Germany is grappling with a sluggish economy, declining employee morale, and the fears of foreign workers and prospective expats for political reasons. The outlook includes a GDP barely surpassing 0% and a plummeting birth rate. Nevertheless, the government relies on immigration reform to reverse this trend and attract foreign professionals.
Employee morale in Germany is at its lowest
According to a study published on March 24, 2024, by Gallup, a management consulting firm, German employees are losing motivation. Every year, Gallup examines the morale of employees in Germany. In 2022, only 13% of employees said they were very committed to their company. In 2023, this figure increased by just one point—only 14% of the 7.3 million workers are highly committed to their companies. 45% were looking for another job and determined to seize a new professional opportunity, up from 42% in 2022. Moreover, 71% believe it's time to leave and work elsewhere.
Today's employees have less confidence in their companies' capabilities: Only 40% believe their company has the financial means to survive, down from 55% in 2020. Trust is also eroding in relations with management. In 2024, 65% of workers wish to continue working with their current employer over the next three years, down from just 40% in 2023.
Stagnant growth is a bad signal for international mobility
The poor morale among employees follows the economic growth trend. The government expects just 0.2% growth for the year. Germany has ended its recession but remains fragile. The economy is stagnant in key sectors: industry and construction are lacking new orders. German industry giants are cutting staff. At the beginning of the year, Miele announced it would cut or relocate up to 2,700 positions globally. Bosch plans to cut 3,500 positions worldwide by 2027. In December, the Stuttgart group announced a job cut of 1,500. This severe blow to the German industry sends a negative signal to foreign workers and prospective workers affected by the economic slowdowns of German multinationals.
The decline in inflation (2.4% in 2024, down from 5.9% in 2023) and the increase in incomes (+6.1% in 2023) have not boosted consumption, which remains weak. Residents are not spending but saving. As historic saving champions, residents are setting new records. According to a report by the five major German economic research institutes, the savings rate of German households is 11.4% in 2024, higher than pre-pandemic rates. Analysts particularly note that the green lights that should have boosted household consumption are not functioning. The cause: morale remains very low, and there is a lack of confidence in the future.
How to Break the Vicious Circle? The loss of morale observed at work and in daily life is slowing down company productivity and weighing down an already struggling German economy. The study points out that disinvestment by employees and the loss of productivity have cost between 132.6 and 167.2 billion euros.
How Germany seeks to attract and retain foreign workers
Germany's new immigration law streamlines the procedures for non-European foreign talents. Shaken by labor shortages and demographic decline, Germany has undertaken a profound reform of its migration system, introducing a point-based permit and an "opportunity card" to ease job hunting. Everything seems to be done to attract and especially retain non-European workers. But did it work as expected?
The first adjustments appeared in 2023 (reform of the law on immigration of skilled workers, which already arranged more favorable conditions for skilled non-European workers). The 2023 reform has been fully deployed since June 1, 2024. But in fall 2023, high-growth sectors (health, construction, energy, education...) were still facing significant labor shortages. The reasons include an aging population (many retirements are not replaced) and a lack of skilled workers. In 2023, the vacant position cost the German economy 90 billion euros, or 2% of GDP. The new law is precisely designed to make Germany more attractive to non-European foreigners. Foreign degrees are better recognized, immigration procedures are simplified, and naturalization is accelerated. In 2022, nearly 170,000 foreigners were naturalized, a 28% increase in one year -- which is a record.
Why Germany struggles to attract foreigners
Still, foreign talents are not flocking to Germany as expected. Worse, some are leaving. According to experts, there are many reasons for this, one of which concerns all of Europe: the rise of the far right—the breakthrough of the AfD. German employers share this concern and fear having even more difficulty recruiting foreigners. Currently, 40% of jobs (1.7 million) are vacant. Germany would need 400,000 foreign workers each year. Companies believe that the radical discourse of the AfD discourages prospective expatriates who prefer to move to more open countries.
Germany's economic gloom is another considerable factor. In 2023, Germany dropped from 12th to 15th place among the most attractive countries of the Organisation for Economic Co-operation and Development (OECD). Other reasons explaining Germany's difficulties in retaining foreign talents include the climate and the German language, which is considered challenging, although the new immigration law lowers its language requirements to attract extra-European candidates.
Solutions to attract and retain foreign workers
Notably, most major economic powers seek foreign talents in the same fields. German companies stress that the international context puts them in competition with companies around the world. For German companies, recruiting foreign workers remains a necessity: the economy, which is international by essence, cannot do without foreign talents.
Strengthening manager training
While companies rely on immigration reform to recruit, they also seek to improve their functioning. The Gallup report shows that employee disengagement partly stems from a loss of confidence in management. The vast majority of German managers (97%) believe they are competent. However, 69% of German employees claim working with a bad manager. According to the report, these discrepancies often result from lacking manager training. Understanding one's team better is one of the keys to employee engagement, especially when the team is international. Strengthening manager training and involving employees more in the work organization could increase their motivation.
Testing the four-day workweek
Another option considered is the four-day workweek. 71% of German workers seem to favor a four-day week, which fits into reorganizing the work schedule. The health crisis and the boom of remote work have changed the global work landscape—more and more large groups are adopting remote work. Those who wanted to return to 100% in-person work faced resistance from foreign talents. German employers are ready to try the experiment. They also want to strengthen the training and integration of their workers (consideration of well-being and mental health).
Promoting German culture abroad
The government also relies on training, and does not hesitate to launch large-scale recruitment operations abroad. In July, the Minister of Labor, Hubertus Heil, went to India with the aim of hiring skilled engineers. Success is already on its way, as demonstrated by the growing interest in the German language, especially in Southeast Asia. According to the German Ministry of Foreign Affairs, 14,000 people are learning German in Vietnam, 15,000 in Malaysia, and more than 17,000 in Thailand. These figures are encouraging the government to promote its culture further. In August, a pilot program was set up in Singapore to teach German to high school students. Singapore is already planning to offer the program to more advanced training.
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