Germany has long been ahead of the curve as a source of technical innovation and manufacturing. Now it is leading much of the developed world toward a demographic cliff edge that could put a damper on Europe’s largest economy, raising pressure on its pension system and pushing inflation higher for years to come.

Economists forecast that Germany’s workforce could peak as soon as 2023 and then shrink by up to five million people by the end of the decade. While the pandemic has exacerbated the trend, it is the impending retirement of the baby boomers that is fueling the labor crunch, economists say.

At Jänicke GmbH & Co.KG, which builds pools and heating systems, as many as five of its 17 employees are due to retire in the next few years. To replace them, the company—located some 40 miles southwest of Berlin—is already looking for new applicants since they need to undergo a three-year-long training. That is proving to be a challenge.

“It’s really hard to find any craftsmen nowadays,” said Anja Jänicke, the company’s human resources manager who spends her days contacting local schools and maintaining an Instagram page to attract new recruits. “And looking ahead, it certainly doesn’t look like it’s going to get easier.”

Germany was one of the first in Europe to experience a sharp drop in birthrates after World War II, as early as the 1970s. This means its fate could be the shape of things to come for other mature economies that are still behind the demographic curve.

The U.S. labor force is expected to increase to around 170 million by 2030 from 161 million last year, according to the Bureau of Labor Statistics. After that, however, most baby boomers would reach retirement age, capping labor-force growth.

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