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Why Germany Still Has So Many Middle-Class Manufacturing Jobs

• deleted 9y ago
  [deleted]
• 11thEarlOfMar 9y ago
  I'd be interested in knowing what percentage of the Hidden Champions are publicly traded companies. Companies of that size are very likely to be acquired in the US. Consolidation is a constant activity by many public firms and probably (I am speculating) tends to reduce the proportion of mid-tier companies relative to Germany. Once acquired, these companies have an additional set of factors weighing on them in that the founding team is likely to leave, budgets are controlled by, and, profits are sent to an external firm. Those three factors will reduce the company's ability to determine it's own fate.
  • JanSt 9y ago
    Nearly none - most are family-owned.
  • qznc 9y ago
    A significant part of the Mittelklasse is certainly part of the car industry. Maybe BMW, Audi, etc are not that keen on acquiring?
    • bluedino 9y ago
      In the US, the big three automakers generally don't acquire small companies. A lot of work in the industry is done by companies like Delphi (who also have sites in Germany)
      • ChefDenominator 9y ago
        IIRC, Delphi was spun off as a former division GM.
      • qznc 9y ago
        Is the car industry a significant factor? How does Detroit compare to Germany?
    • pluma 9y ago
      The term "Hidden Champions" though usually refers to "boring industry" companies like part suppliers, not actual manufacturers of consumer products. Like the one company that practically has a monopoly on manufacturing the plastic part that goes on the end of flat roof drains -- not exactly something to write home about, but still a massively stable market creating plenty of jobs.
• deleted 9y ago
  [deleted]
• crdoconnor 9y ago
  He missed the main reason: currency suppression. Germany has managed to suppress the value of its currency over the years to make its exports artificially cheap, which encouraged growth, creating manufacturing jobs. It did this firstly through reunification (dragging down the value of the DM) and subsequently by joining the Euro (Southern Europe had the value of their currencies pegged higher than their 'natural' value, Germany's was pegged lower). Germany's export boom after joining the Euro would have been short lived if they reverted back to the DM as the value of their currency would have risen in value, pushing up the cost of exports, ending the boom. Instead it continued unabated. China also achieved the same thing largely by buying foreign debt (mostly US treasuries). As did Singapore, Taiwan, Hong Kong and Japan, all of which achieved similar results. There's no magic sauce, it's just a question of whether industry takes political precedence over banking (which likes an overvalued currency).
  • RobertoG 9y ago
    Not sure why you are down-voted. It's obvious that this is part of the trick and many economist have pointed it. It works the other way too, the currency of other countries in the Eurozone is above what it would be without Germany, and all that without a fiscal stabilizer between the countries, like it do happens in the United States between different states. It's a recipe for disaster if the goal is an united Europe. Now, if the goal is to make Germany richer then we are in the correct path.
    • JanSt 9y ago
      He is right in some way, but he also misses that german workers had to take a lot of cuts in pay, benefits and working conditions. While french workers only have a 35 hours work week and greece workers get to enjoy a long pension, germans work till 67 (soon 69) getting a lower pension (as percentage of pay) and mostly work 40 hours (for full time workers. Statistics are heavily skewed by (mostly) female part time work which is tax-incentized). Many countries did not adjust as hard to a globalized world as germany did (real wage loss in the last ten years while lowering pension, pushing back retirement age, etc.) edit: I upvoted him, just for the record
• polmuz 9y ago
  > Tax advantages are another reason. 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. Really? How?
  • crdoconnor 9y ago
    This is basically the same theory as trickle down economics. I thought Harvard wouldn't be pushing that any more.
    • ChefDenominator 9y ago
      There is no actual theory of trickle down economics. This is a derogatory term used as a distraction from discussing real economics.
      • darpa_escapee 9y ago
        Colloquial use of theory usually means concept or hypothesis.
        • ChefDenominator 9y ago
          Okay, there is no formal concept or hypothesis of trickle down economics. (However, most PhD economists use the phrase "economic theory," but you may have some insight into this that they have not yet been exposed to.)
          • defterGoose 9y ago
            Sure there is. The concept is that if you allow the richest to keep all their riches, they will spend it on things which will stimulate the rest of the economy. Of course, this has proven to be a seriously misguided theory, with the actual results being a lack of consumer spending and concentration of wealth to the wealthy. Is that succinct enough for you? Now, whether a bonafide economist came up with this, or RR just pulled it out of his butt is another question...
• buro9 9y ago
  Wow, that's a pretty appalling article. Seems to avoid even mentioning the desire of most of Europe to try and learn from what went wrong after the Great War. In 1918-1930 Germany was left so weakened by peace treaties that the seeds were sown for WW2. Post-WW2 the allies felt that a Germany crippled would only bring future wars, and a huge co-ordinated effort to build a sustainable industry and economic growth was put into motion. Germany and the people of Germany should profit from peace. Part of this was the Marshall Plan, part the European Recovery Program. This positioned Germany to have a couple of advantages, namely that the Victorian era mass production methods that had been pioneered could be discarded (but remained in place in a lot of the other European developed countries). In Germany these were fully replaced by WW2 era production methods as most of Germany's industrial capability had been destroyed or damaged. Additional processes to limit industrial capabilities (the key method of which was limiting steel output of the Ruhr Valley, which acted to restrain all industry) meant that industry was incentivised to find a larger profit per unit rather than slimmer margins from more units. Combined with not being able to maintain a military, Germany was able to invest in skilled manufacturing like no-one else were able to. Over a course of 50 years this resulted in not just a modern manufacturing capability to be put in place, but for that to be at the very highly skilled end of manufacturing. The reason so many of the mid-sized market leaders come from Germany can be traced back to post-WW2 policies to ensure that Europe could be at peace. Some of these policies were undoubtedly exploitative in the short term, but long term have achieved their goal.
  • olewhalehunter 9y ago
    does the fact that Germany is right smack in the middle of Europe between Eastern European powers that can supply cheap (EDIT: and skilled, looking for better universities or opportunities) labor and Western/Northern European markets that can afford their goods have anything to do with this?
    • buro9 9y ago
      Not really as that only represents time since the Berlin Wall fell. Whilst the flood of cheap labour is of course an important factor since then... the companies being talked about established themselves long before the borders were opened.
• sparkling 9y ago
  Related: https://www.youtube.com/watch?v=eUjqQZLbKgA https://www.youtube.com/watch?v=eUjqQZLbKgA
• IdontRememberIt 9y ago
  I think the most important factor has been missed: planned luck. All the countries (in Europe) who are having success today are the ones who had a crisis (each for a different reason) in the '90s and made structural reforms. During the crisis in the 2000s and 2010s, these countries (Sweden, Switzerland, Germany, etc.) were leaner, more flexible than their "competitors". Fun fact, most of these countries are protestant. It would be interesting to have an explanation for this correlation.
  • JanSt 9y ago
    You are right on the structural reform part, you should not be downvoted! There were massive changes in Germany (Hartz IV Reformen)
    • marenkay 9y ago
      Though I wonder how these changes have actually had effects on these sectors, as this basically just produced a low payment workforce that these days benefits low paying unicorns like Uber, etc. All that Germany basically did was to change social law so that a higher amount of people would end up within the lower range of the work force and make it harder to get out. E.g. effectively these days losing your job for longer term means you have to liquidate all your assets as a German until you have nothing left before social service would help you. Coming back to the article, as a German I actually do not remember any larger structural reforms that would have had beneficial effects on mid to high skilled workers. Looking at my own 25 years of working I would say... I notice an increase in costs for maintaining the high skill level and income completely being almost irrelevant because of devaluation of currency and almost no increases in the market in the past two decades.
  • thesumofall 9y ago
    Max Weber has you covered: https://en.m.wikipedia.org/wiki/The_Protestant_Ethic_and_the_Spirit_of_Capitalism https://en.m.wikipedia.org/wiki/The_Protestant_Ethic_and_the... However, the German economic powerhouses are the Southern states - all of which are predominantly Catholic
• strict9 9y ago
  >Germany is far ahead of other large countries with regard to mental internationalization. This includes language competencies, international experience from student exchanges, and university studies. Countries such as France, Italy, Japan, and Korea lag far behind in these respects. Don't know much about France or Italy, but know enough about Korea and to a lesser extent Japan about how important language and international studies are for an already overly rigorous education system. That along with the bombshell assertion without evidence that the inheritance tax is the greatest burdens companies face today removes any credibility from the rest of the article.
  • skue 9y ago
    > That along with the bombshell assertion without evidence that the inheritance tax is the greatest burdens companies face today removes any credibility from the rest of the article. You disagree with one point [1] and question another, so for that reason you discount the entire article? If you can't align new information with your existing mental model, then the new information must be completely wrong? This attitude has become so pervasive and so pernicious. Somehow even information has become partisan. [1] BTW, do you have enough familiarity with Germany to make this comparison, or are you holding the author to a higher standard than yourself?
    • strict9 9y ago
      There is at least one enormous falsehood in the article, and in another, a large political assertion made as though everyone agrees with it. Of course I'm holding the author to a higher standard. Mine is a comment on HN, the other is an article by a purported expert on a specific topic. Information isn't partisan, but it inevitably ends up used for partisan purposes.
    • jcampion 9y ago
      I think this puts into light the fact that the article doesn't cite sources for its affirmations, thus making it worth as much as an opinion piece, and allowing other people to interject and oppose their own view points. I know this piece comes from HBR, and the author probably has done his share of research before writing, but still.
• kevmo 9y ago
  This article grinds too many axes to be as insightful as it could be. E.g., "[T]he inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector." is just casually tossed in there.
• Boothroid 9y ago
  Perhaps this means Germany could suffer disproportionately as a result of automation. It's also worth pointing out that Germany is not immune to global trends that may erode the ability to sell based on quality - I recently bought a 2001 BMW E39, thought by many to be the best BMW ever made. In fixing up the E39 I've come across the same opinion over and over again: BMWs/German cars in general are not as well made as they used to be. Edit: I'm not saying my E39 is thought to be the best BMW ever made of course :D
  • marenkay 9y ago
    If anything Germany will suffer from the consequences of not investing in education for the past four decades as we are already seeing the lack of capable, well-trained, high skilled workers. German education basically has been focussed on producing low level work forces and ignoring the rest, you can see that clearly while hiring.
    • rtfs 9y ago
      This is not correct. We are quite over educated here in the high skilled workforce - nowadays much more students, meister and techniker everywhere, and sure we have created a low wage sector recently as well, but this is another story and represents a much smaller share of the entire workforce.
      • marenkay 9y ago
        Have you tried checking out some of these students these days? Have you missed the shortage notes about classical Meister, etc. roles given out the past decade? Also low wage sector is a few million people (last official numbers are about 8 million people). Compare that to high skilled workers.
  • prodmerc 9y ago
    Maybe you were thinking of the E36? :D Many say the 1984-1994 Mercedes E-klasse was the last car that was built to last. Afterwards, they switched to cheaper parts, less overengineering, to keep up with competitors and profit more from planned obsolescence. Personally, I've seen many of them break down, and they rust quite badly if not maintained :)
• baxtr 9y ago
  Germany is a highly decentralized country. Maybe go and study in one of the metropolitan areas but then return to their beloved villages far away from the maddening crowds. In fact many of these hidden champions are in the "middle of nowhere" with often sub-par logistics (e.g. no immediate Autobahn or major train connection).
• samfisher83 9y ago
  I think this is a big contributor: A further pillar of the Hidden Champions’ competitive strength is the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades. The Hidden Champions invest 50% more in vocational training than the average German company. I think a 4 year college degree does not make sense for a lot of jobs. It just puts students with more debt, and sometimes skills that don't lead to a job.
  • dejv 9y ago
    We have similar educational system here in Czech Republic. There are numerous pros and cons. Basically at the age of 15 you have to choose what you want to do with your life as changing careers are not that simple. And lets be honest, most of 15 years old kids have no idea what they want to spend rest of their life doing. I did take this technical route (focusing on electronics, computer networking and programming) and it give me some edge when I started my CS degree, but further study of medicine, law or even art is out of question as I don't had any theoretical basics for those majors. All I study during my high school was mathematics, physics and specialised subjects.
    • samfisher83 9y ago
      In america you are required to take english, math, physics, chemistry etc. in high school. I am just talking about the post high school years.
      • dejv 9y ago
        Well, it is different system here and in Germany. Vocational study or technical high school is limiting your choices of uni and career paths. Post high school you either go work (you already spent few years on the job during school) or uni. There are tons of jobs that are closed to you when you choose wrong path at the age of 14 or 15 and it is really hard to change the tracks. It is good system for manufacturing companies and economy, but not that great for some people.
        • 9y ago
• ChefDenominator 9y ago
  One thing not listed in the article is that German tax policy is very export-friendly.
• tiatia 9y ago
  Germany's real secret is that they don't pay their engineers. An engineer, even with a PhD from a world class university, makes around 55k. Even in cities like Munich they will laugh about you if you request 60k. Sure, if you have tons of experience, industry contacts etc., maybe more SOMETIMES. But let's get back to the 55k. A short internet search (www.nettolohn.de) tells us this is approximately 2600 Euro net pay per month. And this is for a full time job that is likely very stressful and comes with tons of responsibility. An English teacher in China (Shanghai, Beijing) can make 3000 Euro net a month. Even if you claim my numbers are a bit off. It gives you an idea.
  • taway_1212 9y ago
    From what I can tell, the pay in UK, France, Spain, Italy is similar or worse. I guess that's how we roll in Europe.
  • quonn 9y ago
    First of all, you have to adjust this for the cost of living and the fact that employers have to pay about half of the health insurance and retirement savings cost on top of the salary as well as three or four weeks of payed holidays etc. 55k Euros in Munich is easily worth more than $100k in the US. Second, a CS graduate can certainly get 60k in Munich and a PhD will likely have 70k or more. At BMW this may be 80k or more.
  • s3nnyy 9y ago
    This is why I moved to Switzerland.
• tiatia 9y ago
  "I don't understand why this comment is being down voted." Because most readers on hackernews are left wing idiots and teenagers? "Germany has managed to suppress the value of its currency" Actually, Germany did not suppess it's currency. But France basically insisted it gives up the "Deutsche Mark" in exchange for the reunification. This had the, in back-sight obvious but at that time unexpected side effect, that other European countries could not devalue anymore. In combination with quite low wages it makes the current German industry very successful.
  • dang 9y ago
    Since we asked you repeatedly not to break the HN guidelines and you've continued to do it repeatedly, we've banned this account. We detached this comment from https://news.ycombinator.com/item?id=14434886 https://news.ycombinator.com/item?id=14434886 and marked it off-topic.
• skookumchuck 9y ago
  Rarely mentioned is the fact that post-war Germany turned to free markets, hence the "German Miracle". This persisted until 1970 or so, when the German economy turned significantly towards socialism and big government.
  • Roboprog 9y ago
    It seems they did well both before and after 1970. So???
    • skookumchuck 9y ago
      The growth rate flattened out after 1970.
• LeanderK 9y ago
  I think our education system is pretty solid and well equipped to deal with tomorrows challenges and create competent employees (this is just briefly addressed in the article). While our education system is pointlessly complicated, a typical product of german bureaucracy, it's surprisingly flexible. If you want a job in Germany, you have do get some form of a degree. Especially "hidden champions" don't hire unskilled labourers, ever. There are essentially 3 options: 1. the apprenticeship: Still popular it is the most practical of the three. It takes a few years where you learn to master all the basics, even if its in practice handled by a machine, but also all the necessary theoretic backgrounds so that you know what you are doing. All the practical skills are taught at the company and there are (mostly) special schools for the theoretic parts. Also important: The apprentice already earns something during his apprenticeship! For some, depending on the individual circumstances, this is very important. Also you apply your skills as soon as possible, since the company already pays you, it tries to get you productive as soon as possible. Apprenticeship are no joke, they produce hard working, competent and practical employees. There are A LOT of companies looking for apprentices right now and not enough applicants. 2. the "dual study system"(direct translation): This is getting more and more popular and for many it is the right choice. It's a mix between apprenticeship and a university study. Half of your time you spend at your company, the other half you study at special "applied university"-like institutions(legally, they are not universities in Germany). I think especially for CS, most would be in good hands in these programs. They don't focus on super-theoretical stuff, they are very practical while providing your with a valid bachelor-degree in the end. For some subjects, the dual is the better option. The applied universities are not super focused on research and staffed with professors coming from the industry. They will teach you real-world, relevant stuff without neglecting the theoretical basics. After the bachelor, you have the choice to delve deeper into research with a master, either at this institution or switching to a traditional university. Also, you get paid during your study. 3. the university study: Well, this is essentially the same compared to your universities beside that it's free ;) They are often way more theoretical then the dual-study system. You have to be motivated by your material, since it's not immediately useful. Also in germany as an university student you are very independent, nobody pushes you to go to your lectures, take the tests or do your weekly problem set. Many get too relaxed and perform better in a more controlled environment. But if you're interested in the theoretical side of your subject and you want get a more academically demanding degree, the university is the right choice. As a CS-student in germany, automation and digitalisation of factories (industry 4.0, as we call it) is the buzzword heard everywhere and i think this system is equipped to handle the challenge. Don't underestimate the apprentices, they know their stuff. 2-3,5 years of training are separating him from unskilled labor.
• tehabe 9y ago
  What people overlook, also this linked pieces is, that Germany also has the banking system for this. You can say, there are three types of banks, private, state and co-op banks. And while there are huge private banks, most state and co-op banks are organised locally. Almost every district has its own Sparkasse und many towns still have a Volksbank or Reifeisenbank. This is an important feature of the economics in Germany I think. Yes, many of these banks might be too small today and many merge into bigger banks but they are still the most trusted banks in the country.