AI Use in German Companies Expected to Lower Wages, Especially for Less Experienced Workers

A recent survey by the Ifo Institute has revealed that half of German companies employing artificial intelligence (AI) anticipate wage reductions for workers with less than five years of experience. This trend presents considerable challenges to young professionals, with roughly 18.3% of those aged 15 to 25 employed on fixed-term contracts in 2025, complicating long-term career planning. According to the survey, around 40% of companies also expect wage cuts for employees with five or more years of experience, while only about 9.7% foresee wage increases for those groups.

Anna Ruffert, a researcher at Ifo, noted that more companies anticipate negative impacts on wages from AI than positive ones. The survey highlights that highly qualified workers could benefit, as approximately 25% of companies expect positive wage effects for this group, whereas only about 6% foresee wage increases for low-qualified workers with limited experience.

The wage impact varies significantly across industries. Service sector companies predict the largest wage reductions, while the construction industry remains more optimistic, anticipating wage increases for high-skilled workers. Dr. Tobias Zimmermann, a labor market expert, cautions about a growing divide in the labor market, where high-qualified jobs expand but pressures intensify on less qualified employees.

Despite these trends, youth labor participation has increased to its highest in decades, challenging stereotypes about Generation Z's work ethic. However, on a global scale, the International Labour Organization (ILO) warns about rising difficulties for youth entering the job market, with youth unemployment edging up from 12.3% to 12.4% between 2023 and 2025.

Economic experts remain divided on the overall economic effects of AI on wages. While Zimmermann is optimistic about AI’s positive potentials, others like Nicola Fuchs-Schündeln urge caution against drawing premature conclusions.

In summary, AI is reshaping wage structures in Germany, with clear signals of downward pressure on less experienced and lower-skilled workers, while offering potential benefits for highly qualified employees and certain industries. This nuanced impact reflects broader shifts in the labor market amid ongoing technological transformation.