influences the functional income distribution between companies and employees.

Christoph Schröder IW

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Älterer Mann arbeitet in seinem Fahrradladen.
IW-Report No. 29 19. June 2026 Ruth Maria Schüler / Stefanie Seele

Abolition of the Additional Earnings Limit

The ageing population in Germany is increasing pressure on the social insurance systems and will (in the future) exacerbate the shortage of skilled labour.

Ruth Maria Schüler / Stefanie Seele IW

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Is Lifelong Learning the Key to Later Retirement?
IW-Trends No. 1 19. May 2026 Wido Geis-Thöne / Andrea Hammermann / Ruth Maria Schüler

Is Lifelong Learning the Key to Later Retirement?

There appears to be a connection between lifelong learning and remaining longer active in the labour market.

Wido Geis-Thöne / Andrea Hammermann / Ruth Maria Schüler IW

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Christina Anger

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Helena Bach

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Alexander Burstedde

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Christoph Schröder

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Dr. Oliver Stettes

Head of Labour Economics and Collective Bargaining Policy Research Unit

Tel: +49 221 4981-697 Oliver Stettes
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Dr. Sandra Vogel, Senior Economist für Tarifpolitik und Arbeitsbeziehungen

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Senior Economist for Wage Policy and Labor Relations

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IW-Report No. 39 6. October 2026

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