Bavaria's job market encounters ongoing challenges
The Association of the Bavarian Economy (vbw) has expressed concerns about the increasing pressure to boost Bavaria's competitiveness, as the region grapples with the effects of a broader economic downturn. The vbw is calling for the coalition to implement further measures from its action program, particularly focusing on the flexibilization of working hours and further bureaucratic reduction.
The number of socially insured employees in Bavaria is approaching the six million mark, yet the labor market is facing significant challenges. Unemployment in Germany has climbed to about 2.98 million in July 2025, with hiring slowing and job vacancies dropping sharply. This economic slump has impacted Bavaria's labor market, as sectors such as manufacturing and traditional retail experience declines in employment.
High social security contributions and an inefficient citizen’s benefit system are seen as barriers to employment growth. Employers’ associations, including vbw, are advocating for a "reset" in labor market policy to prioritize placement and better alignment of Federal Employment Agency efforts with employment creation goals. Additionally, they are calling for incentivizing longer working hours, particularly among women, by addressing tax and social security disincentives and improving childcare and elderly care infrastructure.
The vbw also supports facilitating labor-market oriented migration by reducing bureaucratic hurdles in visa and qualification recognition processes, and supporting immigrants’ long-term integration to retain skilled workers. Strengthening vocational training and continuing education systems is also a key focus, to help the workforce adapt to changing economic conditions and industry demands.
Bertram Brossardt, vbw CEO, states that the labor market is still in a difficult situation and that economic growth needs to get back on track to form the basis for a stable labor market. The trade agreement between the EU and the USA could prevent a trade war, but tariffs of 15 percent will make Bavarian exports more expensive, potentially reducing growth and making trade with the USA more difficult.
The unemployment rate in Bavaria increased by 0.1 percentage points in July, reaching 4.0 percent. The vbw highlights the already passed Investment Booster, corporate tax cut, and improved research funding as potential growth drivers. However, the economic and structural crisis in Bavaria is not yet over, according to vbw. The ifo business climate index for Germany has slightly risen, but companies remain uncertain and cautious.
Despite these challenges, the vbw sees the brightening mood in the Bavarian economy as a positive sign. However, the tariffs could have long-term effects on the labor market in Bavaria, according to vbw, and the current geopolitical situation is particularly challenging. The vbw remains optimistic that with the right policy measures and investments, Bavaria's labor market can be stabilized and revitalized within Germany's cyclical economic challenges.
- The vbw believes that the ongoing geopolitical situation, particularly trade tensions, may have long-term impacts on the labor market in Bavaria.
- In addition to advocating for labor-market oriented migration, the vbw also emphasizes the importance of strengthening vocational training and continuing education systems to adapt the workforce to industry demands.
- The vbw, in response to the economic downturn, also supports policy measures such as the reduction of bureaucratic hurdles, the incentivization of longer working hours, and improving tax incentives for employment growth.
