German labor market: foreign workers have offset demographic decline

Demographic context

Between 2014 and 2024, the working-age population holding German passports declined by 3.9 million people. At the same time, the number of working-age residents without German passports increased by 3.4 million.

In 2026, the Erwerbspersonenpotenzial — the total volume of potentially available workforce, including employed persons, registered unemployed, and those likely to re-enter the labor market — will contract for the first time by approximately 40,000 units, according to Andrea Nahles, president of the board of the Bundesagentur für Arbeit.

This decline is expected to intensify in coming years as the post-war baby boom generation moves into retirement.

Timeline

1. 2014
   Beginning of the reference period. The working-age population holding German passports begins its structural decline, while the foreign-born component grows steadily.
2. 2019–2024
   The number of socially insured employees from leading refugee-origin countries (Syria, Afghanistan) more than doubles in five years.
3. June 2025
   Decade-long assessment: 43% of net employment growth is attributable to non-EU third-country nationals, with approximately one-third originating from the eight leading asylum seeker source countries.
4. 2026
   First contraction of Erwerbspersonenpotenzial anticipated (approximately −40,000 people), marking the onset of structural labor market tension that will intensify with baby boomer retirements.

Quotes

Integrating refugees into the labor market is an investment in the future.

— Daniel Terzenbach, board member of the Bundesagentur für Arbeit

What remains uncertain

Available data do not specify the sectoral distribution of jobs held by foreign workers nor their average compensation levels. The pace at which immigrant workers can continue to offset baby boomer retirements remains an open question.

FAQ