Tony Blair once asked Angela Merkel, what was the secret to Germany’s economic success? The German chancellor simply responded, “We still make things.” Since the industrial revolution in the 1890’s, that statement could not be truer. The fuel that drives Germany’s industrious export economy is the strength of their medium sized business; a product of the country’s educational system and values.
These medium sized businesses, called “mittelstand,” would equate to a 20 to 10,000 employee business. There are roughly 3.5 million mittelstand companies which employ more than 70% of all German workers in the private sector. Most of these firms make their products in Germany and export them globally. Germany’s top exports are based around vehicles, machinery, and pharmaceuticals. These three categories alone consist of 51.6% (US $691 billion) of Germany’s exports.
Mittelstand companies utilize Germany’s unique educational system to hire people out of college. In America, a student who drops out of high school or even chooses to forgo college are mostly disregarded in the broader economy. On the contrary, these people are assets in Germany.
An excellent example of Germany’s success in hiring young adults is seen in Trumpf, a family-owned company with head offices in Ditzingen. Trumpf is one of the world’s largest providers of machine tools and receives business from companies ranging from Harley-Davidson to Apple. This family-owned firm earmarks a little more than 8% of revenue towards fundivng vocational programs. These programs consist of hiring students out of tenth grade and putting them on a three-year training and schooling program while promising a full-salary job afterward. Many companies employ similar programs to Trumpf, utilizing a sector of the workforce that is often easily disregarded. In fact, only 7.8% of those under the age of 25 are unemployed.
In addition to the already remarkable low unemployment rate among young adults, Germany’s cultural values lead to minimal job turnover. On average, only 2.7% of German workers want to leave their company each year, compared to 30% in some American companies. This loyalty stems from the perks that come with vocational programs, such as companies having paid for their education. Many countries have tried to replicate Germany’s success by creating better vocational schools, hoping for them to act as a catalyst for youth employment; although, it is not that simple. Germany’s success is based on deeply rooted relationships vocational schools have with each company, along with the trust that employees have with their employers. This loyalty has yielded long lasting employees, who often stay with the same company for decades, allowing a company to operate at peak efficiency levels.
Germany is easily outshining other countries in the European Union when it comes to youth employment and job stability. Spain struggles with unemployment with a staggering 25% unemployment rate versus 5% in Germany, and a 40% youth unemployment rate compared to 6.70% in Germany. Germany’s unemployment has steadily decreased since 2008 compared to other EU countries, where there has been a steady increase. Germany’s focus on apprenticeships and vocational systems has proven successful and has allowed for increased job stability amongst the German population.
An addendum, many economists argued that Germany’s highly regulated, export-oriented based economy would not be able to thrive in the modern world. Germany easily proved their strength and is now the richest country in the European Union and one of the largest exporters in the world. Germany also managed to recover from the global recession in 2008 faster than any other world power. Even among high stress, Germany’s mittelstand companies still committed to fund vocational schools, therefore maintaining a skilled workforce. Germany’s recession was short-lived and they fully recovered by the first quarter of 2011. Germany stands out in the European Union, and is a role-model for stability and efficiency for countries both in Europe and North America.