The analysis focused on the consequences for the labour market and fiscal policy. The population of the east German Länder will continue to shrink massively in the years to come and at the same time will be subject to serious changes in the age distribution. The labour force will decline even more than the population at large. The foreseeable decline of the population and the accompanying ageing will slow the growth of the economy.
With the labour market in mind, several simulations were conducted up to 2020. The production of tradable goods was explicitly differentiated from that of non-tradables. In the sector of tradable goods foreign demand for the goods pro-duced in east Germany lastly also determines the demand for labour. Demographic shifts cannot be expected here. The demand for non-tradable goods, in contrast, is determined locally. As shown by the calculations, the demographic change will result in a dampened demand for non-tradables. This is primarily due to the decline in the population, whereas an age-caused shift of demand toward non-tradable goods is not likely. The reduced demand in the sector of non-tradables that employs 80 percent of the labour force will also reduce the demand for labour.
Thus, the future state of the labour market will be characterised by two parallel developments. For one, due to the shrinking population and its ageing, the supply of labour will decline, and secondly, the demographic change will also lead to a reduction in the demand for labour in the sector for non-tradable goods. The change of the labour market re-garding individual skill levels also depends on the change in the wage levels. The relative scarcity of highly skilled workers should lead to wage increases in this market segment, whereas continuing unemployment in the other segments will not result in upward wage pressures resulting overall in a greater spread of wage rates.
Ragnitz, J. et al (2007): Die demographische Entwicklung in Ostdeutschland, ifo Dresden Studie 41, Munich/Dresden. (in German)
Grundig, B. and C. Pohl (2007): Demographischer Wandel in Ostdeutschland: Fluch oder Segen für den Arbeitsmarkt, in: ifo Dresden berichtet 03/2007, p. 3-13 (Download, PDF, 251 KB).
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