Mechanical engineering with productivity problems

New study commissioned by VDMA

Mechanical engineering is regarded as the showpiece sector of the German economy. Over 1.3 million people work in this sector. Especially international companies appreciate the know-how of German mechanical engineering companies – in other words, made in Germany.

However, a recent study commissioned by the VDMA industry association shows that productivity in the industry has actually fallen since the financial and economic crisis of 2008/2009. In 2000, productivity was still 23 percent higher than in other branches of industry. The last survey took place in 2015. At that time, the figure was about ten percent lower than the German industry average. The high level seen before the crisis has not yet been reached again. Since 2011, productivity has even fallen.

Mechanical engineering as a pioneer for digitization

The researchers explain the productivity paradox in the study using four empirically based approaches. The authors see digitization as a major cause of this paradox. Although the industry is regarded as a pioneer for digitization and industry 4.0, digital change has not yet translated into greater productivity gains. One reason for this is that new business models are still emerging. Researchers also cite the increasing international orientation as one reason.

The third reason is the increasing share of services in the German mechanical engineering sector. Although this brings new business potential, this sector has a structurally low level of productivity because services cannot be easily automated.

The last reason given by the researchers is the difficulty of recording price developments in the industry. The products change and improve over time, for example through innovations or customer requests.

About the study

The Centre for European Economic Research in Mannheim and the Fraunhofer Institute for Systems and Innovation Research in Karlsruhe participated in the productivity study. The industry association VDMA commissioned the study.