Germany’s labour market is buzzing. The unemployment rate is currently close to 5%. Although the business cycle could cool down in the near future, the trend is not expected to reverse course in the coming years. In the long run, however, pessimism dominates. As automation intensifies, many observers expect an era of mass unemployment in which only highly-qualified skilled workers will have a regular employment contract. At the same time, baby boomers will retire, and the decreasing labour force might lead to a skilled labour shortage, lower growth rates and an overburdened welfare state.
Yet, empirical findings and theoretical arguments suggest that there will be neither mass unemployment, nor a dramatic skilled labour shortage. Moreover, these two problems will certainly not emerge together. Rather, the decrease in labour demand due to automation will be manageable, and partly absorbed by the simultaneously drop in the labour force. By contrast, increasing income inequality is more likely to become a key isuue.