OECD Employment Outlook 2026: Germany
Table of contents
These country notes provide an overview of the labour market situation in each country based on data from OECD Employment Outlook 2026. This edition has a special focus on geographic disparities in jobs and incomes.
The OECD labour market remains resilient, with employment and labour force participation rates at record highs (72.1 and 76.7% in Q1 2026 on average across countries, respectively) and unemployment low by historical standards (4.9% in May 2026). However, there are increasing signs of weakening, including rising unemployment in many countries, slowing employment growth, and easing labour shortages. Due to the new surge in energy prices, real wages are expected to fall in many countries.
The German unemployment rate stood at 3.8% in May 2026, well below the OECD average. However, it has increased from 3.7% in May 2025 and 3.4% in May 2024. At the same time, Germany has seen an upward trend in labour force participation. In Q1 2026, it stood at 80.5%, up from 80.3% in Q1 2025 and 79.9% in Q1 2024. Developments in the employment rate were more muted. In Q1 2026, the employment rate was standing at 77.3%, similar to where they stood in Q1 2025, but up marginally from 77.2% in Q1 2024.
Germany is where labour market tightness has decreased the most across the OECD by Q1 of 2026, falling to 0.3 vacancies per unemployed person below pre‑crisis level in Q4 2019. However, due to several structural reasons (e.g. including population ageing, the digital transformation, the move toward carbon neutrality), labour market tightness remains relatively high compared to the early 2010s, when it was more than 0.6 vacancies per unemployed person below Q4 2019.
Labour hoarding in Germany, measured as the share of firms expecting their output to decrease without decreases in their workforce, stood at 11.8% in Q1 2026, down from 13.9% in Q1 2025, yet still noticeably up from the pre‑pandemic level, when it stood at 10.6% Q4 2019. This persistence is notable despite the simultaneous decline in German labour market tightness.
In Germany, real wages have increased by 1.2% between Q1 2026 and Q1 2025, compared to a more marked increase of 2.2% on average across the OECD. With modest increases over recent years, German real wages are now 0.9% above the Q1 2021 level (before the inflation surge episode), while real wages have risen to 1.2% above the Q1 2021 level on average across the OECD. Despite the recent inflationary pressure due to the surging of energy prices, German real wages are projected to increase by around 1% in 2026 and 2027, assuming that that the disruptions from the conflict in the Middle East are sizeable but limited to a relatively short period of time.
Regional disparities in labour market outcomes are large across the OECD. In over half of OECD countries, employment rates across small regions vary by more than 20 percentage points (p.p.). These disparities do not simply reflect differences in who lives where, but also in the economic opportunities that regions have to offer, and they translate directly into disparities in living standards.
In Germany, the gap between regions in the top and bottom quintiles of employment rates stands at 12.4 p.p., slightly greater than average disparities of 11.4 p.p. across OECD countries where data are available (with a range from 3.2 p.p. in Costa Rica to 24.8 p.p. in Italy). These regional disparities are particularly persistent in Germany, where regional gaps in employment rates have not narrowed significantly since the early 2010s, unlike in most other OECD countries.
People’s chances of finding work are strongly shaped by where they live. In 2023, the unemployment rate in the worst-performing Kreis, Gelsenkirchen, stood at 16.1%, multiples higher than that of the best-performing one, Pfaffenhofen an der Ilm (2.1%).
Strong and weak labour markets tend to group together geographically. Kreise with high unemployment are found in the east, which are still bearing the structural legacy of reunification, and in the Ruhr area, scarred by decades of decline in the coal and steel industries. Those with low unemployment are concentrated in the south of the country. Therefore, workers seeking better employment opportunities would often need to relocate over long distances.
Globalisation and digital technologies continue to reshape local labour markets across OECD countries, but the effects differ substantially across regions. Areas highly exposed to import competition from low-wage countries often face persistent manufacturing job losses, while regions exposed to digital technologies tend to experience stronger growth in non-routine and higher-skilled employment.
In Germany, Kreis Dingolfing-Landau is the most exposed to import competition from low-wage countries, particularly due to the high concentration of the automobile industry and its supply chain, while Kreis Vorpommern-Rügen sees the country’s lowest exposure.
Like elsewhere, exposure to regional low-wage competition is associated with decreases in manufacturing employment in Germany, but regional employment growth in non-manufacturing sectors offsets these declines from the start. Particularly in the 2010s, these offsetting effects led to robust overall employment growth linked to exposure to low-wage competition.
At the national level, imports from China largely displaced German imports from other low-wage countries rather than competing directly with domestic producers, muting the adverse manufacturing effects. Increased imports from low-wage countries went together with increased exports, suggesting that overall international trade led to the creation of more manufacturing jobs than it destroyed.
As elsewhere, the adjustment in regional manufacturing employment as a response to structural change in Germany is brought about largely by flows into and out of employment (workers entering or leaving employment), while regional and industry mobility play only a minor role.
Non-compete clauses – contract terms that prevent workers from moving to a competitor or starting a competing business – and related contractual restrictions are widespread across OECD labour markets. they covered about 30% of workers in 2025, and are increasingly used beyond highly specialised jobs. While firms may use such clauses to protect trade secrets or investments, evidence suggests they can reduce job mobility, weaken wage growth, slow knowledge diffusion and undermine productivity growth.
According to employers, between 24% and 35% of private‑sector employees in Germany are currently bound by a non-compete agreement compared to an average of 20% to 30% across the OECD countries. Firms in Germany report an upward trend, suggesting growing reliance on contractual restrictions in the German labour market.
In Germany, as in several other OECD countries, non-compete clauses have spread into parts of the labour market where the traditional justification, such as protecting sensitive information or high-value investments, appears weak. For example, between 9% and 25% of workers with no access to confidential information nonetheless declare having signed a non-compete agreement as well as between 10% and 24% of low-pay workers.
In addition, about 30% of surveyed firms in Germany report knowledge of either no-poaching, wage‑fixing, or both occurring within their industry compared to 48% on average across the surveyed countries.
Contact
Jonas FLUCHTMANN (✉ jonas.fluchtmann@oecd.org)
Stéphane CARCILLO (✉ stephane.carcillo@oecd.org)
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The full book is available in English: OECD (2026), OECD Employment Outlook 2026: Geographic Disparities in Jobs and Incomes, OECD Publishing, Paris, https://doi.org/10.1787/7e710f54-en.
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