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The Future of Work in the Digital Age: A German Perspective

Monday, October 23, 2017

By Paula Klein

It may be obvious that the impact of digital technology on the future of work is a global concern. But it’s also true that the seismic rumblings taking place are felt differently in every country and region of the world.

At a recent MIT IDE seminar, Max Neufeind (in photo, above), researcher and adviser at the German Federal Ministry of Labor and Social Affairs, shed light on digitization’s impact on his country’s labor and social policy.

Recently, Neufeind said the German government received input from trade unions, businesses, the public, and NGOs to draft a white paper on the topic of Work 4.0. The paper, which was published in November, 2016, addressed the overarching question: “How can we preserve, or even strengthen, our vision of quality jobs and decent work in an era of digital transformation and societal change?” Additionally, a representative survey of 1,200 German citizens focused on work in the next few decades and resulted in varied opinions of digitization and ideals about future worlds of work.

A National Dialogue

The dialogue is a first step in what the German government sees as an ongoing and deliberate process of engaging and educating the public about the digital economy. As a country that relies heavily on manufacturing, previous discussions of automation revolved around industrial disruption. “Now,” Neufeind said, “we have to take a more holistic approach,” not just focusing on technology, “but on global value chains, societal and cultural trends, as well as workers’ needs and expectations.” Technological, economic, and social factors will determine the future of work, he said.

 “We believe that with every structural change in terms of technology, production, and products, there is change in the way work is designed and organized. How do we guarantee that Work 4.0 is going to yield decent work?”

Currently, Germany seems to be in a comfortable position: The unemployment rate hovers at a fairly low 5.5 percent while GDP continues to rise. Recently, a minimum wage has been established without any negative labor market effects. Yet, Germany has to manage the transition toward a knowledge-based economy and—despite the recent influx of immigrants—the population is decreasing and aging, raising the issue of skilled-labor shortages.

Even with a strong economy and low unemployment, Germans discuss the risk of automation eliminating their jobs. Neufeind estimates that roughly one in eight German jobs can be automated.  He attributes this fairly low rate to the tradition of high-quality vocational training and the strong culture of Mittelstand: Small- to medium-sized companies, often world-market leaders for highly specialized products, providing more than 60 percent of all jobs. These traditional, often family-run businesses now have to figure out how digital transformation can help them and their employees continue to compete in world markets.

More investment in midcareer retraining is key among the requirements, Neufeind argues, especially in science, IT, management, and even the humanities. The goal should be a general “upskilling” of the workforce.

Policies to Shape the Future of Work

From a policy perspective, Neufeind described the German Labor Ministry’s plans to improve skills forecasting and monitoring regionally and for specific industries. He explained possible steps toward more comprehensive and prevention-oriented labor policies, including a “counterproposal to a basic income plan,” that would encourage individual investments in continuous education and entrepreneurship.

The Ministry is promoting the concept of company-level innovation spaces that boost agile management practices, employee participation, and human-machine collaboration. So far, 100 consulting centers have been established nationwide. The goal is to have 2,000 small- and medium-sized companies addressing crucial questions about digital transformation and experimenting with new ways of organizing work, including innovation strategies, securing skilled labor, leadership, and career development. These companies are encouraged to share and disseminate their experiences.

Neufeind is optimistic that policies are moving in the right direction, but that “doesn’t mean we won’t see massive structural change in the next two decades,” including shifts between sectors and within occupations, he said. There’s no doubt that labor markets are changing and so are jobs; employers and employees will have to become proactive to meet those changes.