Labor Market Trends in Germany in 2026

What is commonly known as the labor market remains an inevitable feature of an economic system that converts everything into a commodity. Not surprisingly, the economist who understood this system better than many others started his three-volume seminal opus with “commodities” – the defining element of capitalism.

In capitalism, two features are attached to every commodity. Commodities have a “use-value,” as they are useful to us, like the air we breathe. But they also have an exchange-value, with money having a very high “exchange-value”, as it can be exchanged for almost everything.

In short, air has a very high use-value but no exchange-value, as it costs nothing. It is hardly sold. By contrast, money has a very high exchange-value but next to no use-value. It is pretty useless: you cannot burn it, heat your house with it, you can barely write on it, and you can hardly wipe your bum with it.

Worse, capitalism assigns the same logic to labor. Labor has a use-value to companies, as it can perform a certain function – it can work – and labor has, to the annoyance of capitalists, also an exchange-value. That means wages have to be paid.

Yet, labor has one more particularity. Unlike the money market or the commodity market, where goods and services are bought and sold and money changes hands, labor can no longer be bought outright. For the most part, slavery – that is, a market where a capitalist can buy labor or a person – no longer exists, except for the estimated 28 million people who still suffer in slavery, according to the ILO.

While slavery does not exist in Germany today, Germany’s labor market – like any other labor market – shows certain trends. Some of them are common to all labor markets; others are unique to Germany.

One of the more recent trends in the German labor market is the increased use of the English language. In other words, in some German companies, English has already become the “working language.” This trend goes only in one direction: upward. Yet, this should not be overemphasized, as plenty of young Germans already speak English, and there are thousands of small and medium-sized companies that cater primarily to the local and domestic market.

The second overarching trend in Germany’s labor market is that employment growth comes from one single source. In an aging society like Germany, this means that almost any growth in the labor market comes from people arriving from abroad. As much as Germany’s neo-fascist political party, the AfD, hates it, Germany’s labor market grows only because of immigration.

On the former of the two trends, one pragmatic approach would be to introduce English as the working language in larger companies. While a hairdresser in far eastern Germany or a local bakery in Germany’s south-west might not switch to English, there are plenty of companies that engage with the EU and beyond. In some cases, this might result in English becoming the dominant working language, while German remains the language of everything else in society.

In other words, a good number of Germans might slowly come to terms with the seemingly inescapable. Many Germans will accept English as a working language. German will continue as the language of Thomas Mann, Albert Einstein, Marlene Dietrich, Kant and Hegel, Bach and Beethoven, Claudia Schiffer and Michael Schumacher, as well as the Scholl siblings, Ulrike Meinhof, and Anne Frank.

Beyond that – and this is the second overarching trend in Germany’s labor market – Germany increasingly depends on immigration from third countries. These are non-EU countries, as labor arriving from other EU countries is regarded as intra-European labor based on the freedom of movement guaranteed by the EU. Post-Brexit, the UK, for example, has turned itself into a “third” country outside the EU.

Yet, it is not only EU labor but labor coming from outside the EU that is important to Germany. In other words, without immigration, there would no longer be any growth in the German labor market.

Today, hardly a week goes by in which German companies do not announce job cuts. However, there is also another side to Germany’s labor market. As widely recognized, 2025 was a crisis year, and this had an impact on Germany’s labor market.

There are already dark clouds – in other words, the usual crisis of capitalism – but there is also bright sunshine, as Germany’s economy is transitioning away from manufacturing toward R&D, services, and related sectors. Germany is seeing a marked decline in industrial employment.

In Germany’s manufacturing sector, for example, more than 10,000 jobs were lost every month in 2025. Meanwhile, there are also positive developments. The number of jobs contributing to Germany’s social security system increased slightly in 2025.

However, this growth came exclusively from part-time jobs, while full-time employment declined in 2025. This trend is likely to continue as atypical forms of employment increase and precaritization deepens: full-time and permanent jobs are converted into insecure jobs.

Worse, Germany’s youth unemployment rose slightly in 2025. The fact that it remains one of the lowest in the EU by comparison is neither consoling nor reassuring, nor does it help young people in Germany.

On the upswing, Germany’s training regime and apprenticeship market are shaped by a long-term trend of closing gaps. On the downswing, however, there were fewer apprenticeship positions available in 2025, while more young applicants were unable to secure a place. Worse, many do not expect a strong recovery in 2026. In other words, it will not get any easier for many young people in Germany.

With 5.4 million workers, Germany’s public service employs roughly 12% of all employees in the country. It is therefore not surprising that the civil service is a significant job creation machine. Perhaps this reflects German conservatism as “strong-state” conservatism rather than neoliberal conservatism. Thankfully, Germany has neither a Donald Trump nor an Elon Musk nor a DOGE-style assault that has caused tremendous damage to much-needed state institutions elsewhere.

In Germany, it is not just public administration but also crucial sectors such as education, care institutions, and the health system that are desperately seeking personnel and struggling to fill vacancies.

In these areas, almost any increase in staff results in permanent positions. Meanwhile, because Germany is an aging society, the need for care continues to grow, and more aged-care workers are required.

Yet, the upward trend in public-sector employment may be transitional, as digitization, automation, and, more likely, artificial intelligence may dampen job growth in Germany’s administration in the long term.

In other words, administrative processes are becoming faster and leaner, and as a result, labor requirements may decline over time.

Many are beginning to see real and concrete effects of AI on employment. With the steady introduction of artificial intelligence systems, Germany is likely to experience productivity gains. There will be more output per capita but not necessarily more jobs. Rather, increased profits may come with fewer employees – an almost paradise-like scenario for capitalism.

At the same time, it is possible that increased AI adoption could accelerate Germany’s economic growth, increasing labor demand and job creation. However, these jobs are unlikely to involve routine or repetitive tasks.

In the absence of comprehensive sociological studies, the effects of AI on employment remain largely anecdotal. Yet, in some areas, they are already measurable. Language translation and text summarization, for example, are increasingly being taken over by AI.

In media, graphic design, and the broader design industry, AI tools have already assumed routine tasks. In German industry, AI is already being used for quality control, maintenance, and planning.

AI has become embedded in production processes, making them more efficient. Such tasks can now be completed with fewer workers. Jobs are lost.

Job cuts in the medium term are therefore likely. Yet, this also depends on whether management uses AI-driven productivity gains to expand production and develop new products or merely to cut costs by laying off workers.

It also depends on how quickly companies train and re-qualify their workforce so employees can transition into activities with long-term prospects.

In short, German industry is at a critical threshold – as capitalism nearly always is. From the replacement of the steam engine by diesel and electric motors to the shift from ledgers to computers, innovation has always required investment. AI is no different.

Yet, the US and China are far ahead of Germany. One advantage for the US in particular is that language barriers do not present an artificial obstacle on the path toward an AI-driven future.

Meanwhile, German traditionalism and conservatism mean that too many managers still prefer to cling to old and increasingly outdated technologies.

Worse, the conservative government’s decision to postpone the transition to e-mobility will not magically halt it. It merely ensures that Germany will fall further behind.

This will have consequences for employment. The slowdown in the transition toward electric vehicles must be used for investment, requalification of existing workers, and the attraction of immigrant labor.

Yet, Germany’s conservative coalition government follows right-wing populism, ensuring that the opposite occurs. Instead of growing, the workforce is shrinking. Worse still, anti-migration ideology has resulted in a dramatic decline in immigration.

Instead, many Eastern European countries are encouraging their citizens to return home. They are leaving Germany. The same applies to refugees from Syria, whom Germany’s government has encouraged to return.

Countries such as Poland and the Czech Republic already have lower unemployment rates than Germany and stronger job growth, despite facing even greater demographic challenges.

Worse for Germany, these countries are actively reclaiming their workers through targeted campaigns. The influx of labor into Germany is not just drying up; it is reversing – to Germany’s detriment.

At the same time, employment in Germany is shrinking primarily for demographic reasons. In recent years, the workforce has declined by roughly 250,000 Germans annually.

Employment growth now depends almost exclusively on workers from third countries. It no longer comes from Germans or other Europeans. These are the facts, and Germany must change its strategy. Fewer workers will inevitably mean declining prosperity.

Despite its flirtation with right-wing populism, the demands of German industry have led the government to consider so-called “work-and-stay” agencies to facilitate immigration and long-term residence.

This will help only if Germany abandons xenophobic ideology and returns to a genuine welcome culture that encourages migrants to stay. Once, Germany had a comparatively liberal immigration law. In practice, however, administrative hurdles made it unnecessarily complicated and poorly aligned with the needs of migrants and businesses.

A work-and-stay program implies permanence. Yet, countervailing trends exist. Every year, between 800,000 and one million people leave Germany. To improve Germany’s labor market, five paths must be pursued:

Rules: Germany’s regulatory framework and immigration rules must be streamlined to support newcomers.

Laws: Administrative processes must be simplified and harmonized across Germany’s 16 states and at the European level.

Policy: Germany must become an attractive place to live and work by reviving its welcome culture. Migrants must feel comfortable with their families. Right-wing populist rhetoric must end, and the government must actively combat hate speech, xenophobia, and racism.

Training: A comprehensive training regime must support skill development and improve both English and German language proficiency.

Housing: Affordable housing and strong municipal infrastructure must be provided for migrant workers.

In conclusion, Germany must become more open, more cosmopolitan, more flexible, and more multicultural. Alongside language acquisition and skill development, Germany must recognize that labor market growth will primarily come from immigration.

Germany’s aging society means that domestic labor market entrants will no longer compensate for the loss of retiring workers. While AI will affect employment, it will not lead to mass unemployment – no innovation in the history of capitalism ever has. Nor will AI-induced job losses offset the demographic decline caused by the retirement of the baby-boomer generation.

Rather than demonizing immigrants – as the far right, conservatives, right-wing media, and some online platforms do – Germany must fundamentally change its approach to immigration and rebuild a welcome culture grounded in the five principles outlined above.

Thomas Klikauer was born half-way between Castle Frankenstein, the place where Johannes Gutenberg invented the printing press, and Karl Benz’s garage where the first motor-car was developed. Educated at the TU Darmstadt, Bremen University, Boston University, and Warwick University, Thomas Klikauer teaches MBA students and supervises PhDs at the Sydney Graduate School of Management (SGSM) at Western Sydney University, Australia. Among his 1,130 publications are 17 books. He writes for ZNet, Cross Border Talks and Countercurrents. His homepage is: klikauer.wordpress.com. He lives in Sydney’s beachside suburb of Coogee.