The state of manufacturing – The
case of Germany
Institute for Research on Labor & Employment,
UC Berkeley
Friday November 16, 2012
Prof. Dr. Gerhard Bosch
Institut Arbeit und Qualifikation
Forsthausweg 2, LE, 47057 Duisburg
Tel.: +49 203 / 379 1827; Fax: +49 203 / 379 1809,
Email: gerhard.bosch@uni-due.de ; http://www.iaq.uni-due.de/
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Gerhard Bosch
1. Characteristics of German manufacturing
2. Reasons for its recent success
2.1 Wage restraint without danger of re-valuation
2.2 Innovation
2.3 High skill level
2.4 Internal flexibility
3. Challenges and Risks
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Structure of presentation
1.
2.
3.
4.
5.
Relatively high share of manufacturing in GDP
Diversified quality production: specialisation in
growing medium-tech industries (automobile,
machine-tool…..)
Combination of high investments in innovation
with manfacturing in own country – not mainly
blueprints as smaller countries - Sweden or
Finland
High shares of internal (within manufacturing)
and external tertisarisation
Off-shoring overall neutral or positive effects on
employment (however, differences by industries)
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Characteristics of German manufacturing
Austria
Germany
Japan
USA
France
Italy
United Kingdom
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1.2 Shares of manufacturing in GDB in
international comparison (1991-2010)
1.3 Share of value added versus BERD Intensity –
Average annual growth, 1995-2006 (Germany)
(1) High-Tech
and
MediumHigh-Tech
sectors are
shown in
red. ‚Other
transport
equipment‘
includes
High-Tech,
MediumHigh-Tech
and
MediumLow-Tech.
(2) ‚Basic
metals‘ and
‚Fabricated
metal
products‘
are not
visible on
the graph.
Source: DG Research and Innovation
Long tradition of wage moderation to support exports
in Germany
Until introduction of Euro continuous re-valuation of
DM reduced trade surpluses
Since 2000 stagnation of real wages and unit costs in
DE – because of high unemployment after
unification and labour market reforms (Hartz-IV)
Increasing trade surpluses of DE and trade
imbalances within Euro-Zone because of this defacto de-valuation - one reason of Euro crisis
If countries with trade surpluses (China, DE) do not
develop doemstic demand – high share of
manufacturing unsustainable
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2.1 Reasons: Wage restraint without
danger of re-valuation
Italy
Ireland
Spain
Portugal
Greece
France
Germany
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2.1.1 Unit Cost (nominal, in EURO
2000=100)
Balance of payments in Billion Euros
Surpluses
Austria
Belgium
Germany
Netherlands
Spain
Portugal
Italy
Deficits
Greece
France
Ireland
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2.1.2 Increasing differences in balances of
payment in the EURO Zone
Most innovation indicators show high innovation
performance :
- For example: world market relevant patents,
expenditure for R&D, share of skilled employees,
share of companies/SME‘s with product or
production process innovation etc.
Relative weakness in high-tech-industries proved not
to be a problem
Lead market in important industries
Special characteristics:
High diffusion of innovation across the
-
economy also in SME‘s
Strong family ownership with patient capital
(Mittelstand) and long-term business models
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2.2 Reason: Innovation
Source: European Commission 2012
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2.2.1 EU Member States‘ Innovation
Performance
Source: German Federal Ministry of Education and Research 2010
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2.2.2 Gross domestic expenditure on research
and development as a percentage of gross
domestic product in selected countries, 1991 2008
Quelle: Bundesministerium für Bildung und Forschung, 2012
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2.2.3 World-Market Relevant Patents: D, EU-27, J,
USA 2000 - 2009 per Milion Inhabitants (registered
in Europe and by World Intellectual Property
Organization)
Share of un- and semi-skilled employees went down
from about 65% in 1964 to around 15% 2010
Manufacturing industries employs mainly skilled
workers (also for jobs which are done by semi- or
unskilled workers in many other countries)
Acculumulation of tacit knowledge and high
functional flexibility because of high job tenure
Middle managers mostly have a certificate from VET
plus promotional training or tertiary education
Good communication flow from shop floor to
engeneers/managers and vice versa
Low shares of graduates from tertiary education no
disadvantage due to modernized VET
„Facharbeiter“ secret of competitiveness – not
second choice for bad school leavers
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2.3 Reason: High and appropriate skill levels
Source: BiBB (Mikrozensus , Statistisches Bundesamt, Berechnungen und Darstellungen ) QuBe-Project2008
Stayer
external
professionals
without
vocational
training
School/
training
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Total
Teaching
occupations
Health, social work a.
personal hygenie
occupations
Media, human a. social
sciences a. creative
occupations
Legal, managerial a.
business occupations
Technical a. scientific
occupations
Clerical a. administrative
occupations
Catering a. cleaning
occupations
Transport, logistics a.
security occupations
Distribution a.
merchandising occupations
Machine and plant operation a.
maintenance occupations
Processing and
repair occupations
Extractive occupations
2.3.1 Skill levels in main occupational
and professional activities
6,000,000
5,000,000
4,000,000
Number of employees
3,000,000
Number of apprentices
2,000,000
*5.9 %
*6.0 %
1,000,000
*5.7 %
0
332,367
2008
Source: BIBB, Datenreport 2012, Tables A10.1-28-30-Internet
326,932
2009
309,781
2010
*Apprenticeship rate
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2.3.2 Employees, Apprentices and
Apprenticeship rate in the German
manufacturing industry 2008 - 2010
share of the 25-to-64-year-old working population in skilled jobs (ISCO 1-3 Managers, Professional,
Technicians and Associate Professionals) and share of the 25-to-64-year-old population with tertiary education
(2006)
50%
share of the 25-to-64-year-old working population in skilled jobs
45%
share of the 25-to-64-year-old population with tertiary education
40%
35%
30%
25%
20%
15%
10%
5%
0%
Source: Müller BiBB
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2.3.3 Share of population in skilled jobs and share
of population with tertiary education (2006)
Contrasting business models: USA external, DE more
internal flexibility
In DE long tradition of „Dismissing hours not
employees“ - over last 20 years new tool box
negotiated betweeen social partners:
- most collective agreements allow temporary
reduction of standard weekly w-hrs. (metall
industry from 35/38 hrs to 30/33 hrs)
- 50% of entreprises have working time accounts
(for overtime hrs. etc. )
short-time – subsidized by employment office
German Job „miracle“ in big recession
because of internal flexibility
Short time scheme = Industrial policy to save
the industrial fabric of the country
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2.4 Reason: High internal flexibility
100
90
80
70
60
50
40
30
20
10
0
Source: http://www.conference-board.org/economics/database.cfm EUROSTAT (2010a).
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2.4.1 Percentage of fall in total labour
input due to fall in working hours per
employee, Germany, 2008–2009
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2.4.2 Production of manufacturing sector
(2005=100)
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Feb 09 March Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09
09
3 months
3 to 6 months
6 to 12 months
Source: Brenke, Rinne and Zimmermann (2010).
12 to 18 months
Over 18 months
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2.4.3 Short-time working by duration in months,
Germany, February 2009–December 2009
%
50
total
1,000,000
45
40
950,000
35
30
900,000
25
20
850,000
15
10
800,000
5
750,000
0
Jan 09
Feb 09
Mar
Mar 09
09
Apr 09 May
May 09
09
Jun 09
Jul 09
Aug 09
Sep 09
Oct
Oct09
09 Nov 09
Dec 09
Jan 10
Feb 10
employment machine tool industry
employment automobile industry
share of short time machine tool industry in percentage
share of short time automobile industry in percentage
Source: own calculation
Mar
Mar 10
10
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2.4.5 Employment and short time in machine tool
and automobile industries, Germany, 1/2009 –
5/ 2010
2.4.6 Changes of working hours and employment in
relation to changes of GDP 1991-2009 in DE and USA
Germany
Working hours
per employee
Volume of working
hours
Employment
Source: Schaz and Spitznagel, 2010
USA
1.
2.
3.
4.
5.
6.
Macro-economy: Stability of the Euro-Zone - No
development of domestic demand in DE
Technology: Possibly new innovation push
through „High Tech Strategy“ of government One main goal: „Smart Factory“ (Cyber-Physical
production systems)
Capital: Increasing short-term thinking due to
changes in ownership – capital may get
„impatient“
Delocation: Disconnection between R&D and
production in own country
Skill bottlenecks: Ageeing, underinvestment in
education/training – lack of skilled immigrants
Academic „drift“: Declining reputation of dual
system of apprentices-ship
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Challenges and risks