Constraints and Challenges in Overcoming the Demographic Productivity Gap in Germany

This demographic productivity gap can only be closed by means of accelerated capital intensification and technical and organisational progress. Averaged over the last five years, however, technical and organisational changes have actually slowed productivity growth, while the contribution of capital intensification has been weaker for the last 20-odd years. Moreover, companies' estimates of their scope for future productivity increases are not optimistic. Half of the companies surveyed by the German Economic Institute (IW) expect their productivity growth over the next five to ten years to be weak, a further 36 percent expect it to be normal, with only 8 percent anticipating an acceleration. Obstacles to more rapid improvements in productivity include the regulatory thicket, high levels of red tape and excessive reporting requirements. Skills shortages and a lack of personnel for research and development also hobble progress on productivity. Over a third of companies report that securing supply chains and customising products are a drain on human resources and thus have a negative impact on productivity, while one in three companies cites insufficient government research grants as an obstacle. Uncertainties surrounding the green and digital transformation and its costs are also seen as hindering productivity.