At her Schuko factory Germany, a family-owned air filter business, workers recently witnessed an unusual sight on the production line. The 46-year-old owner, André Schulte-Südhoff, took the tools and started fiddling with them as the company struggles to meet a delivery schedule. The factory employs 200 people but is estimated to need 15 more. And like thousands of businesses across Germany, it is lagging behind because it can’t find workers. “We could sell a lot more. What is missing is the labor force,” Schulte-Sudhoff says in an interview with Bloomberg.

According to a model prepared by a German state research institute, Germany’s workforce of 47 million will stop growing very soon. Maybe it’s already stopped. And this moment will be the culmination of an economic supercycle that has turned the war-torn country into an industrial superpower and one of the richest countries in the world. According to Bloomberg, the era when one generation after another has seen their standard of living improve is coming to an end. “Those days are over. The foundations for further growth in prosperity are crumbling,” KfW, a development bank, warned this year.

Barring major changes, Germany’s workforce will shrink sharply in the coming years, undermining economic growth, increasing inflationary pressures and creating serious problems for industrial companies such as Schuko, which form the backbone of Europe’s largest economy. Over the next decade, the labor supply will fall by 3 million people, or 7%, unless Germans retiring are replaced by a significant influx of immigrants.

Over the next decade, the workforce will shrink by 3 million people.

Just to stay at current levels, Germany needs 400,000 new immigrants a year. With the retirement of the post-war baby boomer generation, the growth of the German economy is now dependent on productivity growth. Thus, growth is not expected to exceed 1% for decades.

One solution is to get more Germans to work. But this “reservoir” is limited, as women’s labor market participation has increased by 10 percentage points over the past 30 years and now exceeds levels in other large European countries, while in line with US data. .

One group that Germany can turn to is pensioners. Less than 9% of Germans over 65 work, while the corresponding percentage is close to 20% in the US and 25% in Japan. With a gradual increase in the retirement age to 67 by 2030, the share of working pensioners is expected to grow, but at a slow pace.

Therefore, the future growth of Germany can be based on increasing the productivity of each worker. However, in recent years, this size has stalled, increasing by only 2% since 2015 compared to 8% in the US. One reason for poor performance is that Germany is lagging behind in digital transformation.