Tuesday, 16 April 2013

Because we make things

When Angela Merkel was quizzed about the resilience of the German economy she curtly replied : "because we still make things".

This delivered the message that Germans did not allow their economy to become unbalanced towards the service industry and Germany still boasts of a strong manufacturing base.

This should be a clear message for an ex-Minister who once wanted to wager that within a decade Malta' economy would become totally service oriented and we will have no manufacturing base.   It is utterly important to keep our economy well diversified and for manufacturing to remain an important component thereof.  The Cyprus debacle is a clear eye-opener in this respect.

The question is how does the German economy manage to keep itself competitive in spite of its high cost base?

Basically it is all a matter of the efficiency and proficiency of their labour.   Although the average hourly cost of a German labour  is Euro 37 compared to  Euro 25 in the US,  Germany remains a sizzling export machine, where only the competitive survive.

Edward Luce ( FT - April 15, 2013 - 'Why is the US looking to Germany for answers') goes a long way to provide an answer to this mystery.

Germany channels roughly half of all high school students into vocational education stream from age 16.  More than 40% of Germans start as apprentices.  By comparison only 0.3% of Americans do so.   The result is the Germans are very much work ready when they leave high school, whereas Americans are very much behind producing school leavers with skills that are not in demand by the employment market.

Hear this! According to Luce, 15% of taxi drivers in the US have a degree, 25% of sales clerks are graduates and 5% of janitors have a bachelor degree.   Considering that College education in the US costs a bomb and graduates have to nurse student loans for a long time after they finish their studies, it is unbelievable that there is so much mismatch between the skills taught at Universities and skills demanded by the market.

In the US only the top students who proceed to PhD's and post grads enjoy rising incomes on the basis of their education and often they do dramatically so.

In spite of more than 7% unemployment in the US there are 3.5 million unfilled vacancies, jobs waiting to find employees with skills that are not being turned out by the education system.  

The biggest attraction for foreign investors are not fiscal incentives or tax breaks.  It is availability of trained and efficient human resources.  Siemens in Germany graduates 10,000 apprentices per annum in mechatronics - a hybrid of mechanical engineering and computer science.

In today's The Times a jointly co-authored Opinion by leaders from the University and The Chamber of Commerce stress the importance of co-operation between both organisations.   Indeed!   But we must work harder for more to be done even at the level of MCAST.   A good vocational course often gives students a better passport to employability than a first degree if this is considered by the student as the end of the educational journey.

Malta must continue making things as well.

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