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Home Publications Blogs Beat the Press If Germany Has a Hole of 2.3 Million Workers in Its Labor Force, Does that Mean It Will Be Hard to Get Good Help?

If Germany Has a Hole of 2.3 Million Workers in Its Labor Force, Does that Mean It Will Be Hard to Get Good Help?

Monday, 28 July 2014 07:16

It's hard to know what else it could possibly mean, but the Washington Post dutifully reported to readers:

"The aging population is shrinking here, with the 2011 census showing a loss of about 1.5 million people since the 1980s. As the decline accelerates, by 2030 the government predicts a hole as big as 2.3 million workers in the German labor force."

In a market economy, wages adjust to equilibrate supply and demand. If there are fewer workers in Germany it means that workers will leave less productive sectors, like retail trade, restaurants, and hotels, and instead move to sectors in which they can get a higher wage. Many of the firms in the less productive sectors will go out of business.

This sort of transition happens all the time. It is the reason that half of the U.S. population is not still working in agriculture. In the context of a market economy it is not clear what it can mean to have a hole in the labor force. This would just mean that low productivity jobs cease to exist. So what?

Comments (4)Add Comment
written by dax, July 28, 2014 8:58
Or - there will be immigration from the rest of Europe.
Supply Holes Are Just Mirror Images of Demand Holes
written by Last Mover, July 28, 2014 9:21

Any economist can see, not to mention sock puppets for the 1%, Dean Baker is obviously pushing blatant socialism here. He wants to subsidize the least productive workers with higher wages created by an artificial shortage that creates too much demand designed to eliminate a "hole in supply".

This is no different than subsidizing the same workers by filling a hole in demand with stimulus spending.

The symmetry should be obvious to anyone who follows this issue. They are structually unemployed either way. A hole in supply requires the same solution as a hole in demand - do nothing. Let the law of supply and demand work to seek equilibrium through the magic of relative prices and the invisible hand.

Oh wait.
Yea, pretty much
written by Dave, July 28, 2014 1:48
This is a nothing. But it makes us aware of how newspapers will take an issue the market can handle and make into something people need to worry about.

There has to be an agenda there.

written by Gman, July 29, 2014 4:58
Immigration, automation, globalization, and keeping economic growth below capacity are always covered in the media from the perspective that wages going up for the bottom 90% is just not an option.

Thx Dean for pointing this out at every turn.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.