
Why Germany Still Has So Many Middle-Class Manufacturing Jobs - forgotmysn
https://hbr.org/2017/05/why-germany-still-has-so-many-middle-class-manufacturing-jobs
======
sumedh
I have an interesting anecdote to share, couple of years back I was working in
an Indian branch of an MNC. The water from the tap on a wash basin had low
pressure and it was frustrating to wash your hands but I guess we never
complained because in India you just accept such minor inconvenience.

One day the VP from the American HQ came to the Indian office and yes he was
German, during the intro meeting he talked about the low pressure from the
tap. The tap was changed the next day.

I still remember that story because it taught me how Indians look at their
surroundings and how a German looks at the same surroundings.

~~~
educar
I have a similar anecdote except the German in my story fixed the tap himself!
I was squarely impressed with the skills an average German has.

~~~
mtempm
This is so German actually.

I've been living in Australia the past year (which has a lot of Germans) and
twice I helped someone change a flat tyre. Both times a German also came to
assist, and both times it was an American who didnt know how to change a flat
(there arent that many of them in Aus).

~~~
sverige
As an American with some German ancestry, I find this to be very embarrassing.
(The Swedes in my family can all change a tire as well, including my sister,
but the German side is embarrassed.)

Americans have become complacent and lazy, with no sense of "know how" or
"make do." Hell, kids don't even know how to clean and cook a rabbit, let
alone how to catch one with a snare. If the zombie apocalypse ever happened
for real, The Walking Dead wouldn't last a full season. Everyone would starve
to death.

~~~
a_bonobo
I assure you 99.99999% of Germans don't know how to clean and cook a rabbit.

~~~
Arnt
You're saying that there are only 8 Germans alive who can do it. Between 90
and 99% sounds more reasonable.

~~~
easilyBored
_You 're saying that there are only 8 Germans alive who can do it._

and 6 of them have a 99.9% chance of dying within 10 years, given that they
are 82+ years old. :)

On a serious note: A lot of immigrants make a lot of money (relatively
speaking) right away since they are jack of all trades and are willing /have
to learn. Things that a locksmith would charge you $150 and a plumber $200 and
an electrician $xxx an immigrant can do all within an afternoon, all for
living rent free as superintendent. Probably some rules and codes are bent but
who's watching...

~~~
dozzie
The owner, who is German himself.

~~~
easilyBored
I meant government rules and codes .

~~~
dozzie
I know, but that's kinda the point: Germans tend to obey the rules even if the
government isn't watching at the moment.

~~~
Arnt
Germans want rules to be obeyed and things to work. Which may very well be
related to the original subject.

------
lima
The apprenticeships are particularly important.

Many brilliant friends of mine who failed university or even high school did
an apprenticeship instead.

Among them are CEOs, R&D managers and founders.

~~~
lacampbell
I've often idly wondered if you could do Software Development as an
apprenticeship. Use industry tools in your work day, and theoretical computer
science at night schools/block courses.

~~~
eksemplar
You could. The majority of software development isn't science it's
craftsmanship and often good business skills make more value than something
like calculus or linear algebra.

Not for people inventing new stuff or pushing boundaries, but for the horde of
developers who are copy pasting, google programming and writing classic ASP
every day.

~~~
pjmlp
I did the Portuguese apprenticeship program back in the late 80's/early 90's,
as I wasn't sure to be able to qualify for the university on my first round
and wanted to have already some kind of degree, to pay bills until the next
attempt.

Those three years of apprentice were great and I learned a lot, but at the
university I got to learn how little did I knew, even if those of us coming
from informatics apprenticeships knew more than the majority coming from
classical high-school programs.

~~~
eksemplar
Well, nothing beats learning how to make informative decisions in your field,
which is something you'll have a much easier time picking up at a university
than on your own. Though with all the free video lectures online, the gap is
slowly disappearing.

Almost all the practical stuff I use for actual development has been learned
outside of CS though. So you could easily have a talented CS degree with
middlemanegement skills run an apprenticeship and teach someone how to be a
great developer.

You probably couldn't build an entire company around people who cant decipher
the shit from the quality stuff though. But a degree isn't a certainty in that
department. I've interviewed CS majors who couldn't explain ACID, hadn't heard
of SOLID and who also thought the singleton pattern was absolutely vital.

------
gumby
> 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.

I am surprised by this assertion. Allegedly family-managed firms can make long
term decisions, but those observations are always subject to survivorship
bias. At best I would think this issue marginal. (There's also a bias in the
statement, as inheritance tax in the US is quite low and kicks in at a pretty
high level).

I would think if anything the ability to inherit reduces the likihood of
outside ideas.

(And anyway, in a republic, inheritance is abhorrent. We don't need another
aristocracy.)

~~~
CPLX
You don't have to hedge, that comment about inheritance tax is literally
ridiculous and completely unsupported. The idea that the US has a problem with
too _little_ accumulation of intergenerational wealth is patent nonsense.

~~~
easilyBored
_The idea that the US has a problem with too little accumulation of
intergenerational wealth is patent nonsense._

This is different from parent leaving you stock and bonds.

Father dies, leaves company that makes engines to son and $50 million in cash
because he has invested most in his company. IRS+State: son, you owe us half+
of what your father left you, or $1.1 Billion. If he borrows half of company's
worth that's not going to be a healthy company anymore. So he sells it and
selling is not always the best thing for employees.

Edited: If I was made King, I'd look to lower the inheritance to children to
say 10% and abolish trusts that fund generations of lazy, spoiled brats living
from their great-great-grandfather's money.

~~~
laughingman2
> I'd look to lower the inheritance to children to say 10% and abolish trusts
> that fund generations of lazy, spoiled brats living from their great-great-
> grandfather's money.

Exactly, these leeches have to be stopped.

And the money could be instead put to some good common like free college,
health care leveling the playing field for everyone.

~~~
gambiting
Out of curiosity - let's say I was rich and wanted to set up a trust fund for
my children so they could live like spoiled brats their entire lives. Why,
especially in the "land of the free" would people want to stop me from doing
so? I mean, it's my choice what I do with my money(that was legally earned and
that I paid taxes on), is it not?

This is purely theoretical, as I am neither rich nor have children, but I take
some issue with people saying that kids living off trust funds are "leeches"
\- it was their parents choice to spend money this way, so what is wrong with
that?

~~~
CPLX
Nobody wants to stop you from doing it. They want your kids to pay taxes on
it. That's different.

If I go to work this year and get $100,000 for doing stuff, nobody seems
confused that I have to give a massive chunk of that to the government.

So if you don't go to work this year but get $100,000 from your parents, you
shouldn't act confused that people expect to cough up your share as well.

When families transfer money to the next generation it changes hands. The way
we finance our society, generally, is that when money changes hands a
substantial portion of it is remitted in tax.

So you already paid taxes on it, sure, but that's irrelevant, your kids
didn't. When you give money to your nanny or your driver they have to pay
taxes. When you buy dinner at a restaurant the chef has to pay taxes. So when
you give it to your kids they should pay taxes on it too.

Because when people get money they have to pay taxes on it. That's how taxes
work.

The real question is why the rich kids think that the specific way they get
their money is special and shouldn't be taxed.

------
joelthelion
> 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.

How can you write stuff like that and stay serious?

~~~
mcv
I wondered about that too. I find it hard to believe that Germany has no
inheritance tax, and capital seems to accummulate extremely well in the US
(far too much, I would argue). And the existence of corporations make
inheritance irrelevant to the accummulation of capital for businesses.

------
apo
I was surprised the article didn't mention the euro, specifically how Germany
gets to denominate its goods in a cheap currency that doesn't fully reflect
its strong fiscal policies.

~~~
stephen_g
This is a _huge_ thing - Germany couldn't run its huge trade surplus without
its currency appreciating and reducing its competitiveness otherwise. It's a
pretty bad deal for the consumption-based Eurozone economies though - they
have to internally devalue instead of just being able to devalue their
exchange rate.

It's one of the major problems with the Euro... It was a terrible idea from
the start, and situations like Greece were foreseen by economists like the
great Wynne Godley decades ago (see _Maastricht and All That_ , London Review
of Books, Oct 1992). Unfortunately the mainstream of economics still doesn't
have a developed enough understanding of monetary systems to have worked that
out yet...

~~~
tim333
Dunno. German manufacturing success predates the Euro. The Swiss with a
similar culture but an appreciating currency still run surpluses exporting
stuff they make.
[https://www.tradingeconomics.com/articles/02212017075915.htm](https://www.tradingeconomics.com/articles/02212017075915.htm)

------
KKKKkkkk1
The article asks why there are so many successful mid-size companies in
Germany, and it lists reasons such as continuity of leadership, scientific
competencies, system of apprenticeships and others.

I don't see how this answers the question in the title. How does the school of
mathematics of the University of Goettingen help make German factory workers
competitive with Chinese ones? Why aren't these companies moving their
production to cheaper markets like companies elsewhere do?

~~~
everybodyknows
Wage suppression. Seen most obviously by simple comparison to other Eurozone
states:

[http://fortune.com/2014/10/22/why-germany-is-the-
eurozones-b...](http://fortune.com/2014/10/22/why-germany-is-the-eurozones-
biggest-free-rider/)

This is not something Germans -- such as apparently the author of OP -- like
to talk about.

~~~
claudius
The main point of the article appears to be that peripheral EU countries did
not benefit as much from the internal open market as Germany due to weak
‘civil service’ and oligarchic structures which predated the EU and caused a
misappropriation of EU funds intended to improve competitiveness. It then
somehow seems to conclude that this was all Germany’s fault instead of being
the fault of the people in those peripheral countries with ‘economic
implosion, rising inequality and widespread corruption’.

The article does mention wage suppression in the beginning but does not give a
good argument why the wage suppression as observed in Germany since the early
2000's is a bad thing -- if wages are inflated and you need to compete with
China for manufacturing, then you can either scrap your manufacturing or
suppress wages, there’s not that much of an alternative there.

My sibling comment arguing that the largest low-wage sector in the EU is
somehow inherently bad is also misguided: if the alternative is much higher
unemployment, low-wage jobs are still preferable to no jobs, _especially_ if
they come with the usual social security mechanism, as is increasingly the
case again.

~~~
cowl
exactly. This is something i'll never understand how people fail to consider.
It seems they think that the wages can be magically high and the economy can
go with it 'if we just were willing to want better things'. The fact is if you
ask those workers what do they prefer: a good enough pay for a secure job or a
Better pay for a job that might move tomorrow to a cheaper country? What will
they choose? It seems people of different countries have answered this
differently and we see different results.

No, the magic Better pay and still secure job does no exist outside of naive
communist Ideas.

------
mcthorogood
The HBR article cites the high inheritance tax in the U.S. as reason for the
low number of middle class jobs. But, to the contrary, today the inheritance
tax in the U.S. is lower than in Germany.

~~~
therealdrag0
I didn't really understand that point? Is the claim that if there was no
inheritance tax, a family would accumulate enough money to start a mid-sized
business? Or is the ownership of a business taxed upon death?

~~~
pgeorgi
An inheritance can include a company, if privately held. That company has a
value, and that's taxed through inheritance tax.

The problem is that a company of value $x rarely has liquid assets of
$x*$taxrate, so inheriting a company can mean personal ruin.

On the _other_ hand, not accounting for companies in inheritance tax means
that every family ever will shift all its possessions into a company.

Roughly speaking, Germany solved this by creating a set of exceptions for
value "in a company", as long as it continues to be held for a given number of
years (otherwise, since it was sold, it's considered a liquid asset and thus
fully taxable).

~~~
easilyBored
_On the _other_ hand, not accounting for companies in inheritance tax means
that every family ever will shift all its possessions into a company._

No taxes if a company has an employee that makes at least x00% of minimum wage
for every, say $500K of worth. So your parents leave you a company that has a
$20mm value and you have 40 employees that average $35,000 a year, you pay no
inheritance taxes. Of course you need you'd to set a reasonable timeable to
discourage cheating, otherwise they'd sell /fire 50% as soon as the x year
timeline expires.

------
olivermarks
You could make the argument that the Mittelstand has profited from Germany's
controlling stake and dominance in the EU. One of the big arguments for non
German businesses seeking to leave the EU have been perceptions of unfair EU
bureaucratic advantage to German businesses at the expense of other member
states.

Having said that they have a very good national business model and an
excellent culture around vocational training and expertise building.

~~~
throwaway13337
Yes. They are insulated by EU trade tariffs on goods external to the EU.
Combine that with the most efficient factories in the EU. They get to provide
things that can still beat China after considering the tariffs.

In other words, trade barriers strengthened the middle class.

~~~
comicjk
Tariffs on the EU strengthened manufacturing employment in Germany, but many
other EU countries don't seem to have much manufacturing and are poorer than
Germany, yet still pay those tariffs. That's consistent with the idea that
tariffs provide substantial help to a lucky few while levying costs on
everyone else.

~~~
throwaway13337
But there is manufacturing in those countries too.

Those poorer countries are more able to compete with Germany than with China.

Cheaper goods are nice but aren't as useful to people without jobs.

------
anentropic
I don't find the arguments presented in the article for "why" to be very
convincing.

\- The most important difference is the continuity of the leadership. The
leaders of the Hidden Champions stay at the helm for an average of 20 years

ok yes, could be

\- the German history of many small independent states (until 1918 Germany
consisted of 23 monarchies and three republics), which forced entrepreneurs to
internationalize early on in a company’s development if they wanted to keep
growing

there must be lots of countries where this is the case

\- Scientific competencies also play an important role

there must be lots of countries where this is the case

\- the unique German dual system of apprenticeship, which combines practical
and theoretical training in non-academic trades.

ok yes, could be important

\- Tax advantages are another reason.

skeptical

\- the international openness of a society is an essential factor in the
globalized world of the future. Germany is far ahead of other large countries
with regard to mental internationalization

skeptical that this vague claim is true, let alone an important factor

I was expecting to hear something about
[https://en.wikipedia.org/wiki/German_company_law](https://en.wikipedia.org/wiki/German_company_law)

e.g. "in companies with over 2000 workers just under half the seats on a
supervisory board are selected by the workers"

seems like shareholders have less power and employees have more, under the
German system, and it seems fairly logical that this could lead to long-
lasting companies producing high-quality products

------
nom
I'd like to think it's because WW2 changed us, for the better. We just want to
build great things now and help everyone and not only ourselves. We respect
others, independent of race or nationality, and it think we're much less
superficial than some other countries are. But that holds true for most
European countries so IDK, maybe I'm simplifying it too much right now. It
just feels that way to me.

~~~
sandworm101
German culture is older than ww1/2\. The german respect for labour predates
the 20th century. So too in japan. Some like to think of modern japan and
germany as only a product of post-ww2 development programs, but that denies
the long history of these great nations. That they were able to participate in
ww1/2 demonstrates thier success prior to that conflict. (Imho ww1 and ww2
should be read as one historical narrative.)

------
GBond
I would add differences in domestic consumers preferences. Americans are now
addicted to cheap-quality goods. I passed through the gift shop inside Empire
Sate Building in NY yesterday and 98% of the gifts are asian imported plastic
trinkets branded with Empire State and USA logos. Contrasts that to when I
visited the museums in Berlin where the shops mainly focused on selling
locally produced crafts.

------
atlih
Not a single mention of the Euro? If it weren't a member of the Euro, Germany
would be deindustrializing with a sky high Deutsche Mark.

~~~
luca_ing
Have you missed the discussion initiated by user apo?

[https://news.ycombinator.com/item?id=14261923](https://news.ycombinator.com/item?id=14261923)
(I hope I'm linking the right thing).

Germany had a strong Mittelstand (and was indeed struggling with an
uncomfortably strong Deutsche Mark) long before the Euro. I suspect it would
have worked out.

------
lightedman
Because German engineering is world-renowned. This much has been known for a
good long while. You can take a German bearing of 'low quality' vs. a Chinese
bearing of 'high quality' and easily tell that the German bearing is far
superior.

It only makes sense such engineering capability would result in a lot of
manufacturing work in the middle-class range.

~~~
panzer_wyrm
And the reason that this is true is because Germany protect those jobs and
values people that mastered their craft.

Which are the valued blue collar jobs in US - doctor, chef, programmer and
lawyer. That's it.

~~~
sleepingeights
The US only values lawyers.

Doctors, programmers, chefs are significantly imported from other countries...
particularly India and China.

Over 50% of the doctors and specialists visited by myself and friends were
Indians. Also, over 50% of the highly skilled software personnel and upper
management I worked with were Indians.

* However, none of the lawyers were imported. The position coveted by the US is simply lawyer. A friend of mine had a father who was educated as a lawyer in the country he immigrated from and is one of the poorest person I know. Shame, had they been educated as a doctor or software engineer, then they and their adult-son would not have found poverty as quickly if at all.

------
yuli67
Maybe the globalized world at any one time can only sustain one Germany with
it's hidden champions. But ofcourse it's easier and well paying to travel
around the world and tell everyone they can be like Germany too.

~~~
dx034
The world can sustain more than one because it already does. Switzerland has a
very similar structure and is as successful, if not even more successful. It
also shows that Germany doesn't just succeed because of a cheap exchange rate,
since most products hidden champions produce aren't that price sensitive.

The world could probably sustain even more companies that focus on long term
growth and quality instead of quick products. But that's not how you become
famous. You become famous by making a quick app used by millions that you can
IPO a few years later. So that's what many people in the world try to achieve.
Not building a small company over decades that specializes in something which
most people don't even know exists.

~~~
IIIIIIIIIIII
As a German I of course (quite irrationally) like the praise for "my" country
(I actually feel I'm human, and being German is just birth luck, especially
since I benefited enormously from the reunification).

On the other hand, OP has a point. This is once more an example of what works
for _anyone_ vs. what works for _everyone_. The countries you name all are
very small. Imagine Asia getting even better (they probably will), and imagine
African countries getting their act together (as unlikely though it may be).
Who would buy all those machines and parts?

Also, another great potential for future trouble is that an oversized part of
our economy is bound to making cars. The "Zulieferers" (component suppliers)
are much larger than the actual car makers, and they are all "Mittelstand". If
they have to find new customers some day... electrical cares require a lot
less expertise and less parts I'm told, plus ever more "growth", meaning ever
more cars, isn't such a promising model (looking at Asian city traffic...).

------
boomboomsubban
It's strange that they credit a holdover from the Holy Roman Empire days as
being one of the reasons, but ignore the privatization of East German industry
and the massive infrastructure investment after reunification.

~~~
cowl
This is not a recent phenomena though so those two factors you mentioned can't
be considered as reasons.

~~~
boomboomsubban
"Why Germany still..."

