Germany's working-age population set to shrink dramatically
Germany is heading toward a major labor crisis, with its working-age population expected to shrink dramatically over the next decade.
A new study by the IW-Institut (Institute of the German Economy / Institut der deutschen Wirtschaft) in Köln (Cologne) warns that Germany could lose 4.3 million working-age people by 2036. This would reduce the labor force to around 51 million, marking a decline of roughly 7 percent. Experts say this poses a serious threat to economic growth and the long-term sustainability of the country’s welfare system.
According to Holger Schaefer of the IW institute, Germany is no longer approaching demographic change—it is already experiencing it. He warned that within just a few years, the country may no longer have enough workers to maintain prosperity and support the welfare state in its current form.
The biggest reason behind this decline is the retirement of the Babyboomer (baby boomer generation)—people born in the two decades after World War II. As millions leave the workforce, too few younger workers are entering to replace them. At the same time, Germany’s Geburtenrate (birth rate) continues to fall, further worsening the shortage.
Germany’s total population has also started shrinking earlier than expected. In 2025, the population fell by about 100,000 people for the first time in many years, bringing the total to around 83.5 million. By 2040, the IW institute forecasts the population could drop below 82 million.
Another major factor is weaker migration. The report says fewer people are moving to Germany due to economic uncertainty and tougher immigration policies under Bundeskanzler (Federal Chancellor) Friedrich Merz. His government has prioritized stricter migration rules, partly to reduce support for the AfD (Alternative für Deutschland / Alternative for Germany). Economists argue that Germany can slow the decline by encouraging higher workforce participation and making it easier for skilled foreign workers to move to the country.