limiting expansion

German economy faces shortages as growth tests limits

Turbine Manufacture At General Electric Co.’s Hungarian Plant
Not enough of this. Source: Bloomberg

The German economy shows no signs of slowing down even after nine years of growth, but there are increasing signs that Europe’s powerhouse may be reaching its limits. Shortages of skilled workers, factories operating at nearly full capacity, and bottlenecks in supply chains threaten to brake the country’s surging economy.

The limits are affecting not only the manufacturing industry, but services and construction as well. And while IT workers are hard to come by, caretakers for an aging population are in even shorter supply.

The economy is reaping the benefits of its own efficiency, gains in productivity and labor-law reforms — but also from a currency regime that keeps the euro undervalued for Germany, bolstering its exports and enabling it to accumulate the largest current account surplus in the world. The country is becoming the victim of its own success and economists are urging companies and lawmakers to take action now to secure growth.

They have plenty of suggestions on how to do that. Greater emphasis on recruitment and training for skilled workers is an obvious step. But economists also recommend removing incentives for early retirement that date from times of high unemployment but now exacerbate shortages. And some are urging lawmakers to do away with tax splitting for married couples — income tax is levied for each partner on half the combined income — which studies have shown inhibits more women from entering the workforce. Germany has the widest gap in working hours for men and women in the European Union.

“Some firms can’t take in more orders because they don't have the personnel to fulfill them.”

Hans Peter Wollseifer, president, German Confederation of Skilled Crafts

Also, companies have to become less perfectionist in standards they set for new hires. “Many still unfortunately think they can buy skilled workers like merchandise,” said Marika Lulay, head of IT firm GFT. Everyone wants fully trained, experienced workers. “If business was prepared to accept more compromises, there would be less shortage of skilled workers.”

In the meantime, almost every measure shows an economy near its limits. The country has 1.2 million job openings — a record. There are only 194 unemployed for every 100 job openings in western Germany and 225 in eastern Germany, the lowest level in 25 years. Openings in manufacturing rose 35 percent over the year-ago quarter, and in construction, they were up by a quarter. The building sector estimates it needs to add 35,000 workers in the current year, to a total of 3.3 million. Openings remain unfilled for more than 150 days, compared to 100 days on average for jobs in general. Caretaker openings are vacant for 171 days, well above the wait for IT workers.

Electrical and metalworking industries are hurting for skilled laborers. Nearly 30 percent of companies say that a lack of workers is dampening production. “Some firms simply can’t take in any more orders because they just can’t find the personnel to fulfill them,” said Hans Peter Wollseifer, president of the German Confederation of Skilled Crafts.

Average capacity utilization is at 87 percent, and in some electrical and metalworking industries it has shot above 90 percent. The chemical industry was running at 87 percent utilization last year, and recently had to revise its forecast upward for production this year.

Logistics sometimes lag for lack of personnel — goods sometimes sit idle because trucking companies lack enough drivers. Nearly half the firms surveyed by the Kiel Institute for the World Economy listed this as a problem. Two-fifths of the procurement managers surveyed by HIS Markit reported longer waits for deliveries in February — longer than they have seen in years. Besides bottlenecks, there are some basic materials, like metals, plastics, and electric components, that are not readily available.

Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. Handelsblatt reporters Martin Buchenau, Donata Riedel and Frank Specht contributed to this article. To contact the author: d.delamaide@extern.handelsblatt.com

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