Ifo Viewpoint No. 13: Greencard, Goethe and Gates

Hans-Werner Sinn
Munich 4 July 2000

Germany currently has a shortage of 50,000 computer specialists, so there are good reasons for Chancellor Schröder's plan to allow 20,000 such specialists to enter the country from outside the EU on a new temporary residence visa - the German Greencard. The 900 specialists in all occupational fields who are currently given exceptional permission to work in Germany are indeed not sufficient.

However, the computer industry comprises barely 1% of the labour market. The bottlenecks in the computer sector cannot justify a general loosening of restrictions for migration from non-EU countries. Germany still has mass unemployment of nearly 4 million. And one must not forget the eastern expansion of the European Union which, with the accompanying freedom of settlement, may lead to mass migration from Eastern Europe possibly starting in 2004 (see Viewpoint 9).

It is absurd when hotel and restaurant owners now call for a Greencard solution similar to that for computer specialists; in this sector the qualifications of unemployed Germans are certainly sufficient. Employment bottlenecks in simple services must be eliminated by improving the incentive structures of the welfare system and not by liberalising immigration policies.

Easing the bottlenecks in the computer sector by immigration is a short-term solution. A better alternative for the medium term is to promote the next generation of German scientists. Doubling the number of trainees in IT-related occupations as well as the number of university graduates in computer science would supply the labour market with as many new IT specialists per year as will be allowed to immigrate into Germany under the new government plan. An immediate expansion of university places in this sector would eliminate the bottlenecks in only a few years.

The Greencard discussion has made it embarrassingly clear that Germany has long since relinquished the leading position it had in the natural sciences a hundred years ago. Young scientist are attracted in droves to the U.S. where they receive high wages and have opportunities not available to them in Germany. Not the limited immigration of specialists but the emigration of scientists is the real problem. Thousands of scientists who have been trained in Germany have been recruited for jobs in America, and thousands of young Germans who have studied in the U.S. have not returned because of the lower earnings offered by German universities.

On the whole, Germany has been neglecting education. In the share of public spending on education in relation to GDP, Germany occupies the fifth last place among all 27 OECD countries and the third last place among EU member states. Even the U.S., where a major portion of university education is in private hands, lies ahead of Germany in public spending on education. Investment in human capital is being foolishly neglected in Germany.

This especially holds for education in the natural sciences. In Germany, academics in the humanities still look down on their colleagues in the natural sciences, and the schools are still dominated by teachers of languages and literature. The German educational system places more emphasis on Latin than on laptops, on Goethe than on Gates. This is not a formula for success in the competition for attracting foreign business and industry into the country.

Hans-Werner Sinn
President of the Ifo Institute