Labour shortage in Germany: A costly problem for the German Mittelstand (‘Fachkräftemangel’)
Consultancy EY estimates €50 bn worth of revenue is lost per year due to unfilled positions. How can the German Mittelstand attract today’s talents?
In the next 3 years, two thirds of all German SMEs (‘Mittelstand’) are looking to hire new employees. Despite a booming economy and full order books, 65% of the firms believe they won’t be able to hire within the planned time horizon, or not at all! In 2014, the number was 57%. In 2018, on average it took 107 days to fill a position, sometimes more than a year.¹ 1.21m jobs in the SME sector are not filled up. KfW suggests labour shortage will peak in 2025 when the baby boomer generation retires.²
By definition, a labour shortage is an economic conditon in which employers believe there are insufficient qualified candidates (employees) to fill the marketplace demands for employment.
According to a survey by DIHK (Association of German Chambers of Industry and Commerce), the labour shortage has reached an alarming high. 61% of SMEs interviewed said that the deficiency poses risk to their business — the highest number since the first edition of the survey in 2010.³ It is THE #1 problem for SMEs. SMEs are the backbone of innovation in Germany, however labour shortage leads them to delay innovation decisions. The construction industry, though spoiled with plentiful received orders and projects, is hit especially hard (Figure 1). Firms look for skilled labour, e.g. craftsmen, engineers.⁴ 20% of the employers say the unattractive working conditions/hours make it hard to convice applicants. 9 out of 10 construction SMEs are afraid of a lack of applications (2014: 75%). Similary affected are sectors sanitary engineering, drywall installation and civil engineering.² In total, circa 150 jobs are on the list of the German Federal Employment Agency (BfA), which are particularly sought after. No wonder, 98.8% of interviewed SME executives by a german saving banks, perceive ‘personel/skilled labour’ as a threat not as an opportunity.⁵
What are the root causes for the labour shortage?
These are the three main reasons, SMEs have a hard time keeping operations up and running while see their recruiting efforts fail:
- Location: Often dubbed ‘hidden champions’, thoses firms have their headquarters on the countryside. The prospect to work at an international (Google, Amazon, Facebook etc) lures the youth into bigger cities. This is especially true for engineering jobs in e.g IT or chemical industry.
- Demographic change: German employees are older then ever and eventually retire. This also affects the business succession planning (see previous article), i.e when the founder/CEOs can’t find anyone to handover their business and at worst close down.
- New job requirements: Over the past decades, new profiles at the intersection of IT, engineering and manufacturing emerged, which did not exist. This adds to the pressure to continuously find skilled workers. ⁵
How can the Mittelstand decrease the labour shortage, i.e increase its attrativess to potential candidates?
In a survey by German bank DZ Bank, employers outlined plans to increase their attractiveness by offering chances for further education (86%), raising salaries (79%) or pension plans (76%).⁶
Here are a few best practices by German SME to a) secure key personnel and b) attract new joiners:
- Software company Veda leverages an ‘innovation lab’ with rotating working students to bring in new faces in the mid-term and generate new ideas away from the stifling bureaucracy of daily operations.
- Kußmaul, specialised in surface treatment, cooperates with local football clubs to attract young employees and keep them in the area.
- In Mexico, Schuler Group trains mechatronic engineers itself as there are not enough skilled workers in that area.
- Clamping technology firm AMF allows for time off in the afternoon in case employees celebrate birthdays or anniversaries, further education, and profitsharing. Principal to CEO, Johannes Maier, is health: yoga classes, employee canteen, gym memberships are among the perks.
- Glas manufacturer Wetzlich Optik had a time finding skilled labour knowledgeable about the glass industry. Hence, the firm had to hire from outside, i.e a production manager who used to work in a bakery.
- HR expert Maike Sippmann of RSI Blitzschutzsysteme, mentions speculative applications as a way to curb labour shortage. Those applicants exhibit additional motivation.⁵
If you like what you just read, please recommend it and then check out more of my stories on Medium or tweet me @MGlawogger.
