Only slight job cuts despite recession

In the course of 2024, around 6800 jobs (minus 0.7%) were lost. At the end of the year, a total of 1.02 million people were employed in companies with at least 50 employees. "The mechanical and plant engineering sector was thus able to maintain its position as the largest industrial employer in Germany. This is remarkable because, according to preliminary figures from the Federal Statistical Office, mechanical engineering production fell by 7.5% in the past year after adjusting for prices. And the mechanical engineering sector already had to cope with a decline in production in 2023, albeit a slight one," commented VDMA Chief Economist Dr. Ralph Wiechers on the employment figures.

However, the overall outlook for the labor market remains bleak. Meaningful leading indicators such as the ifo employment barometer or the results of the latest VDMA economic survey clearly show that the reduction in the workforce is likely to continue in the current year 2025. Enormous economic and structural burdens will continue to affect manufacturers of capital goods in particular, i.e. mechanical and plant engineering. "This will not pass entirely without leaving its mark on employment figures," says Dr. Wiechers.

Short-time work continues to rise

Many companies are currently relying on tried and tested instruments to maintain employment. These include the use of individually agreed company working time accounts and temporary short-time working. According to estimates by the German Federal Employment Agency, the number of people on short-time work in the mechanical engineering sector was around 53,000 in October - and rising. According to the latest VDMA economic survey, one in four companies in the mechanical engineering sector (27%) expects an increase in short-time work in their own company in the first half of 2025. A further 58% expect the level to remain the same. However, this will not be able to prevent a further, hopefully only slight reduction in employment. Companies will make every effort not to reduce their core workforce due to the persistent shortage of skilled workers. At 60%, the majority of companies expect to be able to keep their core workforce constant in the first half of 2025 despite the challenging situation.

However, around a quarter of companies will be forced to reduce their workforce. "How much of this will be permanent and how much can be compensated by new hires at a later date is impossible to say with any certainty," explains Wiechers. "We have a mix of economic pressures and far-reaching structural changes. The challenge is to take sensible measures to safeguard jobs and skills while at the same time cushioning structural change, but not preventing it. After all, the politically desired and supported retention of urgently needed skilled workers in jobs that are no longer competitive in the long term ultimately does more harm than good for everyone involved."

Rapid reforms needed in the labor market

In order to counteract the trend on the labor market, the next German government must act quickly and adopt reforms to secure jobs. The VDMA chief economist criticizes that there has been no sign of this so far. Instead, social security contributions continued to rise at the turn of the year and are now as high as they were before the Hartz reforms. "There is a great need for structural action to stabilize the social security system. This is because their contributions continue to drive up the cost of employment. They have a direct negative impact on employers' ability to retain employees and recruit junior staff," emphasizes Wiechers. In addition, a modern working time law with weekly instead of daily maximum working hours is needed, as well as a noticeable reduction in bureaucracy, especially in employment law. "Everyone agrees that we want to retain medium-sized industrial companies. Anyone who is serious about this must not shy away from sometimes painful reforms in the labor market," demands Wiechers.