German firms hone tools to defuse demographic time bomb

WUPPERTAL, Germany (Reuters) - For more than 130 years, Knipex, a family-owned company in western Germany, has made pliers for craftsmen around the world. Recently it has developed a different set of tools to help it cope with an aging workforce and skilled labor shortage.

Kai Wiedemann, head of personnel of Knipex, a 130 year-old family-owned pliers and tools maker company poses for a picture in Wuppertal, western Germany, October 26, 2016. Picture taken October 26, 2016. REUTERS/Wolfgang Rattay

The management toolkit includes above inflation wage rises, subsidized meals and an on-site nursery, as well as training for older workers to operate machines doing work they used to do and flexible working conditions beyond the statutory minimum.

It shows how companies in Europe’s biggest economy are increasing their efforts to adapt to a long-heralded shortage of people of working age now that an economic upturn has driven employment and vacancies to record highs.

Low birth rates and increased life expectancy are affecting many advanced economies, but a survey by staffing firm ManpowerGroup found German companies were far more worried about attracting and retaining talent than their peers in the United States, France, Italy or Britain.

“Our strategy to avert a shortage of skilled labor can be summarized like this: We simply want to be seen as the best employer in the region, by our own employees and by outside candidates,” Knipex’s head of personnel Kai Wiedemann said.

While globalization and digitalization have eroded wages and benefits in many developed countries, Holger Schaefer, labor market expert at the Cologne Institute for Economic Research noted the demographic time bomb was ticking elsewhere too.

“It’s somewhat like a look into the future if you look at what German companies are doing,” he said.

Pay rises are the most noticeable shift. Last year, wages rose in real terms by 2.5 percent, the most in over two decades.

As a non-listed company, Knipex does not face instant pressure from shareholders if profits come in lower for a year or two. The building of the kindergarten, unusual for a company of 1,200 workers, was financed with savings built up over years.

Many of Germany's DAX-listed companies are taking their own measures, however, and even household names like Siemens SIEGn.DE or BMW BMWG.DE, who still attract plenty of applicants, have trouble in some areas.

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Siemens reintroduced a scheme this year to pay up to 3,000 euros to employees who refer candidates that it successfully places in jobs.

“The problem is not leaving us unscathed,” said a company spokesman, adding that the talent pool was getting smaller, especially in software development and engineering.

Car maker BMW has turned to the United States, creating a 200-strong digital innovation hub in Chicago and hiring software engineers who worked for mobile phone pioneer Nokia.

Others are looking to education. Software company SAP SAPG.DE said it was offering studies in IT and Economic Computer Science to fill knowledge gaps among applicants.

Knipex, founded 1882 by the great-grandfather of CEO Ralf Putsch, has given above inflation pay rises for three years. Its other measures have cost roughly 1 million euros per year, while annual sales are more than 100 million euros.

With an eye on competitors such as Facom and Gedore, the company, located in the western city of Wuppertal in Germany’s most populous state, North Rhine-Westphalia, it has limited price rises, but for Wiedemann, the investment is paying off. “We’re getting many more job applications now,” he said.

Katarina Dudesin, who came to Germany in 2003 from Bosnia-Herzegovina, works 20 hours per week in pliers production while her two smallest kids are in the company kindergarten, which she said had more staff and cost 10 percent less than equivalents.

“It makes life so much easier,” Dudesin said, adding that it had enabled her to return to work more quickly than otherwise.

Despite a recent rise in the birth rate and the arrival of nearly 900,000 migrants last year, experts estimate the working age population, whose pension contributions support the growing number of retirees, will shrink by up to 6 million by 2030.

At Knipex, roughly a third of employees are aged 50 or older. Most will retire within the next 10 to 17 years.

“This will be a crunch for the company,” Wiedemann said, while adding that training older workers to program machinery that now does some of the more labor-intensive jobs has helped.

A study by Boston Consulting Group predicted Germany’s GDP per capita would grow by only 0.5 percent in 2030, far below the average of 1.3 percent. Maintaining the current labor force would need immigration of at least 400,000 people every year until 2050, the Institute for Employment Research estimates.

But Chancellor Angela Merkel’s open-door policy for migrants has met a popular backlash and while most of the recent arrivals are of working age, many struggle to get jobs, partly due to language barriers and a lack of certified qualifications.


Companies offered more than half a million vocational training positions this year, 3 percent up on 2015, but almost 50,000 remain unfilled, official figures show, with health care, social services and construction among the most affected.

“Our sales would easily be 10 percent higher if I could find enough staff,” said Danny Schindler, CEO of Thuringia-based construction firm HBS Elektrobau that specializes in electrical installations for industrial buildings.

The firm raised wages for its almost 300 employees by 6 percent on average in the past three years, more than double the national average. It passed the cost to customers, showing how the lack of skilled workers is also lifting inflation, which hit a two-year high in October.

For Bavaria-based social services company Diakonie Neuendettelsau, with 7,000 employees, recruitment problems have hampered the establishment of new facilities, said CEO Dietmar Motzer.

Both companies have designed special training schemes for young people from other European states like Hungary, Romania, Bulgaria and Spain, where youth unemployment is high.

HBS Elektrobau pays for language classes for its future apprentices in their home countries before they start and has expanded recruitment to include Tajikistan and Vietnam.

“If you ask me, we don’t have too many migrants here,” Schindler said. “We still have too few.”

Additional reporting by Georgina Prodhan and Edward Taylor; editing by Philippa Fletcher