LONDON (Reuters) - Germany will need a big increase in skilled immigrant labour in coming years, from both inside and outside the European Union, to make up for the ageing of its workforce, the OECD said on Monday.
Germany's policy on highly skilled immigrants is one of the most open among the 34 industrial countries in the Paris-based Organisation for Economic Cooperation and Development.
But Berlin will need to liberalise recruitment of those with intermediate skills such as nurses and tradesmen if the government is to fill a projected shortfall of 5.4 million skilled workers - those with vocational or tertiary qualifications - by 2025.
Coaxing more people into the workforce and raising skill levels will not be sufficient, the Paris-based policy forum said in a lengthy report released in Berlin.
"For immigration to provide the expected contribution to meeting skilled labour demand, a significant increase in migration for employment - both from the enlarged EU/EFTA and from non-EU/EFTA countries - will thus be necessary," the OECD said.
EFTA, the European Free Trade Association, comprises Iceland, Liechtenstein, Norway and Switzerland. It is closely linked to the 27-member EU.
With Europe's stagnant economy stirring opposition to immigration in some circles, the OECD's recommendation could be politically contentious.
Only about 25,000 workers a year migrate to Germany from other EU/EFTA countries, or 0.2 percent of the population, which is low compared with most other OECD economies, the report said.
The OECD said Germany had breathing room to adjust its policies because Europe's largest economy was not yet experiencing widespread shortages.
But one in four firms said they were unable to recruit enough junior staff in 2010, more than twice the 2000 share, and as of last August, companies were unable to fill more than 100,000 available apprenticeships.
Chancellor Angela Merkel's government, worried about a shortage of skilled labour, has introduced measures to reduce bureaucracy and encourage companies to recognise qualifications from abroad but critics say there is much more to do.
"Demographic trends suggest that shortages will grow more acute and expand to more occupations," the OECD said.
Labour migration has been increasing since the onset of the financial crisis. Individual job centres and companies in some parts of Germany have launched recruitment campaigns in Spain and Portugal to hire much-needed engineers and health workers.
However, Germany is still not a magnet for labour migration, due partly to language barriers. More Spaniards and Portuguese are moving to Germany in search of work, but the increased flow is from a low level.
Germany needs to do more to sell itself as an attractive destination, the OECD said. It urged the government to streamline administrative procedures for hiring foreign workers, which smaller firms and first-time users find particularly daunting.
What's more, employers can be demanding in their insistence on fluency in German and highly specific qualifications that are hard to find abroad, the OECD said.
"There is a broadly felt perception that Germany is not sufficiently competitive in a global race to attract talent, despite its relatively robust labour market, well-regarded training and industrial system, and high standard of living. More generous conditions should be offered to skilled workers recruited from abroad," the report said.
Reporting by Alan Wheatley; Editing by John Stonestreet