The German job market faces significant strain by 2036, primarily due to the retirement of the Baby Boomer generation. A study conducted by the Institute of the German Economy (IW) indicates that the working-age population is expected to shrink by approximately 4.3 million workers. This projected decline is larger than earlier estimates, which had predicted a reduction of only three million, largely because the population is contracting faster than previously anticipated.
Nearly 20 million people belong to the highly populated birth cohorts between 1954 and 1969. Of these, about five million are already over the retirement age of 67, while the remainder will reach retirement by 2036. On average, 1.3 million people retire each year, yet only about 800,000 young people enter the workforce. This disparity means the labor market is losing around half a million potential workers annually, leading to a projected decrease of about seven percent in labor potential, falling to roughly 51 million people by 2036.
Germany’s population is declining faster than expected. While the IW projected population growth to 85 million by 2040 in 2024, the population count dropped by 100,000 in 2025-the first time this has occurred in many years. By 2040, a decline to under 82 million is forecasted. The main reason is that more people are dying than are being born, with a recent deficit of 350,000 people in a single year. Although immigration has previously offset this decline, the number of newcomers has dramatically slowed.
“Germany is not facing demographic change; it is already in the middle of it,” stated IW expert Holger Schäfer. “In just a few years, the economy will lack the workforce needed to generate prosperity and sustain the social state in its current form.” He noted that two key solutions exist: people must work longer, and it needs to become easier to attract qualified international talent.
