German Economy Struggles with Shortage of Qualified Workers

The situation with regard to qualified workers remains tense for German businesses. In 2017, approximately 200,000 positions in innovation-intensive sectors remained vacant, which corresponds to 18 per cent of all vacancies in Germany. A further 360,000 vacancies – 33 per cent of job openings – could either not be filled with a desired candidate or only after a longer time period. The shortage of skilled labour concerns not only academic but also professional qualifications. In contrast, German businesses were able to fill around 535,000 available positions as planned. In terms of innovation expenditure, the German economy managed to grow by 4.7 per cent compared to 2017, and the share of revenue generated through product innovations even rose by 14.5 per cent.

These are some of the main findings of a recent survey on the innovation behaviour of German businesses carried out by the ZEW – Leibniz Centre for European Economic Research in Mannheim on behalf of the Federal Ministry of Education and Research. The survey has been conducted annually in collaboration with the infas Institute for Applied Social Sciences and the Fraunhofer Institute for Systems and Innovation Research (ISI) since 1993.

Federal Minister for Research Anja Karliczek commented on the results of the most recent innovation survey: “German businesses are at the forefront of research, development and innovation. In 2017 they invested significantly more in these areas than in previous years, which is important since this is how we ensure prosperity for our society. That way, we also make sure that employees and, in particular, small and medium-sized enterprises are not left behind. With the nationwide further training strategy of the federal government, we support employed professionals in keeping their competencies up-to-date, and help them to adapt and further develop their abilities. After all, along with investment in research and innovation, the further training of skilled workers is the key to success.”

In 2017, around 62 per cent of companies in Germany posted job openings. With a total of 70 per cent, this share was even higher among the group of so-called innovators, i.e. companies that have implemented product or process innovations. “In Germany, innovators are less likely to face problems in finding candidates to fill openings,” explains Dr. Christian Rammer, deputy head of the ZEW Research Department “Innovation and Industrial Dynamics” and project leader of the ZEW Innovation Survey.

Expenditure on innovation records another increase

Innovators who had vacancies to fill in 2017 were more likely to look for candidates with academic qualifications than companies that did not introduce product and process innovations. At the same time, however, innovators were still more interested in professional qualifications than in academic qualifications. 16 per cent of innovators had vacancies in the fields of technology, mathematics and statistics, 28 per cent posted job openings in the areas of engineering and natural sciences, and 19 per cent of companies had open positions relating to other academic disciplines.

In 2017, the innovator ratio among companies in the German economy was 36 per cent, which corresponds to almost the exact level recorded in the previous year. The group of innovators comprised a total of approximately 107,000 companies.

Expenditure on innovation recorded yet another increase in the German economy in 2017, climbing from 159.4 billion euros to 166.9 billion euros compared to the previous year. “The recorded increase has surpassed the planned figures, indicating an improvement in the innovation climate in 2017,” Christian Rammer sums up. For the spring and summer of 2018, companies in Germany had planned yet another distinct rise in innovation expenditure, namely by 3.4 per cent to a total of 172.5 billion euros. For 2019, firms are planning to moderately increase their innovation spending to 175.9 billion euros.

Looking at the individual sectors, innovation spending is highest in the automotive industry with a total of 52.4 million euros, followed by the electrical industry (21.4 billion euros) and the chemical and pharmaceutical industries (19 billion euros). 2017 marked the first time in many years that innovation expenditure was not increased in the automotive industry.

Turnover generated through market innovations grows

By comparison, small and medium-sized enterprises (SMEs) raised their innovation expenditure by an above-average 6.4 per cent in 2017, while large enterprises increased their innovation expenditure by “merely” 4.3 per cent. “This positive trend among SMEs will most likely come to a halt in 2018 and 2019. For the coming two years, SMEs are planning to cut innovation spending by two per cent, respectively,” explains Christian Rammer.

The share of total turnover of the German economy spent on innovation – the so-called “innovation intensity” – reached a new record high in 2017 with a total of 3.1 per cent. With innovation intensities of 4.0 per cent and 1.5 per cent, respectively, large enterprises recorded a significantly higher level than SMEs. The most innovation-intensive sector was the electrical industry (10.6 per cent), followed by the automotive industry (9.3 per cent), the chemical and pharmaceutical industries (8.9 per cent) and technical service providers (8.0 per cent).

It is noteworthy that in 2017, German companies achieved a turnover of 822 billion euros with product innovations – an increase of as much as 14.5 per cent compared to the previous year. German companies were able to increase the turnover generated through market innovations, or product innovations that had not been introduced by another firm before, to a total of 168 billion euros. This corresponds to a 9.4 per cent increase compared to 2016. With a turnover of 550 billion euros, the industrial sector accounted for the lion’s share of the turnover generated with new products. 85 per cent of this product turnover is attributable to large companies, while the automotive industry was responsible for around one third of the total turnover generated through product innovations (269 billion euros).