The climate conference in Glasgow and the coalition agreement in Germany have one thing in common: the economy must become radically climate-neutral in the shortest possible time. The consensus among the parties and climate activists is that the 2020s must bring a turnaround in the decarbonization of our economy if we want to stay within reach of the 1.5° target. Huge efforts are needed.

However, politicians, industry and the population in Germany have been turning a blind eye to another paradigm shift that is far more crucial to the system: demographic change.

Demographic change

Labor market researchers and economic experts are once again sounding the alarm. Starting with the 'summer fairytale 2006' with the World Cup in Germany, the German labor market experienced a brilliant upswing until 2019; the number of people in employment rose from year to year to a new record level. In 2019, employment amounted to 45.3 million, meaning that around 95% of the potential workforce in Germany had been exhausted. In other words: more is not possible, we are at the limit.

Thomas Rappold: "Germany can get to grips with its demographic problem and generate new business through broad-based and bold investments in Industry 4.0 and collaborative robotics."

© Thomas Rappold

However, Germany is now facing a momentous demographic change in the coming years. Economic researchers expect the potential growth rate to fall by around 1% by 2030. The golden age of employment growth could abruptly turn in the other direction. The reason for this is the fact that between 2025 and 2035, the baby boomer generation will retire from the workforce, while at the same time there will be significantly fewer school leavers available as job starters. For example, 1.36 million children were born in Germany in 1964, the baby boomer generation's highest birth rate year. In the past two decades, however, the number of annual births was only around 700,000. Despite a recent slight increase in numbers, there were still only 770,000 births in 2020. According to the Institute for Employment Research (IAB), if we simply extrapolate today's figures into the future, a dramatic picture emerges: the labor force potential, which was still at a record high, will collapse by more than seven million people by 2035. This means that demographic change will take full effect.

Smart technology - Society 5.0

Interestingly, there was virtually no mention of demographic change in the last parliamentary election campaign. Some media representatives thought that politicians were trying to solve a practically unsolvable problem by solving climate change instead of tackling the possible in the form of demographic change.

The robotics and automation nation of Japan shows us how it could be done. After South Korea and Singapore, and just ahead of Germany, Japan has the third-highest robot density in the world. With the slogan 'Society 5.0', the Japanese government and leading companies want to kill two birds with one stone: solve the demographic problem at home and at the same time open up new markets for their export industry in the field of smart automation solutions. Japan's population is already one of the oldest in the world.

One in four inhabitants is older than 65; more than 36 million people. While other countries such as Germany are focusing on migration, this is frowned upon in Japan and the solution to the demographic problem is therefore seen in the use of smart and AI-supported digital technology.

However, 'Society 5.0' is about much more than just the use of new robot technology. On its website, the Japanese government speaks of a "super-aging, super-smart society". Key technologies of 'Society 5.0' and core components of the technology stack are the new 5G mobile communications standard and the intelligent orchestrated interaction of sensors, robotics, artificial intelligence, high-performance computers and augmented reality (XR). The global community was able to see parts of this vision at this year's Summer Olympics.

Car manufacturer Toyota is building a smart city based on the 'Society 5.0' approach: an intelligent city for 3,000 people is being built for more than a billion dollars. It is intended to serve as a reference project to prepare the Japanese population for a digital transformation. The Japanese still prefer fax machines, paper documents and face-to-face meetings to digital services. The new smart city, called 'Woven', is also powered by environmentally friendly hydrogen technology. The focus is on autonomous robots and vehicles to ensure smooth logistics.

Collaborative robotics and Industry 4.0

With the Industry 4.0 Performance Index (ISIN: DE000VS8Y403) from Vontobel, investors can invest in the 20 most important shares of leading companies in the Industry 4.0 sector via an index certificate. The index covers the entire value chain with companies from the robotics, automation solutions, sensor technology, digital image processing and application-oriented artificial intelligence sectors.

© Solactive

The latest figures published by the International Federation of Robotics (IFR) show that the hunger for intelligent robot solutions continues unabated. Covid-19 is acting as a gigantic accelerator, particularly in the field of service robots. The market for this segment grew to USD 6.7 billion, up 12% on the 2020 level. End-customer-oriented robotics solutions grew even more strongly, by 16% to USD 4.4 billion. Demand for professional cleaning robots rose by 92% to 34,400 units sold. The potential for disinfection robots in hospitals and other public facilities remains high: sales of professional floor cleaning robots are expected to grow at double-digit rates on average every year from 2021 to 2024.

Collaborative robots have a key role to play in solving the demographic problem. Providers such as Universal Robots have shown that completely new markets with considerable volumes are emerging here. German suppliers, who have so far focused strongly on factory automation and the automotive industry, would do well to step up their efforts in the field of collaborative robotics.

Interesting robotics start-ups from Germany are bringing new momentum to the topic. These include Wandelbots from Dresden, which advertises with the slogan 'No Code Robotics', and RobCo from Munich, which develops modular robots for industry. If the German government wants to be a 'government of the future', it should focus strongly on artificial intelligence and robotics and thus on Industry 4.0 across the board. In this way, Germany can get to grips with its demographic problem and secure new business for industry, including exports.