“This law is an overdue sign that we respect the qualifications of others,” said Education Minister Annette Schavan after receiving the support of her cabinet colleagues.
Her ministry estimates recognizing foreign credentials could provide up to 300,000 highly qualified workers for key industries by utilizing underemployed people already living in Germany.
The German government expects the changes would particularly benefit qualified tradesmen, scientists, engineers and medical workers.
According to the draft law, every person who had qualifications from abroad would be entitled to have them assessed by German officials within three months.
Economy Minister Rainer Brüderle said German business would also see a positive impact from the law.
“Recognizing foreign job credentials is an important contribution to finding desperately needed skilled workers,” he said. “This will strengthen Germany as place to do business.”
Brüderle said the measure would help better integrate immigrants into German society.
With failing unemployment and a rapidly ageing population, employers in Germany complain it is extremely difficult to find qualified workers, especially scientists and engineers.
According to the head of the German chamber of commerce and industry, Hans Heinrich Driftmann, Germany is in urgent need of about 400,000 engineers and other skilled workers.
The cabinet's decision came amid an ongoing debate in Europe's most populous country about immigrants after Chancellor Angela Merkel said that multiculturalism without better integration "had failed totally."
The draft legislation will need to be cleared in parliament before becoming law.