(Bloomberg) -- Chancellor Olaf Scholz urged Germany’s employers to hire more people and pay higher wages to help revive economic growth.
More skilled workers recruited from abroad and an increase in the minimum wage can help reignite growth, Scholz said on Tuesday in a speech to the German employers’ lobby group BDA. He appealed for solidarity as Germany’s traditional strength in manufacturing falters.
“The economy is stagnating. The bad mood is doing the rest,” the chancellor said in Berlin. “We need to get out of this bad situation together.”
Europe’s biggest economy is expected to contract in 2024, the second consecutive year of declining output. The manufacturing sector was hit hard by a surge in energy prices after Russia’s invasion of Ukraine as well as a slowdown in China.
Those issues come on top of demographic trends, as aging baby boomers retire. Over the next decade, Germany is set to lose 7 million people in the workforce. The shortage of skilled labor has already swelled above half a million and is expected to cost the economy almost €50 billion ($54.1 billion) this year.
Scholz’s administration has eased immigration rules to help companies bring in more talent from other countries. Scholz is traveling with his cabinet and a large business delegation to India this week in part to promote immigration to Germany.
“We need many, many smart and creative minds and capable, hands-on workers — as many as we can possibly recruit for us here in Germany,” the SPD politician said.
Alongside his call for more hiring, he said wages need to rise to encourage more people to work and to stimulate domestic demand. As part of its platform for next year’s election, the SPD wants to raise the minimum wage to €15 an hour. This year, it edged up to €12.41. “I know we are not always of the same opinion here,” Scholz told employers.
In his latest effort to spur growth and investment, the chancellor has invited business leaders and labor unions to a roundtable later this month to discuss new measures. Similar meetings in the past have yielded little, but urgency to act is growing, especially with the vote looming in September 2025.
“We need more growth. The cake must become bigger again,” Scholz said. The results of the upcoming roundtable “must then be put into practice. That is my promise to the industry and to the millions of employees.”
©2024 Bloomberg L.P.