September 8, 2013


Suddenly Germany may be in trouble - too little growth, two few babies : Its economy may be thriving now: but as elections loom, the country's vaunted industrial base faces a skills shortage of startling proportions (Katie Allen, 9/07/13, The Observer)

Sonneberg and its neighbouring towns also offer glimpses of a longer-term problem facing Germany. Europe's growth engine is grappling with the costs of one of the lowest birth rates in the world, and here at its heart the resulting skills shortage is already being felt.

This is the biggest issue for more than 500 local Mittelstand bosses gathering for their Industrie- und Handelskammer (chamber of commerce and industry) gala, a short dash up the recently extended motorway in the town of Suhl. The chamber's latest survey showed a record number of businesses on good form, and there are high spirits at the annual knees-up, which features speeches, dance routines by a troupe draped in locally made LED lights, a prizegiving and a buffet of potato salad, schnitzels and sausages.

But there are nods of recognition when the chamber president for South Thuringia, Dr Peter Traut, highlights a worsening labour crunch. "When I started in this role 10 years ago there were 2,200 young people finishing their exams. Now there are 1,000 fewer. The maths is easy: it has virtually halved."

The drive to attract young trainees is something Karl-Heinz Sladek has been working hard at. He is general manager of HPT Pharma Packaging, based in Sonneberg, and says the tables have been turned on German employers. While their counterparts in eurozone countries such as Spain and Greece are inundated with applicants for every job, German bosses are left wondering where to find young people to meet the rising demand for their car parts, biotech innovations and other exports.

"It is no longer a case of young people applying to us; it's us applying for future trainees," he says.

Companies are wooing school leavers with golden hellos, petrol vouchers, gym memberships and help with childcare. But the numbers are not in the employers' favour. The regional employment agency in Suhl has just reported a record August for trainee demand. There were 869 unfilled training slots but just 336 applicants still looking for a placement. [...]

Peter Stahlhut manages production at Glaswerk Ernstthal, on the edge of the town of Lauscha in the nearby Thuringia mountains. Workshops here have been crafting glass since the 16th century and claim to be the birthplace of the Christmas bauble. Lauscha is to Christmas decorations what Sonneberg is to toys.

Stahlhut's factory now produces decorative glass bottles for the spirits industry, more than a third of them for export. The plant has 30 trainees among its 500 staff. But holding on to them is tough.

"In our industry you need experience to do the job well... that means years of learning and doing," says Stahlhut. "But a glass works isn't the sexiest place to work. It's hot. It's noisy. You have to expect to lose 50% of the people you start training."

Economists say the skills shortage will become more acute as the German population continues to fall. The official projections are for drastic ageing: in 2060, every third person will be 65 or older.

Not only are people living longer, but when it comes to having children, Germans lag well behind most other OECD countries. There is anecdotal evidence among women that combining a job and a family is still frowned on. There is also research, including by the OECD, suggests that finding childcare remains a barrier to starting a family for some.

This demographic time bomb has received too little attention in the election campaign, say many economists. "They are not concentrating on structural reform, and that is what you need for women to have more kids," says Laurence Boone, chief European economist at Bank of America Merrill Lynch.

Analysts say that Germany also faces mounting pension and healthcare costs as the population ages and its advantageous economic position starts to crumble away.

"There are big implications for trend growth," says Boone. "The more people who work, the more you grow. And if you have to choose between kids and working, you take women out of the workforce. You need children being born and women working. Not only is Germany's trend growth going to be lower than it was before the crisis five years ago, it's going to be closer to Italian trend growth and below Spanish, UK and French trend growth."

Posted by at September 8, 2013 7:51 AM

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