The demographic trends in Germany are presenting significant challenges for small and medium-sized enterprises (SMEs), according to recent findings from the KfW SME Panel of September 2024. A majority of SMEs, approximately 58%, anticipate difficulties in filling job vacancies over the next five years. Among these, around 40% foresee a potential reduction in order volumes due to labor shortages. Additionally, more than a third of these businesses expect to decrease output, opening hours, or accessibility.
KfW Research conducts an annual survey involving SMEs from various economic sectors. The current analysis highlights concerns about the declining working-age population, which is expected to drop by an average of 8.2% over the next decade. Enterprises in eastern Germany and rural areas are particularly concerned, projecting declines of 13.1% and 9%, respectively.
The shortage of skilled workers poses a serious threat to business survival for one-third of SMEs in the medium to long term, with small businesses expressing particular concern. In response, nearly eight out of ten companies anticipating recruitment challenges plan to enhance their appeal as employers through monetary incentives such as wage increases—an approach favored by 67% of respondents. Other strategies include offering flexible work arrangements (59%) and professional development opportunities (53%). Furthermore, 45% intend to improve their visibility.
Only a minority of SMEs (22%) aim to expand childcare services despite its importance for achieving better work-life balance. Meanwhile, recruiting foreign labor is considered by 25% of these businesses.
Dr Elisabeth Grewenig, an economist at KfW Research, emphasized that "In light of the sweeping demographic change, the efforts undertaken by enterprises alone will not be enough to alleviate the looming shortages in the labour market." She added that education and economic policies must play a role: “One key starting point for policy...is to strengthen education and training pathways.” Dr Grewenig also noted the importance of enhancing on-the-job professional development options.
KfW supports SMEs with several promotional programs on behalf of the Federal Government.