Has Germany lost its ability to innovate?
The malaise of Germany's economy is also caused by a loss of innovation capacity, which has long characterized German industry. Facts, numbers and insights
There is something deeper in the malaise gripping the German economy, which is currently struggling with the government's remodeling of the financing provided for in the special funds rejected by the Constitutional Court ruling . And that goes beyond the serious energy crisis, the explosion of costs caused by the end of the privileged relationship with Russia and its gas.
It is a theme that economists define as structural and concerns the innovation capacity of what has traditionally been considered the locomotive of Europe.
HAVE GERMAN COMPANIES LOST THE DESIRE FOR INNOVATION?
German companies have lost the taste and desire to innovate. This was revealed by the data from the latest Innovation Report drawn up by the German Chamber of Industry and Commerce (DIHK) and relaunched by the weekly WirtschaftsWoche . The summary: in 2023 the German economy's propensity to innovate fell to its lowest level since 2008, the year in which the DIHK carried out the first survey on the topic. Of the more than 2,200 companies surveyed by researchers, only one in three said they wanted to expand their innovation activities. In 2020, the year of the last survey, it was half that. And one in six companies even intends to reduce their innovation activities in the next twelve months.
For Martin Wansleben, CEO of the Chamber of Industry and Commerce, this is a clear alarm signal: “Germany needs new ideas and products more than ever to get back on its feet economically,” he said. said while commenting on the findings of the report.
THE SHORTAGE OF QUALIFIED LABOR OBSTACLES INNOVATION
The brakes are those that have been highlighted for some time now by all German economic research institutes and which are on the government's table awaiting laws and measures capable of addressing them: lack of manpower, bureaucracy, uncertainties. And finally, energy costs and courtship by competing countries.
The responses of companies interviewed by DIHK researchers confirm that the shortage of qualified labor has become the main obstacle to innovation. Nearly three-quarters of businesses believe they are held back by their limited staffing capabilities. Another recent survey, the quarterly one by the Institute for the Labor Market and Occupational Research, revealed that there are approximately 1.73 million vacancies that German companies are currently unable to fill. According to the Federal Employment Agency, the average time to fill a position is currently 153 days.
BUREAUCRACY
Next on top of the concerns are the high bureaucratic requirements. More than two-thirds of companies complain that bureaucracy limits their innovations. These involve complex permitting and approval procedures and detailed documentation requirements.
“Many companies are completely occupied with their current core business and regulatory compliance or implementation and therefore have almost no resources left for the development of new products or services,” warns Wansleben.
THE IMPACT OF BIDEN'S WRATH
Thus German entrepreneurship has become a terrain of conquest by competing countries: first and foremost the United States, which with Joe Biden's Inflation Reduction Act has already attracted investments from several German companies, but also China and other Asian countries. The DIHK report highlights how the growing interest of German companies in establishing research and development activities abroad is a warning sign for Germany as an industrial hub. While in the last survey three years ago only a quarter of companies wanted to set up research and development activities abroad, this figure has now risen to a third.
THE REMEDIES OF THE SCHOLZ GOVERNMENT
In his government statement to the Bundestag just over a week ago, Olaf Scholz tried to spread confidence. Referring to the cut in investment caused by the Constitutional Court ruling, the chancellor said it would be a "serious, unforgivable mistake to neglect the modernization of the country in the face of serious challenges". Modernization is necessary and right, because "only if Germany modernizes will we be able to react forcefully to the unexpected crises of the future", he added, "in these coming years, it will be decided where value creation will take place in the future, where innovation and prosperity will be at home in a climate-neutral world.”
While infrastructure investments depend on the government's ability to recalibrate the expenditure chapters of the 2023 and 2024 budgets following the dictates of the Constitutional Court, to address the labor shortage, a new law has recently been passed which should make Germany more attractive for aspiring foreign workers. A series of benefits, the main innovation of which is the introduction of the so-called "opportunity card" based on a points system. Skilled workers who are willing to work and want to immigrate to Germany with the help of this law must demonstrate language skills, professional experience, age and a connection to the country. For skilled workers from non-EU countries it will be easier to bring along their spouse and children, but also parents and in-laws. However, the prerequisite for family reunification is that the support of the relatives is guaranteed and the parents cannot request social benefits.
For entrepreneurs it is still too little. “It is absolutely necessary to counteract demographic decline in the coming years,” says the president of the Federal Association of German Business Associations (BDA) Rainer Dulger, “without skilled workers and workers from abroad we will not maintain our prosperity.”
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/germania-capacita-innovazione/ on Fri, 08 Dec 2023 07:31:40 +0000.