Look, there is no conclusive evidence here, only pointers. The strongest evidence in my book is the similarity between Germany and Japan in all of this.

“But what tells you that eg. it is not caused by a combination of too low unemployment and a shitty educational system forcing German companies to scrap the bottom in terms of skills?”

Well, actually, isn’t that what the Hartz reforms were all about, forcing people at the bottom of the employability range off the registers and into work. A lot of these people were over 55.

“Thirdly, if young workers really become scarce why don’t we see rising wages for the young?”

Well this is what Delia Marin argues about Easten outsourcing (and Hans Werner Sinn is more or less in the same line) – that the skilled work was outsourced to expand the pool of available skilled workers, and hence keep wages down. This part seems to have worked.

But…. the thing is if Germany hadn’t done this, then even what little economic miracle we have seen wouldn’t have worked, since there wouldn’t have been sufficient competitiveness to boost up the exports machine.

I don’t know why the German education system is as it is, that’s way beyond my expertise. Although, incidentally, all the international “ranking” reports I have seen have come to similar conclusions here.

In fact we know that graduation rates in Germany are low, but in a shrinking population more resources should be spent on an individual, so why is that?

Thirdly, if young workers really become scarce why don’t we see rising wages for the young?

The annual productivity numbers Oliver, and the fact that lots of jobs have been created, but wages have hardly moved.

My own personal feeling is that you need to look at the age profile of the German workforce, and the low value added content of much of the new employment. Some reflection of this can be found in the fact that (on aggregate) labour productivity (price-adjusted gross domestic product per person in employment) in the third quarter of 2008 was down by 0.1% year-on-year in Q3 2008. When measured on a per hour worked basis labour productivity was down by 0.2%.

As reported by the Federal Statistical Office (Destatis) on the basis of first calculations for October 2008, the number of persons in employment whose place of residence was in Germanyamounted to 40.84 million. That was an increase by 538,000 persons (+1.3%) on October 2007 and the highest number of persons in employment ever. But experience shows that it often takes several months for trend changes in the overall economic development to show on the labour market.

As reported by the Federal Statistical Office (Destatis), the number of first graduates at German institutions of higher education increased to 239,900 in examination year 2007. Hence the graduates rate, that is the share of graduates of a first course of studies in the age-specific population, reached an all-time high (24%). To meet the rising demand for highly qualified employees over the next few decades, the graduates rate should be raised to 35% in the medium term, according to the opinion of the Science Council. In an international comparison, too, the graduates rate in Germany is again below the average of the OECD countries, which in examination year 2006 was 37%. When calculating the graduates rate for Germany without the colleges of public administration, which are not included in the higher education sector according to the international definition, it was 21% in 2006 and 23% in 2007.

This is why there is so much high skilled outsourcing to places like Poland and the Czech Republic.

As reported by the Federal Statistical Office (Destatis), about 4.4 million persons in Germany, which is about every tenth employee, worked in the health sector on 31 December 2007. Hence, in 2007, there were about 63,000 more jobs in the health sector than in 2006, which is a job growth of 1.5%. Compared with the previous years, that was the largest increase in jobs in the health sector – figures from health personnel accounts have been available from reference year 1997. Between 1997 and 2000, the number of staff in the health sector decreased slightly at first (–20,000 employees or –0.5%). Then the number of employees rose considerably by a total 143,000 or 3.5% until 2003. Between 2003 and 2006 total employment growth in the health sector (+75,000 jobs or +1.8%) was somewhat more moderate.

WIESBADEN – As reported by the Federal Statistical Office (Destatis), 2.25 million persons in Germany were in need of long-term care in December 2007 as defined by the Long-term care insurance Act – Code of Social Security Legislation XI. Due to the ageing of the population, that were some 118 000 persons or 5.6% more than in 2005 and 231 000 persons or 11.4% more than in 1999, when the survey was conducted for the first time.
The majority (68%) of those in need of long-term care were women. 83% of the persons needing long-term care were 65 years and over; about one third (35%) were 85 years and over.

And as I said in my last comment, fertility hardly moved in Germany in 2007. True births were up slightly, but this is hardly a revolution, and it was the height of the boom, and you need to take into account the slightly larger number of women in the key child bearing ages. But the Tfr remained stuck in the 1.3 range (up to 1.37, but a far cry from the 1.45 which was being loudly trumpeted at press conferences by your family minister in the spring). I think its time to say, enough of all those it doesn’t matter, it’ll get better tomorrow attitude. If you care about your country (and I’m sure you do) it’s time to do something.

Now we wait to see home much damage a couple of years of sharp economic contraction will do to short term fertility.

As reported by the Federal Statistical Office (Destatis), the average number of children per woman in Germanywas 1.37 in 2007, up from 1.33 in 2006. This was the first rise since 2004. 2000 was the last year in which the average number of children per woman was higher (1.38). In 2007, some 685,000 children were born, about 12,000 more than in 2006. As in past years, the average number of births by younger women continued to decline in 2007, while it rose for women in their late twenties or older. Even in comparison to earlier years, a particularly strong increase was observed in 2007 for women aged from about 33 to 37. The average number of children increased in both western and eastern Germanyin 2007, reaching 1.37 in each part of the country. Accordingly, for the first time since 1991, the average number of children per woman was at the same level in the new Länder as in the former territory of the Federal Republic(in each case excluding Berlin).

“Why do we need demographics for that?”

Well:

“stagnating wages (maybe even falling some of those years when adjusted for inflation)”

Well, the rising median age of your population means that the labour force is not so productive as it was. In crude terms – on aggregate – it is not worth what it used to be. This is one of the reasons that Germany has been outsourcing higher value work (due to the shortage of skilled young people at home, and thus the comparatively higher cost) to the East and taking the lower value work to reduce unemployment back home (reversing the traditional US role of Maquilladras in Mexico) – as Munich based researcher Delia Marin has been pointing out for some years now. It all builds up and up.

“no housing boom/bubble in Germany”

This is straight demography I’m afraid, same case Japan, same case Italy. NO country with a median age over 41 has had a major housing boom since it crossed that threshold. We are still waiting for a counter example – the stereotypical housing boom people (UK, US, Spain, Australia, Ireland, Iceland etc) all are aged between 35 and 40. The theory to explain this isn’t that difficult, since people in the higher age cohorts don’t take on so much debt, and when their specific weight in the population passes a certain level, well then housing – like the proverbial goose – is well and truly “done”.

Basically, the German financial system has problems because the excess savings (the CA surplus) went into housing booms elsewhere – USA, Spain, Ireland etc.

“Just after 1+ year of economic growth.
- rising oil prices till 2008″

You’re right here. This one is laregly explained by events elsewhere. But, of course, it is the export dependence which means that the crash at the end of only one year of boom is so substantial.

“a federal sales tax increase from 16% to 19% on January 1, 2007. Just after 1+ year of economic growth”.

This one is all about demography. It was an (ill-advised) attempt to pay for the extra elderly dependence without cutting back on services. It didn’t work, as we can see from the chart above, and it effectively killed off what little life household consumption had at that point, not that you’ll find the politicians and the economists who advised them on this admitting it.

“The last newspaper reports published shortly before Christmas mentioned a “good” Christmas business for retailers. With slightly rising sales year over year. They wrote that probably rising wages in 2008 and lower gasoline prices were responsible for that.”

I’m sorry, this is just spin in my opinion. You may see some small improvement in xmas cheer. I don’t say that that is impossible. But if you look at retail sales as classified at the Federal Statistics Office, then these definitely peaked in 2006, and are now in what I think could well turn out to be long term decline, so even if there is a blip, this is unlikely to change things substantially.

Basically, as with the fertility issue ( eg the famous “babies in Dusseldorf” episode – after all the fuss, live births in Germany had only a very slight increase last year) German opinion is just not facing up to what is happening, and as a result nothing substantial is being done to try and correct course.

This is very dangerous. The current slump is set to be much worse than 2001/02. Recovery is going to be hard – it isn’t at all clear who is going to buy the extra exports next time round – and even when we do get lift-off, well I dread to think what things will look like at the end of the next cycle (2015-2016??), I really don’t. Better to get that national debate started, and to get it started now.

Well, stagnating wages till at least 2007 might have played a role too?
Stagnierende Löhne, steigende Kapitaleinkünfte (in German).

Translating one paragraph on the fly:
“During the period of wage restraint wages as a percentage of national income went down from around 72% in 2000 to 64.6% in the first quarter of 2007. Inversely the percentage of business profits and capital income has risen.”

So:
- stagnating wages (maybe even falling some of those years when adjusted for inflation)
- no housing boom/bubble in Germany
- credit cards are unpopular in Germany
- a federal sales tax increase from 16% to 19% on January 1, 2007. Just after 1+ year of economic growth.
- rising oil prices till 2008
—> resulting in stagnating or falling domestic spending.

Why do we need demographics for that?
You´ve got tax raises and higher gasoline prices coupled with stagnating wages so of course less is available for consumption. Unless of course you want to follow the US and UK model with debt-financed consumption?
(Although you´re partly right. At least some of the new jobs were low wage jobs. Not much higher than unemployment benefits.)

The last newspaper reports published shortly before Christmas mentioned a “good” Christmas business for retailers. With slightly rising sales year over year. They wrote that probably rising wages in 2008 and lower gasoline prices were responsible for that. Who would have thought that more money in the wallet might lead to more consumption?
Probably not the economists you mentioned?