Around 1.03 million people were employed in mechanical and plant engineering, the largest industrial employer in Germany, at the end of 2023. Despite the economic downturn, 13,600 jobs (up 1.3%) were created in this key sector over the course of the year. However, the increase in employment could have been stronger, according to the VDMA.

At the beginning of 2023, the majority of companies were still planning to increase their permanent staff by the end of the year. This was hardly surprising at the time, as the supply chain bottlenecks had been significantly reduced and the high order backlog needed to be processed. However, the employees required for this could not be found due to the persistent labor shortage.

"In January 2023, 45% of companies in the mechanical engineering sector were hampered by a shortage of skilled workers. Never before in reunified Germany has the shortage of skilled workers been so severe. However, it wasn't just skilled workers who were in short supply, but the workforce as a whole," says VDMA economic expert Olaf Wortmann. As the year progressed, the economic slump was increasingly reflected in the labor market. The number of vacancies registered with the Federal Employment Agency - still more than 14,000 in April - fell continuously and stood at around 12,000 at the end of the year. Since late summer 2023, the ifo Employment Barometer has shown that more companies in the mechanical engineering sector want to reduce their workforce than increase it. And the VDMA flash surveys also show that member companies have reduced their hiring intentions.

Short-time work is on the rise

© VDMA

According to estimates by the Federal Employment Agency, the number of short-time workers was already more than 17,000 in October 2023, compared to just 10,000 in July. "The early indicators currently point to no improvement in the situation. A further increase in short-time work is therefore to be expected in the coming months. Companies will endeavor to retain their core workforce - if only due to the acute shortage of skilled workers and the demographic situation," explains Wortmann. In October 2023, 39% of VDMA member companies stated that they do not expect to expand their core workforce in 2024. "In view of the current challenging year, it would be a success if companies succeed in retaining their core workforce," says the VDMA economic expert.

Political challenges

Achieving a stable labor market in a weak economy will be a key task for the German government this year. Fabian Seus, Head of VDMA Competence Center Labor Market, explains: "The planned projects are not enough to achieve this, on the contrary. We now need a general overhaul of the labor market policy plans in the coalition agreement. Above all, this includes measures to maintain employment, such as flexible solutions through a modern Working Hours Act and the abolition of retirement at 63. At the same time, new hires must be made easier in order to counter the shortage of skilled workers. To achieve this, social security contributions must be reduced and bureaucracy cut."