The COVID 19 crisis accelerates structural change in the world of work

The current crisis is having a massive impact on the economy and the world of work, and we can expect it to accelerate the structural change that has been shaping German manufacturing industries for at least three decades. Two developments are driving this change: the deep integration of German companies in global production networks and the relocation of production to low-wage countries. This has created a particular pattern of specialization. In a high-wage country such as Germany, only those manufacturing locations that develop innovation-related functions remain competitive. These functions can be special expertise in the ramp-up of new products and technologies, or close cooperation with product development departments. The shift of German manufacturing locations towards a combination of manufacturing and manufacturing-related innovation has led to an increase in the share of engineers, technicians, and skilled workers in employment over the past decades, while the share of semi-skilled workers has been steadily declining.

The COVID 19 crisis will exacerbate this development, because in order to survive the crisis, companies will look for savings. This will particularly affect those locations whose production can be relocated and which do not have specific innovation functions. Contrary to what is often predicted in the current debate, the crisis will not lead to “reshoring” and re-localization of production, but rather to an intensified search for locations with lower production costs and therefore to increased globalization. While it is entirely plausible that medical protective equipment and medicines will be increasingly produced locally, this does not necessarily apply to other products and industries.

It is also not to be expected that automation will trigger a trend that will lead to production being brought back to Germany. The reason is simple: the level of automation in most German industrial companies is already very high. A surge in automation is to be expected rather in China than in Germany. Since the COVID 19 crisis is accelerating the structural change that has taken place so far, long-term measures should be further developed in addition to short-term reactions to the crisis (such as the extension of short-time work benefits). Training and personnel development will play a special role in this context. What is lacking, first, is a systematic promotion of new forms of digital knowledge transfer that can be accessed by employees in a self-organized way and that are integrated into everyday working life. Those companies that have advanced in the introduction of digital learning platforms have benefited from them during the crisis. Second, many companies lack long-term development planning for their employees, especially for those working in production. However, they are the ones most affected by structural change. Long-term development paths must be designed for these people; the necessary training steps can be planned, based on these paths.

ABOUT THE AUTHOR

Martin Krzywdzinski is Professor of International Labor Relations at the Helmut Schmidt University in Hamburg, Head of the Research Group “Globalization, Work, and Production” at the Wissenschaftszentrum Berlin (WZB) and Director at the Weizenbaum Institute for the Networked Society. He is a member of the “Working Futures” Network at the Wissenschaftskolleg zu Berlin.

More articles of the series "Wiko Briefs - Working Futures in Corona Times" can be found here.