Aligned to west trailing
East German economy suffers from aging
03/21/2022, 11:30 a.m
At the beginning of the 1990s, the population in the new federal states was significantly younger than in the west. 30 years later, however, the East German economy is struggling with aging: there is a lack of skilled workers and innovation. The old federal states could soon feel the same way.
According to a recent study, the east German economy will clearly feel the consequences of aging in the coming years. These include declining economic power, fewer innovations and start-ups and an increase in the shortage of skilled workers, as the Institute for the World Economy (IfW) explained. The emigration of young people from East Germany is exacerbating the situation, but West German states are also threatened “with the same fate in a few years”.
“In the early 1990s, the population in eastern Germany was significantly younger on average than in the west,” explained Dirk Dohse, director of the IfW’s research center for innovation and international competition. However, this has changed fundamentally due to the emigration of young people, lower birth rates and fewer inflows from abroad.
In Thuringia, on whose behalf the IfW report was prepared, this development was particularly clear: Between 1991 and 2019, the federal state lost a good 17 percent of its inhabitants, only Saxony-Anhalt turned their backs with 22.3 percent . In the old federal states, on the other hand, the population figures rose significantly in some cases over the same period.
Since the middle of the last decade, the East German economy has been “increasingly losing touch” with the rest of the Federal Republic. Between 2015 and 2019, the economy in Thuringia grew 4.4 percentage points slower than the national average. In Thuringia, the gross domestic product (GDP) per capita in 2020 was almost 30,000 euros, only in Saxony-Anhalt and Mecklenburg-Western Pomerania was the value lower. In Hamburg, on the other hand, GDP per capita was well over 60,000 euros.
Same salary only in 40 years?
The adjustment to the west level is progressing slowly, the IfW explained: If this continues at the same pace as since 2015, east German households will only have the same income as households in west Germany in 40 years.
The researchers warned that the East German economy would face further challenges in the coming years. The increasing shortage of skilled workers means that companies cannot process their orders, so economic output continues to decline. Few young people also meant little innovation and start-ups.
In order to counter the shortage of skilled workers, politicians should increase “the attractiveness of the business location” for skilled and highly qualified workers, recommended Dohse. A “fundamental change of course in funding policy” is necessary. Instead of keeping jobs for which there are no skilled workers, new workers should be attracted. The promotion of structural change and the productivity of companies should also be prioritised.