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Gerhard Bosch

Gerhard Bosch. 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

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Gerhard Bosch

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  1. Gerhard Bosch 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/

  2. Structure of presentation Characteristics of German manufacturing 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 Challenges and Risks

  3. Characteristics of German manufacturing 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)

  4. 1.2 Shares of manufacturing in GDB in international comparison (1991-2010) Austria Germany Japan USA France Italy United Kingdom

  5. 1.3 Share of value added versus BERD Intensity – Average annual growth, 1995-2006 (Germany) • High-Tech and Medium-High-Tech sectorsareshown in red. ‚Other transportequipment‘ includes High-Tech, Medium-High-Tech and Medium-Low-Tech. • ‚Basic metals‘ and ‚Fabricatedmetalproducts‘ are not visible on the graph. Source: DG Research and Innovation

  6. 2.1 Reasons: Wage restraint without danger of re-valuation 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 de-facto de-valuation - one reason of Euro crisis If countries with trade surpluses (China, DE) do not develop doemstic demand – high share of manufacturing unsustainable

  7. 2.1.1 Unit Cost (nominal, in EURO 2000=100) Italy Ireland Spain Portugal Greece France Germany

  8. 2.1.2 Increasing differences in balances of payment in the EURO Zone Balance ofpayments in Billion Euros Austria Belgium Surpluses Germany Netherlands Spain Portugal Italy Deficits Greece France Ireland

  9. 2.2 Reason: Innovation 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

  10. 2.2.1 EU Member States‘ Innovation Performance Source: European Commission 2012

  11. 2.2.2 Gross domestic expenditure on research and development as a percentage of gross domestic product in selected countries, 1991 - 2008 Source: German Federal Ministry of Education and Research 2010

  12. 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) Quelle: Bundesministerium für Bildung und Forschung, 2012

  13. 2.3 Reason: High and appropriate skill levels 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

  14. 2.3.1 Skill levels in main occupational and professional activities Stayer externalprofessionals withoutvocationaltraining School/ training Total Processing and repairoccupations Machineand plant operation a. maintenanceoccupations Transport, logistics a. securityoccupations Catering a. cleaningoccupations Media, human a. socialsciences a. creativeoccupations Extractiveoccupations Distribution a. merchandisingoccupations Clerical a. administrative occupations Technical a. scientificoccupations Legal, managerial a. businessoccupations Health, socialwork a. personal hygenieoccupations Teaching occupations Source: BiBB (Mikrozensus , Statistisches Bundesamt, Berechnungen und Darstellungen ) QuBe-Project2008

  15. 2.3.2 Employees, Apprentices and Apprenticeship rate in the German manufacturing industry 2008 - 2010 *5.9 % *6.0 % *Apprenticeship rate Source: BIBB, Datenreport 2012, Tables A10.1-28-30-Internet

  16. 2.3.3 Share of population in skilled jobs and share of population with tertiary education (2006)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) Source: Müller BiBB

  17. 2.4 Reason: High internal flexibility 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 -

  18. 2.4.1 Percentage of fall in total labour input due to fall in working hours per employee, Germany, 2008–2009 Source:http://www.conference-board.org/economics/database.cfm EUROSTAT (2010a).

  19. 2.4.2 Production of manufacturing sector (2005=100)

  20. 2.4.3 Short-time working by duration in months, Germany, February 2009–December 2009 Source: Brenke, Rinne and Zimmermann (2010).

  21. 2.4.5 Employment and short time in machine tool and automobile industries, Germany, 1/2009 – 5/ 2010 Source: own calculation

  22. 2.4.6 Changes of working hours and employment in relation to changes of GDP 1991-2009 in DE and USA Working hours per employee Germany USA Volume ofworkinghours Employment Source: Schaz and Spitznagel, 2010

  23. Challenges and risks 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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