OECD Employment Outlook 2025: 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 2025. This edition has a special focus on how population and workforce ageing will affect the labour market and workers’ jobs.
The OECD unemployment rate remains at 4.9% in May 2025 – the same as one year ago. However, there are signs of weakening, with employment growth decelerating and labour market tightness falling back to pre‑COVID‑19 levels in many countries.
The German unemployment rate stood at 3.7% in May 2025, well below the OECD average. However, it has been slowly and steadily increasing from 3.0% in May 2023 and 3.4% in May 2024. By Q4 2025, unemployment in Germany is projected to rise to 3.6%, but fall back to 3.5% by Q4 2026.
At the same time, Germany has also seen a rising employment rate, driven by an increase in the share of migrants in employment. In Q1 2025 the employment rate was standing at 77.6%, up from 77.3% in both Q1 2024 and Q1 2023. It is expected to increase by 0.7% over the entire year of 2025, as well as 0.2% over 2026.
Labour market tightness has returned to pre‑COVID‑19 levels in many OECD countries, as has the efficiency of matching between employers and jobseekers. But labour markets remain tight for a number of structural reasons. In Germany, however, labour market tightness in Q1 of 2025 (measured by the number of vacancies per unemployed person) remained 28% below pre‑crisis levels.
Germany’s economy is projected to grow slowly, only 0.4% in 2025, but will increase to 1.2% in 2026. Growth will be driven by increased consumer spending and increased public investment in defence and infrastructure, but tariff and trade uncertainty are expected dampen exports and manufacturing investment.
In July 2024, the previous German Government approved the Growth Initiative (Wachstumsinitiative), including measures that focus on reducing bureaucracy, providing incentives to work longer hours as well as providing incentives for skilled migration. The historic EUR 500 billion fund for infrastructure investment and defence spending exemptions from the debt brake, approved in March 2025, are expected to also fundamentally reshape the labour market.
Real wages are growing in virtually all OECD countries, but in half of them, they are still below the levels of early 2021 – just before the inflation surge that followed the pandemic.
In Germany, nominal wages have increased by 2.7% between Q1 2024 and Q1 2025. While real wages have grown by 0.4% over this period, they remain 0.2% below the Q1 2021 level (see figure below). These cumulative changes since Q1 2021 are about the same as at the OECD median, but well below the OECD average (which is driven by positive outliers with strong real wage growth – e.g. Türkiye).
Successive increases of the German minimum wage since its introduction in 2015 have meant that the lowest paid workers have seen their wages rise over recent years. For example, following the most recent increase, the minimum wage now stands at EUR 12.82 per hour in April 2025, which compares to EUR 9.50 in January 2021. In real terms, the minimum wage in Germany has risen by 12.0% over this period, well above the OECD average (7.9%) and median (4.7%). Between 2021 and 2023, the ratio of gross minimum and gross median wages increased from 44.8 to 51.7% (compared to 55.3 to 56.7% on average across the OECD).
People around the world are living longer and healthier lives than ever before. This remarkable achievement has been accompanied by declining fertility, leading to significant demographic shifts. The number of old-age people per working-age person will rise by 67% by 2060 across the OECD. The share of people employed in the population will fall unless policies change, slowing down annual GDP per capita growth by 0.4 percentage points.
For Germany, the baseline projection by 2060 forecasts that the population of traditional working age will shrink by 22%. This means that the number of old-age dependents per working-age individual will increase from 0.39 to 0.60. At the same time, the employment to population ratio will decrease by 4.63 percentage points by 2060 (see figure below), likely putting further strain on Germany’s pay-as-you-go pension system.
Over the same period, and assuming productivity growth remains constant at the level of the 2006‑19 period, this implies that GDP per capita will grow at an annual rate of only 0.27% (compared to 1.4% between 2006 and 2019).
Getting more jobs for older workers and promoting gender equality at work could stabilise employment-to-population ratios in most OECD countries. However, GDP per capita growth will still slow in many countries. Only by boosting productivity growth can countries maintain a growth level close to past levels.
By mobilizing untapped labour resources – e.g. reducing the gender gap in employment and, most importantly, activating older workers in good health as well as increasing regular migration – Germany can increase annual GDP per capita growth to 0.58%. This may increase to 1.08%, if productivity growth additionally reaches half of the 1991‑2000 OECD median. Thus, Germany can partially – or even completely – offset the drag on growth brought by the demographic transition.
Employment of both men and women drops sharply after age 60 in most countries. Promoting lifelong learning, healthy workplaces, flexible retirement, and inclusive employer practices is essential to boost older workers’ employability and extend working lives.
Employment rates in Germany increased by 27 percentage point for those aged 55‑59, and by 57 percentage points for those aged 60‑64 between 2000 and 2024. This is driven by the gradual raising of the statutory retirement age to 67 years since 2012 and rising education levels, which are associated with longer working lives. At age 60‑64 the employment rate in Germany in 2024 was 66.7%, well above the OECD average of 55.9% (see figure below). However, employment rates are noticeably lower for women, especially above the age of 60.
In Germany, the average age of labour market exit remains below that of the normal retirement age, with a gap of 2.4 years for women and 2.1 years for men, both of which are well above the OECD average. Opportunities to combine work and pension income can facilitate a gradual retirement. However, in Germany only 14.3% of workers aged 50‑69 continue working on first receipt of a pension, compared to an average of 22.4% among 24 European OECD countries.
Germany’s previous government proposed policies to encourage longer working lives, but implementation was limited by political instability and government collapse. The new government has also proposed several initiatives to increase old-age employment, including a EUR 2 000 tax-free allowance for post-retirement work, but none have yet been approved or implemented.
Contact
Stéphane CARCILLO (✉ stephane.carcillo@oecd.org)
Jonas FLUCHTMANN (✉ jonas.fluchtmann@oecd.org)
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The full book is available in English: OECD (2025), OECD Employment Outlook 2025: Can We Get Through the Demographic Crunch?, OECD Publishing, Paris, https://doi.org/10.1787/194a947b-en.
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