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Why Germany Still Has So Many Middle-Class Manufacturing Jobs

147 points by forgotmysn 9y ago

deleted 9y ago
[deleted]
postMarxist 9y ago
Proganda shit! Germany has in oft the biggest low deployement sector in Europe.
- nimchimpsky 9y ago
  "Germany has in oft the biggest low deployement sector" no idea what your saying
  - killerpopiller 9y ago
    probably meant: G "has one of the biggest low income employment sector" - less than 1/3 of median income - < 20% of all employees (Dec 2016) with decreasing tendency
KKKKkkkk1 9y ago
The article asks why there are so many successful mid-size companies in Germany, and it lists reasons such as continuity of leadership, scientific competencies, system of apprenticeships and others. I don't see how this answers the question in the title. How does the school of mathematics of the University of Goettingen help make German factory workers competitive with Chinese ones? Why aren't these companies moving their production to cheaper markets like companies elsewhere do?
- bootload 9y ago
  "How does the school of mathematics of the University of Goettingen help make German factory workers competitive with Chinese ones?" The search for precision and applied scientific discovery. [0] Enlightenment drives every aspect of German manufacturing. Factory workers are in an environment that makes things driven by these processes. [0] An immediate example that comes to mind is the electric signal activation of the liquid suspension (magneto-rheological fluid) in the Audi R8. cf "The Audi R8: The Suspension" ~ https://www.audiworld.com/articles/the-audi-r8-the-suspension/ https://www.audiworld.com/articles/the-audi-r8-the-suspensio... This is an extreme example. It also highlights why Chinese/German manufacturing is different. One is aiming at mass market, low cost. The other high cost but desirable. The low cost German manufactured cars are measurably better than the Chinese.
  - antnisp 9y ago
    Every A4 owner is crying over his repair bills reading this.
    - bootload 9y ago
      I mentioned R8 specifically (hand built), what's the A4 problem? How does this compare to Chinese cars (Great-Wall, Cherry) Especially where extensive asbestos is still used in brakes? [0] https://blogs.wsj.com/drivers-seat/2012/08/16/chinese-cars-recalled-in-australia-for-asbestos/ https://blogs.wsj.com/drivers-seat/2012/08/16/chinese-cars-r...
- everybodyknows 9y ago
  Wage suppression. Seen most obviously by simple comparison to other Eurozone states: http://fortune.com/2014/10/22/why-germany-is-the-eurozones-biggest-free-rider/ http://fortune.com/2014/10/22/why-germany-is-the-eurozones-b... This is not something Germans -- such as apparently the author of OP -- like to talk about.
  - binarray2000 9y ago
    To add to less talked about downsides of the "German boom": Wage suppression has caused the fact that Germany has the largest low-wage sector in Europe. An article in English: http://www.nachdenkseiten.de/?p=18499 http://www.nachdenkseiten.de/?p=18499 > The share of low-wage workers (less than 2/3 of the median hourly wage) rose from 17.7% in 1995 to 23.1% of all workers in 2010. The number of low-wage workers increased from 5.6 million in 1995 to 7.9 million in 2010. Another article, from Süddeutscher Zeitung, in German: http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtschaft-schattenseiten-des-deutschen-erfolgs-1.1737409-3 http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtsc...
    - lispm 9y ago
      > has the largest low-wage sector in Europe . That's easy, since Germany is also the largest country in Europe (not counting Russia), has the largest number of employees, has a lot of people from East Europe coming for work, ... The alternative would be to move many of these jobs outside of Germany, which sits right next to a lot low-wage countries. The low-wage sector was also expanded, because politics wanted to reduce long-term unemployment and thought that a low-wage job with some social security is better than not working. We should also remember that Germany with now 80+ million people has taken in 20 million people from East Germany (with its economy mostly collapsing) and many of them have still a harder time to find jobs, which has a lot of reasons. One of the reasons is exactly that this eastern part of Germany now lacks this large based of mid-sized companies who are competitive.
      - binarray2000 9y ago
        (1) My comment was an addendum to the post which (partly) explained to another post(er) why German companies aren't moving their production to cheaper markets. I remind you of this because the author of the article and many people here have a rosy view of the economic situation in Germany. Seeing only the "positives" and blending out the "negatives" because they don't fit the official narrative isn't helpful for our discussion. (2) Germany is the biggest country in EU (EU != Europe), has the largest workforce and, thus, the largest low-wage sector. Yes, that is correct. But it is not "easy", as this Eurostat graph shows: http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Low-wage_earners_%E2%80%94_employees_(excluding_apprentices)_earning_less_than_two_thirds_of_the_median_gross_hourly_earnings,_2014_(%25_of_employees)_YB17.png http://ec.europa.eu/eurostat/statistics-explained/index.php/... You see Germany in the company with such economic powerhouses as Estonia, Poland, Lithuania, Romania, Latvia - all of them having a bit worse PERCENTAGE of low-wage workers than Germany. This is not someone's perception, or some narrative, these are hard numbers. (3) You obviously didn't read the articles I've posted. Especially that from Nachdenkseiten as it lists many other issues not widely spoken about in the mainstream media - neither in Germany nor in other countries. It is an analysis from Prof. Dr. Gerhard Bosch (Geschäftsführender Direktor Institut Arbeit und Qualifikation Universität Duisburg-Essen). While we discuss the article published oh hbr.org, which talks about the causes for the success of the German economy, Mr. Bosch mentions the elephant in the room: > German economic policy continues to be characterised by its excessive focus on exports. As a way of dealing with the euro crisis, the German federal government advises other countries to introduce their own labour market reforms on the model of the Hartz Acts. This policy, however, cannot be applied at will to other countries, since only by abolishing the laws of mathematics would be it possible for all countries to have export surpluses. Meaning: German model doesn't work for others. And, it only works for Germany because others take a hit while Germany "takes" a surplus. Yes, German economy/society has it's qualities. But would it be such a "success" without major influence in EU institutions, in ECB, without Euro, with other countries having their currencies (which they can devalue to make their good cheaper and imported - German - goods more expensive), with customs on its goods, with fairer wages in Germany? I highly doubt it.
- flohofwoe 9y ago
  I'm not an economy expert, but I'd say that the jobs that can be done with 'cheap labour' have already been moved to other countries long ago (at latest in the 90's after the reunification). If you look at a typical German 'Mittelstand company', many look more like high-tec laboratories than typical factories from the inside, lots of robots, high automation, the people working there need to know the technology inside out, troubleshoot and fix problems quickly. That's difficult to get from a manufacturer on the other side of the globe who needs to juggle many different clients from all over the world. And many German workers still have a certain loyalty to their company, since the company owner isn't some international celebrity CEO installed to squeeze the last bit of money out for 'shareholder value'.
sumedh 9y ago
I have an interesting anecdote to share, couple of years back I was working in an Indian branch of an MNC. The water from the tap on a wash basin had low pressure and it was frustrating to wash your hands but I guess we never complained because in India you just accept such minor inconvenience. One day the VP from the American HQ came to the Indian office and yes he was German, during the intro meeting he talked about the low pressure from the tap. The tap was changed the next day. I still remember that story because it taught me how Indians look at their surroundings and how a German looks at the same surroundings.
- educar 9y ago
  I have a similar anecdote except the German in my story fixed the tap himself! I was squarely impressed with the skills an average German has.
  - easilyBored 9y ago
    A lot of things are common sense. OK, "this part must go here because it looks like it does X." We just need a little motivation. Granted, doesn't mean you should rewire your house using YouTube videos
    - jbigelow76 9y ago
      Watch enough YouTube videos and I hear you can build a whole house. http://www.cnn.com/2017/01/13/us/mother-house-youtube-build-trnd/ http://www.cnn.com/2017/01/13/us/mother-house-youtube-build-...
      - _nedR 9y ago
        I am pretty sure that wiring your house is (rightly) illegal in many countries unless you are a licensed electrician, because of the fire Hazard and all.
        toomuchtodo 9y ago
postMarxist 9y ago
If write about german economy and you dont mention the biggest low deployment sector in Europa, than it is just Propaganda nonsense. The germans killed with their neoliberal strategy the middle-class in the Rest oft the EU. We are too dump to produce products we really consume ourselfs. When we say we have done our homework in economy, it means that we pass our shit and problems to other European countries.
lima 9y ago
The apprenticeships are particularly important. Many brilliant friends of mine who failed university or even high school did an apprenticeship instead. Among them are CEOs, R&D managers and founders.
- da02 9y ago
  Were the apprenticeships for factory jobs/careers?
  - nom 9y ago
    A large number of apprenticeships in Germany are in the metal and electronics industry. Check out the list [0] (in German). In fact, most jobs listed there are performed in factories, with desk-jobs being second. 0: https://de.wikipedia.org/wiki/Liste_von_Ausbildungsberufen#Metallberufe https://de.wikipedia.org/wiki/Liste_von_Ausbildungsberufen#M... Edit: many jobs on the list were retired (fused into others) in 2013 so it's probably a little outdated, but it tells a tale.
- shriphani 9y ago
  This is a model I desperately hope returns in a big way around the world. The modern education-factory model is a post WW2 invention and the quicker we can EOL it the better. We got so much from the older model and I dare say people lived better lives while studying.
- lacampbell 9y ago
  I've often idly wondered if you could do Software Development as an apprenticeship. Use industry tools in your work day, and theoretical computer science at night schools/block courses.
  - slackingoff2017 9y ago
    I don't think software is much different from anything else in this respect. You could learn any job assuming you're fairly intelligent and being taught by somebody decent. In not sure why we churn out degrees now instead of apprenticeships. I assume it's an equilibrium where The quality of people coming out of school is "good enough" that it saves the company money on training. If you look at it as a way of companies forcing people to pay for their own training, the proper way to bring apprenticeships back is to make college more selective or expensive. This would increase upward mobility for those that can't afford school by forcing companies to train their employees again. However it would probably be seen as an attack on the poor and minorities for making college more exclusive. Put differently, the increased accessibility of college has killed informal forms of education. To undo this would mean making college elitist again because the widespread nature of college education is what causes companies to hire only graduates. Another factor in the downfall of apprenticeships is the inability to weed out people unlikely to succeed because of discrimination laws. In the past it was common to get engineering apprenticeships off the street IF you could pass a series of tests. IQ especially has a strong correlation to job success, and only taking say the top 10% of scores made apprenticeships much more likely to succeed (and less expensive for the company). These tests were found to be biased against minorities and women so disappeared in the 60's, around the same time college education became popular among the middle class. Correlation isn't causation of course, so I can only speculate on these being driving forces behind the end of job training. Looking back at Germany, an interesting twist is that education is free but the acceptance rate low. Basically college in Germany is elitist, and if my theory holds water this would lead to more on the job training. Another somewhat depressing thing to keep in mind is that HN is a bubble. You need to be fairly smart to be an effective engineer. Most are significantly smarter than the average person, and by popular accounts an odd bunch. It might seem reasonable to people like us to teach people to code by osmosis but to most people programming is incomprehensible and unenjoyable. I saw this first hand in primary school where software programming was an elective. There were 30 or so students in the class and only three of us had any idea what we were doing and interest in writing code.
olivermarks 9y ago
You could make the argument that the Mittelstand has profited from Germany's controlling stake and dominance in the EU. One of the big arguments for non German businesses seeking to leave the EU have been perceptions of unfair EU bureaucratic advantage to German businesses at the expense of other member states. Having said that they have a very good national business model and an excellent culture around vocational training and expertise building.
- throwaway13337 9y ago
  Yes. They are insulated by EU trade tariffs on goods external to the EU. Combine that with the most efficient factories in the EU. They get to provide things that can still beat China after considering the tariffs. In other words, trade barriers strengthened the middle class.
  - deleted 9y ago
    [deleted]
  - posguy 9y ago
    Seems like a net good, I'd rather a strong middle class due to decent trade policies than a "free" market causing severe wealth stratification with the bulk of the populace being poor.
  - comicjk 9y ago
    Tariffs on the EU strengthened manufacturing employment in Germany, but many other EU countries don't seem to have much manufacturing and are poorer than Germany, yet still pay those tariffs. That's consistent with the idea that tariffs provide substantial help to a lucky few while levying costs on everyone else.
    - throwaway13337 9y ago
      But there is manufacturing in those countries too. Those poorer countries are more able to compete with Germany than with China. Cheaper goods are nice but aren't as useful to people without jobs.
lightedman 9y ago
Because German engineering is world-renowned. This much has been known for a good long while. You can take a German bearing of 'low quality' vs. a Chinese bearing of 'high quality' and easily tell that the German bearing is far superior. It only makes sense such engineering capability would result in a lot of manufacturing work in the middle-class range.
- rtx 9y ago
  On the other hand German cars have one of the worst reliability scores year after year.
  - dmoo 9y ago
    Data from the UK seems to suggest it's not as clear as that. Depends on the make, even cats from the same group VAG vary heavily. Skoda and VW seem good and Audi poor. http://www.jdpower.com/press-releases/2015-uk-vehicle-dependability-study-vds http://www.jdpower.com/press-releases/2015-uk-vehicle-depend...
    - lightedman 9y ago
      In my circles in the USA, AUDI means "A Used Dodge Intrepid" so no wonder it's got a poor rap.
  - mpweiher 9y ago
    Huh? Citation needed. "The myth suggests that these German brands produce unreliable vehicles, but actual long-term dependability results do not lie. Lately, German makes have been producing reliable vehicles, and the belief that they are unreliable should remain as nothing more than a myth." http://www.jdpower.com/cars/articles/automotion-blog/5-car-quality-myths-busted http://www.jdpower.com/cars/articles/automotion-blog/5-car-q...
- panzer_wyrm 9y ago
  And the reason that this is true is because Germany protect those jobs and values people that mastered their craft. Which are the valued blue collar jobs in US - doctor, chef, programmer and lawyer. That's it.
nom 9y ago
I'd like to think it's because WW2 changed us, for the better. We just want to build great things now and help everyone and not only ourselves. We respect others, independent of race or nationality, and it think we're much less superficial than some other countries are. But that holds true for most European countries so IDK, maybe I'm simplifying it too much right now. It just feels that way to me.
- sandworm101 9y ago
  German culture is older than ww1/2. The german respect for labour predates the 20th century. So too in japan. Some like to think of modern japan and germany as only a product of post-ww2 development programs, but that denies the long history of these great nations. That they were able to participate in ww1/2 demonstrates thier success prior to that conflict. (Imho ww1 and ww2 should be read as one historical narrative.)
apo 9y ago
I was surprised the article didn't mention the euro, specifically how Germany gets to denominate its goods in a cheap currency that doesn't fully reflect its strong fiscal policies.
- gumby 9y ago
  The Mittelstand far predated the Euro; to my mind the Euro, if anything, favored the larger companies.
- stephen_g 9y ago
  This is a huge thing - Germany couldn't run its huge trade surplus without its currency appreciating and reducing its competitiveness otherwise. It's a pretty bad deal for the consumption-based Eurozone economies though - they have to internally devalue instead of just being able to devalue their exchange rate. It's one of the major problems with the Euro... It was a terrible idea from the start, and situations like Greece were foreseen by economists like the great Wynne Godley decades ago (see Maastricht and All That, London Review of Books, Oct 1992). Unfortunately the mainstream of economics still doesn't have a developed enough understanding of monetary systems to have worked that out yet...
  - tim333 9y ago
    Dunno. German manufacturing success predates the Euro. The Swiss with a similar culture but an appreciating currency still run surpluses exporting stuff they make. https://www.tradingeconomics.com/articles/02212017075915.htm https://www.tradingeconomics.com/articles/02212017075915.htm
  - lispm 9y ago
    > Germany couldn't run its huge trade surplus without its currency appreciating The Euro policy is not German monetary policy. Germany has always asked for a harder currency policy. Germany also had a huge trade surplus long before the Euro. The economic numbers were going down after a the reunification and its problems (collapse of the East German economy). Germany is now back to the same success West Germany had before the reunification. Now with a larger market (the EU integration now is deeper and with more countries), simplified exports to the larger market (mostly) with a common currency, a much better access to east Europe as an emerging market, ...
mcthorogood 9y ago
The HBR article cites the high inheritance tax in the U.S. as reason for the low number of middle class jobs. But, to the contrary, today the inheritance tax in the U.S. is lower than in Germany.
- WillPostForFood 9y ago
  I'm not sure that's right, the German max rate is lower, though it might kick in at a lower level. Regardless of the rate, there are big exemptions for the transfer of businesses in Germany that definitely give the the advantage in that specific case.
- therealdrag0 9y ago
  I didn't really understand that point? Is the claim that if there was no inheritance tax, a family would accumulate enough money to start a mid-sized business? Or is the ownership of a business taxed upon death?
  - pgeorgi 9y ago
    An inheritance can include a company, if privately held. That company has a value, and that's taxed through inheritance tax. The problem is that a company of value $x rarely has liquid assets of $x*$taxrate, so inheriting a company can mean personal ruin. On the _other_ hand, not accounting for companies in inheritance tax means that every family ever will shift all its possessions into a company. Roughly speaking, Germany solved this by creating a set of exceptions for value "in a company", as long as it continues to be held for a given number of years (otherwise, since it was sold, it's considered a liquid asset and thus fully taxable).
    - easilyBored 9y ago
      On the _other_ hand, not accounting for companies in inheritance tax means that every family ever will shift all its possessions into a company. No taxes if a company has an employee that makes at least x00% of minimum wage for every, say $500K of worth. So your parents leave you a company that has a $20mm value and you have 40 employees that average $35,000 a year, you pay no inheritance taxes. Of course you need you'd to set a reasonable timeable to discourage cheating, otherwise they'd sell /fire 50% as soon as the x year timeline expires.
gumby 9y ago
> The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector. I am surprised by this assertion. Allegedly family-managed firms can make long term decisions, but those observations are always subject to survivorship bias. At best I would think this issue marginal. (There's also a bias in the statement, as inheritance tax in the US is quite low and kicks in at a pretty high level). I would think if anything the ability to inherit reduces the likihood of outside ideas. (And anyway, in a republic, inheritance is abhorrent. We don't need another aristocracy.)
- devoply 9y ago
  And so only the rich inherit... as over time banks and other businesses figure out how to take away all the income from the middle class. then the higher business class which has huge amounts of capital moves it overseas to generate greater returns. the country hollows out. Something very similar happens in third world countries. To do any sort of real business you need capital. If you don't have it you are in no position to actually do any sort of real business or even try.
- CPLX 9y ago
  You don't have to hedge, that comment about inheritance tax is literally ridiculous and completely unsupported. The idea that the US has a problem with too little accumulation of intergenerational wealth is patent nonsense.
  - easilyBored 9y ago
    The idea that the US has a problem with too little accumulation of intergenerational wealth is patent nonsense. This is different from parent leaving you stock and bonds. Father dies, leaves company that makes engines to son and $50 million in cash because he has invested most in his company. IRS+State: son, you owe us half+ of what your father left you, or $1.1 Billion. If he borrows half of company's worth that's not going to be a healthy company anymore. So he sells it and selling is not always the best thing for employees. Edited: If I was made King, I'd look to lower the inheritance to children to say 10% and abolish trusts that fund generations of lazy, spoiled brats living from their great-great-grandfather's money.
yuli67 9y ago
Maybe the globalized world at any one time can only sustain one Germany with it's hidden champions. But ofcourse it's easier and well paying to travel around the world and tell everyone they can be like Germany too.
- dx034 9y ago
  The world can sustain more than one because it already does. Switzerland has a very similar structure and is as successful, if not even more successful. It also shows that Germany doesn't just succeed because of a cheap exchange rate, since most products hidden champions produce aren't that price sensitive. The world could probably sustain even more companies that focus on long term growth and quality instead of quick products. But that's not how you become famous. You become famous by making a quick app used by millions that you can IPO a few years later. So that's what many people in the world try to achieve. Not building a small company over decades that specializes in something which most people don't even know exists.
  - IIIIIIIIIIII 9y ago
    As a German I of course (quite irrationally) like the praise for "my" country (I actually feel I'm human, and being German is just birth luck, especially since I benefited enormously from the reunification). On the other hand, OP has a point. This is once more an example of what works for anyone vs. what works for everyone. The countries you name all are very small. Imagine Asia getting even better (they probably will), and imagine African countries getting their act together (as unlikely though it may be). Who would buy all those machines and parts? Also, another great potential for future trouble is that an oversized part of our economy is bound to making cars. The "Zulieferers" (component suppliers) are much larger than the actual car makers, and they are all "Mittelstand". If they have to find new customers some day... electrical cares require a lot less expertise and less parts I'm told, plus ever more "growth", meaning ever more cars, isn't such a promising model (looking at Asian city traffic...).
martinborman88 9y ago
B/c they chased the Jews out in the 40s
martinborman88 9y ago
B/c they chased the Jews out in the 40s
boomboomsubban 9y ago
It's strange that they credit a holdover from the Holy Roman Empire days as being one of the reasons, but ignore the privatization of East German industry and the massive infrastructure investment after reunification.
- cowl 9y ago
  This is not a recent phenomena though so those two factors you mentioned can't be considered as reasons.
  - boomboomsubban 9y ago
    "Why Germany still..."
joelthelion 9y ago
> The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector. How can you write stuff like that and stay serious?
- postgeographic 9y ago
  By ignoring things like this I suppose - https://econoblog101.wordpress.com/2015/09/15/income-inequality-in-germany-the-top10/ https://econoblog101.wordpress.com/2015/09/15/income-inequal...
- mjburgess 9y ago
  It's the strange writing style of self-righteous ideologues who have to cram something irrelevant about their ideology in everything they write. I once read a book on mental heath by a professional academic who threw in something about how some irrelevant conclusion in the mental health field showed government was inherently wrong.
- mcv 9y ago
  I wondered about that too. I find it hard to believe that Germany has no inheritance tax, and capital seems to accummulate extremely well in the US (far too much, I would argue). And the existence of corporations make inheritance irrelevant to the accummulation of capital for businesses.
atlih 9y ago
Not a single mention of the Euro? If it weren't a member of the Euro, Germany would be deindustrializing with a sky high Deutsche Mark.
- luca_ing 9y ago
  Have you missed the discussion initiated by user apo? https://news.ycombinator.com/item?id=14261923 https://news.ycombinator.com/item?id=14261923 (I hope I'm linking the right thing). Germany had a strong Mittelstand (and was indeed struggling with an uncomfortably strong Deutsche Mark) long before the Euro. I suspect it would have worked out.
GBond 9y ago
I would add differences in domestic consumers preferences. Americans are now addicted to cheap-quality goods. I passed through the gift shop inside Empire Sate Building in NY yesterday and 98% of the gifts are asian imported plastic trinkets branded with Empire State and USA logos. Contrasts that to when I visited the museums in Berlin where the shops mainly focused on selling locally produced crafts.
anentropic 9y ago
I don't find the arguments presented in the article for "why" to be very convincing. - The most important difference is the continuity of the leadership. The leaders of the Hidden Champions stay at the helm for an average of 20 years ok yes, could be - the German history of many small independent states (until 1918 Germany consisted of 23 monarchies and three republics), which forced entrepreneurs to internationalize early on in a company’s development if they wanted to keep growing there must be lots of countries where this is the case - Scientific competencies also play an important role there must be lots of countries where this is the case - the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades. ok yes, could be important - Tax advantages are another reason. skeptical - the international openness of a society is an essential factor in the globalized world of the future. Germany is far ahead of other large countries with regard to mental internationalization skeptical that this vague claim is true, let alone an important factor I was expecting to hear something about https://en.wikipedia.org/wiki/German_company_law https://en.wikipedia.org/wiki/German_company_law e.g. "in companies with over 2000 workers just under half the seats on a supervisory board are selected by the workers" seems like shareholders have less power and employees have more, under the German system, and it seems fairly logical that this could lead to long-lasting companies producing high-quality products

147 points by forgotmysn 9y ago

deleted 9y ago

[deleted]

postMarxist 9y ago

Proganda shit! Germany has in oft the biggest low deployement sector in Europe.

nimchimpsky 9y ago
"Germany has in oft the biggest low deployement sector" no idea what your saying
- killerpopiller 9y ago
  probably meant: G "has one of the biggest low income employment sector" - less than 1/3 of median income - < 20% of all employees (Dec 2016) with decreasing tendency

KKKKkkkk1 9y ago

The article asks why there are so many successful mid-size companies in Germany, and it lists reasons such as continuity of leadership, scientific competencies, system of apprenticeships and others. I don't see how this answers the question in the title. How does the school of mathematics of the University of Goettingen help make German factory workers competitive with Chinese ones? Why aren't these companies moving their production to cheaper markets like companies elsewhere do?

bootload 9y ago
"How does the school of mathematics of the University of Goettingen help make German factory workers competitive with Chinese ones?" The search for precision and applied scientific discovery. [0] Enlightenment drives every aspect of German manufacturing. Factory workers are in an environment that makes things driven by these processes. [0] An immediate example that comes to mind is the electric signal activation of the liquid suspension (magneto-rheological fluid) in the Audi R8. cf "The Audi R8: The Suspension" ~ https://www.audiworld.com/articles/the-audi-r8-the-suspension/ https://www.audiworld.com/articles/the-audi-r8-the-suspensio... This is an extreme example. It also highlights why Chinese/German manufacturing is different. One is aiming at mass market, low cost. The other high cost but desirable. The low cost German manufactured cars are measurably better than the Chinese.
- antnisp 9y ago
  Every A4 owner is crying over his repair bills reading this.
  - bootload 9y ago
    I mentioned R8 specifically (hand built), what's the A4 problem? How does this compare to Chinese cars (Great-Wall, Cherry) Especially where extensive asbestos is still used in brakes? [0] https://blogs.wsj.com/drivers-seat/2012/08/16/chinese-cars-recalled-in-australia-for-asbestos/ https://blogs.wsj.com/drivers-seat/2012/08/16/chinese-cars-r...
everybodyknows 9y ago
Wage suppression. Seen most obviously by simple comparison to other Eurozone states: http://fortune.com/2014/10/22/why-germany-is-the-eurozones-biggest-free-rider/ http://fortune.com/2014/10/22/why-germany-is-the-eurozones-b... This is not something Germans -- such as apparently the author of OP -- like to talk about.
- binarray2000 9y ago
  To add to less talked about downsides of the "German boom": Wage suppression has caused the fact that Germany has the largest low-wage sector in Europe. An article in English: http://www.nachdenkseiten.de/?p=18499 http://www.nachdenkseiten.de/?p=18499 > The share of low-wage workers (less than 2/3 of the median hourly wage) rose from 17.7% in 1995 to 23.1% of all workers in 2010. The number of low-wage workers increased from 5.6 million in 1995 to 7.9 million in 2010. Another article, from Süddeutscher Zeitung, in German: http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtschaft-schattenseiten-des-deutschen-erfolgs-1.1737409-3 http://www.sueddeutsche.de/wirtschaft/bremse-fuer-die-wirtsc...
  - lispm 9y ago
    > has the largest low-wage sector in Europe . That's easy, since Germany is also the largest country in Europe (not counting Russia), has the largest number of employees, has a lot of people from East Europe coming for work, ... The alternative would be to move many of these jobs outside of Germany, which sits right next to a lot low-wage countries. The low-wage sector was also expanded, because politics wanted to reduce long-term unemployment and thought that a low-wage job with some social security is better than not working. We should also remember that Germany with now 80+ million people has taken in 20 million people from East Germany (with its economy mostly collapsing) and many of them have still a harder time to find jobs, which has a lot of reasons. One of the reasons is exactly that this eastern part of Germany now lacks this large based of mid-sized companies who are competitive.
    - binarray2000 9y ago
      (1) My comment was an addendum to the post which (partly) explained to another post(er) why German companies aren't moving their production to cheaper markets. I remind you of this because the author of the article and many people here have a rosy view of the economic situation in Germany. Seeing only the "positives" and blending out the "negatives" because they don't fit the official narrative isn't helpful for our discussion. (2) Germany is the biggest country in EU (EU != Europe), has the largest workforce and, thus, the largest low-wage sector. Yes, that is correct. But it is not "easy", as this Eurostat graph shows: http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Low-wage_earners_%E2%80%94_employees_(excluding_apprentices)_earning_less_than_two_thirds_of_the_median_gross_hourly_earnings,_2014_(%25_of_employees)_YB17.png http://ec.europa.eu/eurostat/statistics-explained/index.php/... You see Germany in the company with such economic powerhouses as Estonia, Poland, Lithuania, Romania, Latvia - all of them having a bit worse PERCENTAGE of low-wage workers than Germany. This is not someone's perception, or some narrative, these are hard numbers. (3) You obviously didn't read the articles I've posted. Especially that from Nachdenkseiten as it lists many other issues not widely spoken about in the mainstream media - neither in Germany nor in other countries. It is an analysis from Prof. Dr. Gerhard Bosch (Geschäftsführender Direktor Institut Arbeit und Qualifikation Universität Duisburg-Essen). While we discuss the article published oh hbr.org, which talks about the causes for the success of the German economy, Mr. Bosch mentions the elephant in the room: > German economic policy continues to be characterised by its excessive focus on exports. As a way of dealing with the euro crisis, the German federal government advises other countries to introduce their own labour market reforms on the model of the Hartz Acts. This policy, however, cannot be applied at will to other countries, since only by abolishing the laws of mathematics would be it possible for all countries to have export surpluses. Meaning: German model doesn't work for others. And, it only works for Germany because others take a hit while Germany "takes" a surplus. Yes, German economy/society has it's qualities. But would it be such a "success" without major influence in EU institutions, in ECB, without Euro, with other countries having their currencies (which they can devalue to make their good cheaper and imported - German - goods more expensive), with customs on its goods, with fairer wages in Germany? I highly doubt it.
flohofwoe 9y ago
I'm not an economy expert, but I'd say that the jobs that can be done with 'cheap labour' have already been moved to other countries long ago (at latest in the 90's after the reunification). If you look at a typical German 'Mittelstand company', many look more like high-tec laboratories than typical factories from the inside, lots of robots, high automation, the people working there need to know the technology inside out, troubleshoot and fix problems quickly. That's difficult to get from a manufacturer on the other side of the globe who needs to juggle many different clients from all over the world. And many German workers still have a certain loyalty to their company, since the company owner isn't some international celebrity CEO installed to squeeze the last bit of money out for 'shareholder value'.

sumedh 9y ago

I have an interesting anecdote to share, couple of years back I was working in an Indian branch of an MNC. The water from the tap on a wash basin had low pressure and it was frustrating to wash your hands but I guess we never complained because in India you just accept such minor inconvenience. One day the VP from the American HQ came to the Indian office and yes he was German, during the intro meeting he talked about the low pressure from the tap. The tap was changed the next day. I still remember that story because it taught me how Indians look at their surroundings and how a German looks at the same surroundings.

educar 9y ago
I have a similar anecdote except the German in my story fixed the tap himself! I was squarely impressed with the skills an average German has.
- easilyBored 9y ago
  A lot of things are common sense. OK, "this part must go here because it looks like it does X." We just need a little motivation. Granted, doesn't mean you should rewire your house using YouTube videos
  - jbigelow76 9y ago
    Watch enough YouTube videos and I hear you can build a whole house. http://www.cnn.com/2017/01/13/us/mother-house-youtube-build-trnd/ http://www.cnn.com/2017/01/13/us/mother-house-youtube-build-...
    - _nedR 9y ago
      I am pretty sure that wiring your house is (rightly) illegal in many countries unless you are a licensed electrician, because of the fire Hazard and all.
      - toomuchtodo 9y ago

postMarxist 9y ago

If write about german economy and you dont mention the biggest low deployment sector in Europa, than it is just Propaganda nonsense. The germans killed with their neoliberal strategy the middle-class in the Rest oft the EU. We are too dump to produce products we really consume ourselfs. When we say we have done our homework in economy, it means that we pass our shit and problems to other European countries.

lima 9y ago

The apprenticeships are particularly important. Many brilliant friends of mine who failed university or even high school did an apprenticeship instead. Among them are CEOs, R&D managers and founders.

da02 9y ago
Were the apprenticeships for factory jobs/careers?
- nom 9y ago
  A large number of apprenticeships in Germany are in the metal and electronics industry. Check out the list [0] (in German). In fact, most jobs listed there are performed in factories, with desk-jobs being second. 0: https://de.wikipedia.org/wiki/Liste_von_Ausbildungsberufen#Metallberufe https://de.wikipedia.org/wiki/Liste_von_Ausbildungsberufen#M... Edit: many jobs on the list were retired (fused into others) in 2013 so it's probably a little outdated, but it tells a tale.
shriphani 9y ago
This is a model I desperately hope returns in a big way around the world. The modern education-factory model is a post WW2 invention and the quicker we can EOL it the better. We got so much from the older model and I dare say people lived better lives while studying.
lacampbell 9y ago
I've often idly wondered if you could do Software Development as an apprenticeship. Use industry tools in your work day, and theoretical computer science at night schools/block courses.
- slackingoff2017 9y ago
  I don't think software is much different from anything else in this respect. You could learn any job assuming you're fairly intelligent and being taught by somebody decent. In not sure why we churn out degrees now instead of apprenticeships. I assume it's an equilibrium where The quality of people coming out of school is "good enough" that it saves the company money on training. If you look at it as a way of companies forcing people to pay for their own training, the proper way to bring apprenticeships back is to make college more selective or expensive. This would increase upward mobility for those that can't afford school by forcing companies to train their employees again. However it would probably be seen as an attack on the poor and minorities for making college more exclusive. Put differently, the increased accessibility of college has killed informal forms of education. To undo this would mean making college elitist again because the widespread nature of college education is what causes companies to hire only graduates. Another factor in the downfall of apprenticeships is the inability to weed out people unlikely to succeed because of discrimination laws. In the past it was common to get engineering apprenticeships off the street IF you could pass a series of tests. IQ especially has a strong correlation to job success, and only taking say the top 10% of scores made apprenticeships much more likely to succeed (and less expensive for the company). These tests were found to be biased against minorities and women so disappeared in the 60's, around the same time college education became popular among the middle class. Correlation isn't causation of course, so I can only speculate on these being driving forces behind the end of job training. Looking back at Germany, an interesting twist is that education is free but the acceptance rate low. Basically college in Germany is elitist, and if my theory holds water this would lead to more on the job training. Another somewhat depressing thing to keep in mind is that HN is a bubble. You need to be fairly smart to be an effective engineer. Most are significantly smarter than the average person, and by popular accounts an odd bunch. It might seem reasonable to people like us to teach people to code by osmosis but to most people programming is incomprehensible and unenjoyable. I saw this first hand in primary school where software programming was an elective. There were 30 or so students in the class and only three of us had any idea what we were doing and interest in writing code.

olivermarks 9y ago

You could make the argument that the Mittelstand has profited from Germany's controlling stake and dominance in the EU. One of the big arguments for non German businesses seeking to leave the EU have been perceptions of unfair EU bureaucratic advantage to German businesses at the expense of other member states. Having said that they have a very good national business model and an excellent culture around vocational training and expertise building.

throwaway13337 9y ago
Yes. They are insulated by EU trade tariffs on goods external to the EU. Combine that with the most efficient factories in the EU. They get to provide things that can still beat China after considering the tariffs. In other words, trade barriers strengthened the middle class.
- deleted 9y ago
  [deleted]
- posguy 9y ago
  Seems like a net good, I'd rather a strong middle class due to decent trade policies than a "free" market causing severe wealth stratification with the bulk of the populace being poor.
- comicjk 9y ago
  Tariffs on the EU strengthened manufacturing employment in Germany, but many other EU countries don't seem to have much manufacturing and are poorer than Germany, yet still pay those tariffs. That's consistent with the idea that tariffs provide substantial help to a lucky few while levying costs on everyone else.
  - throwaway13337 9y ago
    But there is manufacturing in those countries too. Those poorer countries are more able to compete with Germany than with China. Cheaper goods are nice but aren't as useful to people without jobs.

lightedman 9y ago

Because German engineering is world-renowned. This much has been known for a good long while. You can take a German bearing of 'low quality' vs. a Chinese bearing of 'high quality' and easily tell that the German bearing is far superior. It only makes sense such engineering capability would result in a lot of manufacturing work in the middle-class range.

rtx 9y ago
On the other hand German cars have one of the worst reliability scores year after year.
- dmoo 9y ago
  Data from the UK seems to suggest it's not as clear as that. Depends on the make, even cats from the same group VAG vary heavily. Skoda and VW seem good and Audi poor. http://www.jdpower.com/press-releases/2015-uk-vehicle-dependability-study-vds http://www.jdpower.com/press-releases/2015-uk-vehicle-depend...
  - lightedman 9y ago
    In my circles in the USA, AUDI means "A Used Dodge Intrepid" so no wonder it's got a poor rap.
- mpweiher 9y ago
  Huh? Citation needed. "The myth suggests that these German brands produce unreliable vehicles, but actual long-term dependability results do not lie. Lately, German makes have been producing reliable vehicles, and the belief that they are unreliable should remain as nothing more than a myth." http://www.jdpower.com/cars/articles/automotion-blog/5-car-quality-myths-busted http://www.jdpower.com/cars/articles/automotion-blog/5-car-q...
panzer_wyrm 9y ago
And the reason that this is true is because Germany protect those jobs and values people that mastered their craft. Which are the valued blue collar jobs in US - doctor, chef, programmer and lawyer. That's it.

nom 9y ago

I'd like to think it's because WW2 changed us, for the better. We just want to build great things now and help everyone and not only ourselves. We respect others, independent of race or nationality, and it think we're much less superficial than some other countries are. But that holds true for most European countries so IDK, maybe I'm simplifying it too much right now. It just feels that way to me.

sandworm101 9y ago
German culture is older than ww1/2. The german respect for labour predates the 20th century. So too in japan. Some like to think of modern japan and germany as only a product of post-ww2 development programs, but that denies the long history of these great nations. That they were able to participate in ww1/2 demonstrates thier success prior to that conflict. (Imho ww1 and ww2 should be read as one historical narrative.)

apo 9y ago

I was surprised the article didn't mention the euro, specifically how Germany gets to denominate its goods in a cheap currency that doesn't fully reflect its strong fiscal policies.

gumby 9y ago
The Mittelstand far predated the Euro; to my mind the Euro, if anything, favored the larger companies.
stephen_g 9y ago
This is a huge thing - Germany couldn't run its huge trade surplus without its currency appreciating and reducing its competitiveness otherwise. It's a pretty bad deal for the consumption-based Eurozone economies though - they have to internally devalue instead of just being able to devalue their exchange rate. It's one of the major problems with the Euro... It was a terrible idea from the start, and situations like Greece were foreseen by economists like the great Wynne Godley decades ago (see Maastricht and All That, London Review of Books, Oct 1992). Unfortunately the mainstream of economics still doesn't have a developed enough understanding of monetary systems to have worked that out yet...
- tim333 9y ago
  Dunno. German manufacturing success predates the Euro. The Swiss with a similar culture but an appreciating currency still run surpluses exporting stuff they make. https://www.tradingeconomics.com/articles/02212017075915.htm https://www.tradingeconomics.com/articles/02212017075915.htm
- lispm 9y ago
  > Germany couldn't run its huge trade surplus without its currency appreciating The Euro policy is not German monetary policy. Germany has always asked for a harder currency policy. Germany also had a huge trade surplus long before the Euro. The economic numbers were going down after a the reunification and its problems (collapse of the East German economy). Germany is now back to the same success West Germany had before the reunification. Now with a larger market (the EU integration now is deeper and with more countries), simplified exports to the larger market (mostly) with a common currency, a much better access to east Europe as an emerging market, ...

mcthorogood 9y ago

The HBR article cites the high inheritance tax in the U.S. as reason for the low number of middle class jobs. But, to the contrary, today the inheritance tax in the U.S. is lower than in Germany.

WillPostForFood 9y ago
I'm not sure that's right, the German max rate is lower, though it might kick in at a lower level. Regardless of the rate, there are big exemptions for the transfer of businesses in Germany that definitely give the the advantage in that specific case.
therealdrag0 9y ago
I didn't really understand that point? Is the claim that if there was no inheritance tax, a family would accumulate enough money to start a mid-sized business? Or is the ownership of a business taxed upon death?
- pgeorgi 9y ago
  An inheritance can include a company, if privately held. That company has a value, and that's taxed through inheritance tax. The problem is that a company of value $x rarely has liquid assets of $x*$taxrate, so inheriting a company can mean personal ruin. On the _other_ hand, not accounting for companies in inheritance tax means that every family ever will shift all its possessions into a company. Roughly speaking, Germany solved this by creating a set of exceptions for value "in a company", as long as it continues to be held for a given number of years (otherwise, since it was sold, it's considered a liquid asset and thus fully taxable).
  - easilyBored 9y ago
    On the _other_ hand, not accounting for companies in inheritance tax means that every family ever will shift all its possessions into a company. No taxes if a company has an employee that makes at least x00% of minimum wage for every, say $500K of worth. So your parents leave you a company that has a $20mm value and you have 40 employees that average $35,000 a year, you pay no inheritance taxes. Of course you need you'd to set a reasonable timeable to discourage cheating, otherwise they'd sell /fire 50% as soon as the x year timeline expires.

gumby 9y ago

> The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector. I am surprised by this assertion. Allegedly family-managed firms can make long term decisions, but those observations are always subject to survivorship bias. At best I would think this issue marginal. (There's also a bias in the statement, as inheritance tax in the US is quite low and kicks in at a pretty high level). I would think if anything the ability to inherit reduces the likihood of outside ideas. (And anyway, in a republic, inheritance is abhorrent. We don't need another aristocracy.)

devoply 9y ago
And so only the rich inherit... as over time banks and other businesses figure out how to take away all the income from the middle class. then the higher business class which has huge amounts of capital moves it overseas to generate greater returns. the country hollows out. Something very similar happens in third world countries. To do any sort of real business you need capital. If you don't have it you are in no position to actually do any sort of real business or even try.
CPLX 9y ago
You don't have to hedge, that comment about inheritance tax is literally ridiculous and completely unsupported. The idea that the US has a problem with too little accumulation of intergenerational wealth is patent nonsense.
- easilyBored 9y ago
  The idea that the US has a problem with too little accumulation of intergenerational wealth is patent nonsense. This is different from parent leaving you stock and bonds. Father dies, leaves company that makes engines to son and $50 million in cash because he has invested most in his company. IRS+State: son, you owe us half+ of what your father left you, or $1.1 Billion. If he borrows half of company's worth that's not going to be a healthy company anymore. So he sells it and selling is not always the best thing for employees. Edited: If I was made King, I'd look to lower the inheritance to children to say 10% and abolish trusts that fund generations of lazy, spoiled brats living from their great-great-grandfather's money.

yuli67 9y ago

Maybe the globalized world at any one time can only sustain one Germany with it's hidden champions. But ofcourse it's easier and well paying to travel around the world and tell everyone they can be like Germany too.

dx034 9y ago
The world can sustain more than one because it already does. Switzerland has a very similar structure and is as successful, if not even more successful. It also shows that Germany doesn't just succeed because of a cheap exchange rate, since most products hidden champions produce aren't that price sensitive. The world could probably sustain even more companies that focus on long term growth and quality instead of quick products. But that's not how you become famous. You become famous by making a quick app used by millions that you can IPO a few years later. So that's what many people in the world try to achieve. Not building a small company over decades that specializes in something which most people don't even know exists.
- IIIIIIIIIIII 9y ago
  As a German I of course (quite irrationally) like the praise for "my" country (I actually feel I'm human, and being German is just birth luck, especially since I benefited enormously from the reunification). On the other hand, OP has a point. This is once more an example of what works for anyone vs. what works for everyone. The countries you name all are very small. Imagine Asia getting even better (they probably will), and imagine African countries getting their act together (as unlikely though it may be). Who would buy all those machines and parts? Also, another great potential for future trouble is that an oversized part of our economy is bound to making cars. The "Zulieferers" (component suppliers) are much larger than the actual car makers, and they are all "Mittelstand". If they have to find new customers some day... electrical cares require a lot less expertise and less parts I'm told, plus ever more "growth", meaning ever more cars, isn't such a promising model (looking at Asian city traffic...).

martinborman88 9y ago

B/c they chased the Jews out in the 40s

martinborman88 9y ago

B/c they chased the Jews out in the 40s

boomboomsubban 9y ago

It's strange that they credit a holdover from the Holy Roman Empire days as being one of the reasons, but ignore the privatization of East German industry and the massive infrastructure investment after reunification.

cowl 9y ago
This is not a recent phenomena though so those two factors you mentioned can't be considered as reasons.
- boomboomsubban 9y ago
  "Why Germany still..."

joelthelion 9y ago

> The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector. How can you write stuff like that and stay serious?

postgeographic 9y ago
By ignoring things like this I suppose - https://econoblog101.wordpress.com/2015/09/15/income-inequality-in-germany-the-top10/ https://econoblog101.wordpress.com/2015/09/15/income-inequal...
mjburgess 9y ago
It's the strange writing style of self-righteous ideologues who have to cram something irrelevant about their ideology in everything they write. I once read a book on mental heath by a professional academic who threw in something about how some irrelevant conclusion in the mental health field showed government was inherently wrong.
mcv 9y ago
I wondered about that too. I find it hard to believe that Germany has no inheritance tax, and capital seems to accummulate extremely well in the US (far too much, I would argue). And the existence of corporations make inheritance irrelevant to the accummulation of capital for businesses.

atlih 9y ago

Not a single mention of the Euro? If it weren't a member of the Euro, Germany would be deindustrializing with a sky high Deutsche Mark.

luca_ing 9y ago
Have you missed the discussion initiated by user apo? https://news.ycombinator.com/item?id=14261923 https://news.ycombinator.com/item?id=14261923 (I hope I'm linking the right thing). Germany had a strong Mittelstand (and was indeed struggling with an uncomfortably strong Deutsche Mark) long before the Euro. I suspect it would have worked out.

GBond 9y ago

I would add differences in domestic consumers preferences. Americans are now addicted to cheap-quality goods. I passed through the gift shop inside Empire Sate Building in NY yesterday and 98% of the gifts are asian imported plastic trinkets branded with Empire State and USA logos. Contrasts that to when I visited the museums in Berlin where the shops mainly focused on selling locally produced crafts.

anentropic 9y ago

I don't find the arguments presented in the article for "why" to be very convincing. - The most important difference is the continuity of the leadership. The leaders of the Hidden Champions stay at the helm for an average of 20 years ok yes, could be - the German history of many small independent states (until 1918 Germany consisted of 23 monarchies and three republics), which forced entrepreneurs to internationalize early on in a company’s development if they wanted to keep growing there must be lots of countries where this is the case - Scientific competencies also play an important role there must be lots of countries where this is the case - the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades. ok yes, could be important - Tax advantages are another reason. skeptical - the international openness of a society is an essential factor in the globalized world of the future. Germany is far ahead of other large countries with regard to mental internationalization skeptical that this vague claim is true, let alone an important factor I was expecting to hear something about https://en.wikipedia.org/wiki/German_company_law https://en.wikipedia.org/wiki/German_company_law e.g. "in companies with over 2000 workers just under half the seats on a supervisory board are selected by the workers" seems like shareholders have less power and employees have more, under the German system, and it seems fairly logical that this could lead to long-lasting companies producing high-quality products