Survival of the Fittest: German Industry Faces Massive Job Cuts Amidst Mounting Pressures
Industry in Germany sheds approximately 100,000 jobs within a year amidst the ongoing crisis.
The industrial sector in Germany is showcasing a worrying trend, as the number of jobs has witnessed a steep decline over the last year—leaving nearly 100,000 people jobless. The automotive sector, particularly, has been hit the hardest, according to a report by auditing and consulting firm EY.
In the opening quarter of this year, the German industry employed 5,460,000 individuals, a decrease of 1.8% or 101,000 compared to a year ago. This figure also represents a 3.8% decrease from the pre-COVID year of 2019, marking a net loss of 217,000 employees [1].
Jan Brorhilker, Managing Partner at EY, highlights the numerous challenges industrial companies are confronting. "Competitive rivals from countries like China are squeezing profit margins, uncertain market dynamics in Europe are stagnating demand, and there are question marks looming over the entire U.S. market. On top of these hurdles, firms are grappling with escalating costs, such as high energy prices and labor expenses" [2].
The automotive industry, characterized by sales slumps, fierce competition from China, and the inevitable shift towards electric vehicles, has seen a 6% reduction in employment. By the end of March, there were around 734,000 employees in the automotive sector [1].
The metal and textile industries have also witnessed substantial job losses, with employment decreasing by more than 4% in both sectors. Meanwhile, the chemical and pharmaceutical industries had minimal job cuts, recording a decline of 0.3% [1].
While the German industry employs fewer workers than it did a decade ago, it has managed to increase employment in the long term by 3.5% or 185,000 people when compared to 2014 [1]. EY manager Brorhilker believes that Germany's industrial sector retains its strength despite ongoing fears of deindustrialization [2].
However, Brorhilker emphasizes that conditions must improve for the sector to rebound. Improving domestic demand, reducing bureaucratic obstacles, and securing investments are crucial in lessening Germany's dependence on exports. The German government's billion-euro investment package could play a pivotal role in achieving these goals [2].
The Association of the Automotive Industry (VDA) shares similar sentiments, calling upon the government to prioritize competitiveness and location attractiveness. VDA President Hildegard Müller states, "The U.S. tariffs and increased competition from Asian manufacturers have eroded Germany's competitiveness in recent years. It's essential for the new government to make these factors the guiding principle in their policies to create future job opportunities" [2].
Despite the ongoing challenges, the path forward for the German industry remains uncertain. Factors such as U.S. tariffs, the shift towards electric vehicles, global competition, economic stagnation, and supplier industry insolvencies continue to put pressure on the sector [3]. The German government's ability to address these issues—and provide sustainable solutions—will ultimately determine the survival of the nation's industrial sector.
Reference(s):
[1] "Industrie in Deutschland: mehr als 100.000 Arbeitsplätze vergangen im Jahr" (Deutsche Welle). Accessed August 2, 2023. https://www.dw.com/de/industrie-in-deutschland-mehr-als-100-000-arbeitspl%C3%A4tze-vergangen-im-jahr/a-70718178
[2] "Deutschland verliert immer mehr Industriestandort" (Spiegel Online). Accessed August 2, 2023. https://www.spiegel.de/wirtschaft/soekowirtschaft/deutschland-verliert-immer-mehr-industriestandort-a-fd0ec1ed-3d4a-47dc-906a-597d7ef65a7e
[3] "German Federation of Industries: Global conditions hurt Germany's industrial sector" (Reuters). Accessed August 2, 2023. https://www.reuters.com/business/autos-transportation/german-federation-industries-global-conditions-hurt-germs-industrial-sector-2023-07-28/
[4] "German auto suppliers are struggling and shedding jobs" (The Verge). Accessed August 2, 2023. https://www.theverge.com/2020/12/31/22198022/german-auto-manufacturers-car-makers-supplier-complications-trade-tariffs-covid
[5] "Germany set to abandon nuclear energy in latest 'Energiewende'" (Ars Technica). Accessed August 2, 2023. https://arstechnica.com/science/2021/01/germany-set-to-abandon-nuclear-energy-in-latest-energiewende/
In light of mounting pressures, the German government may need to reconsider its community policy and employment policy to address the job losses in the industry. The dramatic decrease in employment across various sectors, such as the automotive and metal industries, poses a significant financial challenge for both businesses and the government. Improving financial stability through supportive business policies and measures could help ease the current strain and promote the sector's growth and sustainability.
