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Why the US is looking to Germany
By Edward Luce
When asked by Tony Blair for the secret of her country’s resilience, Angela Merkel, the German chancellor, said: “We still make things.” It is a question you often hear in the US nowadays. It would be an exaggeration to say Germany is back in fashion. There is too much disapproval of Berlin’s handling of the eurozone crisis for that. Yet when it comes to the labour market, the US is suffering from a rising case of “German envy”, as one analyst puts it.
“People are continually asking me how we do it,” says Eric Spiegel, the US chief executive of Siemens , which has the distinction of being cited by Barack Obama in his last two State of the Union speeches. Getting a “shout out” from the US president may sound trivial – although executives at unuttered competitors, such as General Electric, do not see it that way. But Mr Obama was only repeating what was being widely said by many business leaders and trade unionists in the US. “Can we replicate the German model?” asks a centrist Democratic senator.
As a package, the answer is no. Germany channels roughly half of all high-school students into the vocational education stream from the age of 16. In the US that would be seen as too divisive, even un-American. More than 40 per cent of Germans become apprentices. Only 0.3 per cent of the US labour force does so. But with the US participation rate continuing to plummet – last month another 496,000 Americans gave up looking for work – many US politicians are scouring Germany for answers.
It is turning into something of a pilgrimage. Rick Snyder, the Republican governor of Michigan, and John Kasich, Republican governor of Ohio, have both recently toured vocational academies in Germany. The German embassy in Washington has even set up a programme called the “skills initiative” to cater to all the questions from the heartlands.
“The US is not a developing country so we don’t need to send teams of technical advisers into the field,” one German diplomat said. “We are just trying to respond to the curiosity about the German model.”
The longer the US recovery continues, the more that curiosity increases. The US faces a deepening mismatch between what its labour market needs and what the education system is producing. There are two sides to this paradox. First, the US is underskilled. It has high unemployment at a time when there are 3.5m job vacancies, according to the Bureau of Labor Statistics. Some economists argue that the US “skills gap” is imaginary – a shortage of engineers would have shown up in salary inflation, which has not happened. The average hourly cost of a US manufacturing worker is $32. In Germany it is $48. Yet US employers insist the shortage of skilled labour is a growing problem.
US states tend to outbid each other with tax breaks. This works well for casinos. But many states, such as Michigan and Ohio, are realising that what desirable investors most covet is skilled labour. According to the OECD, the US comes last out of 29 countries in terms of the work readiness of its high-school leavers. And 46 per cent of those who go to college fail to complete their four-year degree within six years. “Getting a tax holiday does not make up for having a bad business plan, it just delays the pain,” says a senior US executive at Daimler, the German carmaker, which has several US plants. “If you have a good plan, what you are really looking for is good people.”
Second, the US is overqualified. Almost half of Americans with a degree are in jobs that do not require one, according to a study by the Center for College Affordability and Productivity. Fifteen per cent of taxi drivers in the US have a degree, up from 1 per cent in 1970. Likewise, 25 per cent of sales clerks are graduates, against 5 per cent in 1970. An astonishing 5 per cent of janitors now have a bachelor’s degree. They must offer endless nocturnal moments to repent those student loans. Only at the top of the system do the labour and education markets mesh well. PhDs and postgraduates are the only US category to enjoy rising incomes, often dramatically so.
For a company such as Siemens, which has 60,000 American employees and recently reintroduced train manufacturing to the US (in a plant near Sacramento), the answer is simple. The US needs to rejuvenate its community colleges, which offer two-year vocational degrees but are often starved of funds. And it needs to fall back in love with apprenticeships. Benjamin Franklin started off as a printer’s apprentice in Boston. Many US trade unions, such as the pipe fitters and boilermakers, used to train their own. Perhaps they should remember their history.
Siemens, meanwhile, is angling for a third Obama mention. The group recently had 2,000 applications for 50 vacancies in North Carolina. Only 10 per cent passed the aptitude test. At a cost of $165,000 an apprentice, Siemens is training six local high-school leavers in “mechatronics”, a hybrid of mechanical engineering and computer science. These are robot supervisors. The company hopes apprenticeships will catch on in the US. It graduates 10,000 a year in Germany, a country that seems to have fewer problems with the underskilled or the overqualified. “There is a great potential for the reshoring of manufacturing to the US,” Mr Spiegel says. “But if companies have problems finding qualified people, a lot of it won’t happen.”
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