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Industrie 4.0

Engineering sending conflicting signals

The German engineering industry is a paradox: There’s plenty of work, profits are growing and employment is at an all-time high. But the measured productivity has decreased.

03 Nov. 2018
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Engineering sending conflicting signals (Photo: ZEW/ISI)

These are the revelations of a current study by the industry association VDMA . According to the center for European Economic Research (ZEW) , this is due to several factors. Digitalization promises productivity gains in the medium to long term, but right now the initial investments are currently a burden on the books. Statistically, the industry’s increased international efforts have also contributed to a decline in productivity: While profits made abroad are not reflected in the productivity at the home location, the necessary expenditures abroad – for example in research and development – are taken into consideration in the statistics. Other reasons cited include the rising share of services and the difficulty assessing price developments in the area of machine manufacturing. To boost productivity, the study suggests that companies should make targeted strategic investments in technologies and new business models. At the same time, new policies are required to ensure a good infrastructure and universal access to fast Internet.

This development could not have come as a surprise. In 2016, a study by the Cologne Institute for Economic Research (IW) titled “Productivity at Risk” revealed that even then employment was growing faster than production, as production was becoming more complex, digitalization required more employees, and companies were hiring staff without a specific need as a safeguard against a shortage of skilled labor.