Downturn in Asylum Seekers Poses Concern for German Businesses
Germany is currently grappling with a significant labor shortage, a challenge exacerbated by demographic changes and a decrease in asylum applications, which traditionally provided workers for less skilled industries.
In an effort to address this shortage, several policies and initiatives are being implemented or advocated:
Labor Market Policy Reforms
The Employers' Association is calling for a "fresh start" in labor market policy. Their focus is on improving placement services by the Federal Employment Agency and aligning wage replacement benefits to incentivize taking up employment, particularly in less skilled jobs. They also advocate for reducing social security contributions on wages to make employment more attractive and reduce undeclared work.
Recruitment Innovation via AI and Automation
German companies are increasingly adopting AI-powered recruitment tools to efficiently fill vacancies amid a shrinking labor pool. These technologies include chatbots for pre-qualifying applicants, machine learning for better candidate matching, and AI-assisted video interviews to streamline hiring while reducing bias. This strategy is crucial for sectors struggling to attract and retain talent with smaller HR budgets.
Policy Challenges Due to Demographics
The overall workforce is set to shrink due to demographic shifts, with estimates projecting Germany could be short over 7 million skilled workers by 2035. This intensifies the challenge in less skilled sectors traditionally supplemented by asylum seekers, pushing companies and policymakers to rethink recruitment and retention strategies.
No Specific Increase in Asylum Applications or Replacement Measures
There is no indication that Germany plans to increase asylum inflows to counteract labor shortages. Instead, the focus is on domestic labor market reforms and leveraging technology to fill gaps.
In other developments, the number of people moving from unemployed to employed between July 2024 and June 2025 increased by 11.3 percent compared to the previous year. Many German industries rely on refugees to fill less skilled jobs, particularly in manufacturing, trade, logistics, and temporary jobs. However, many refugees are forced to work in jobs below their qualification level to prove financial self-sufficiency and obtain permanent residency.
The 'Job Turbo' programme in Saxony-Anhalt has resulted in 7,775 refugees finding employment since its introduction in October 2023. Meanwhile, the German border controls, ordered by the new government, are currently set to last until September 15th. As of the end of July, 9,506 people had been turned away at the border under these increased controls.
Sandra Warden, Managing Director of the German Hotel and Restaurant Association (Dehoga), advocates for proper employment contracts for foreign workers. Women refugees often work in nursing, the hospitality industry, and education. Several business leaders have also called for targeted labor migration and simplified immigration procedures, including for so-called 'basic' positions.
The Interior Minister, Alexander Dobrindt, has stated that the border controls are working and will continue to be maintained. The number of asylum applications in Germany in 2024 was 250,945, a decrease of almost 50 percent year on year. The majority of asylum applications are from first-time applicants.
Deutsche Bahn maintains that immigration is part of the solution for its continued operations. A report by the Federal Ministry for Economic Affairs suggests that many thousands of additional workers could come onto the market if those with a migrant background were given support with training and integration. Uniform procedures are being advocated to prevent bottlenecks in immigration processes, as they can vary from state to state.
Thus, Germany’s current approach to the labor shortage in less skilled industries due to decreased asylum applications centers on intensifying labor market reforms to strengthen employment incentives and adopting AI technologies to improve recruitment efficiency, alongside contending with the broader demographic challenges impacting workforce availability.
In response to the labor shortage, discussions about labor market reforms have arisen, focusing on improving placement services, aligning wage replacement benefits, and reducing social security contributions. The goal is to make employment more attractive and reduce undeclared work.
In an attempt to cope with the decreasing labor pool, German companies are increasingly employing AI-powered recruitment tools to more efficiently fill vacancies in less skilled industries. These technologies include chatbots for pre-qualifying applicants, machine learning for better candidate matching, and AI-assisted video interviews to streamline hiring.
