Here's how Germany is bridging its growing skills gap

Germany's industrial heavyweights are teaming up to retrain workers in areas such as software and logistics to fill a growing skills gap and avoid layoffs among workers of all ages as the economy shifts to clean energy and online shopping.

More than 36 major companies, ranging from auto suppliers such as Continental (CONG.DE) and Bosch (ROBG.UL) to industrial firms BASF (BASFn.DE) and Siemens (SIEGn.DE), have agreed to coordinate on redundancies at one firm and vacancies at another, training workers to move directly from job to job.

Stefan Dries worked across a range of sectors before landing a job at Deutsche Post (DPWGn.DE) in the middle of the pandemic. While social distancing had made his work as a carer impossible, the postal service was hiring to meet online delivery demands.

Dries, 38, said he completed a 10-day intensive course on everything from using software for registering and tracking post to how to lift heavy packages and has since worked his way up from deliveries to manager of his station.

"Starting something different isn't always easy financially, personally. You have to want it," Dries told Reuters, adding that it is vital that companies advertise positions in a way that assures workers they will be trained on the job.

The scheme underscores Germany's long-term social market economy model, which gives more influence to labour unions as opposed to free-market capitalism focused on maximizing profits.

The costs of the initiative will be shared by the companies involved on a case-by-case basis. So if a factory closes, a dialogue will begin on what to do with its workers and then involve another company which may be seeking new skills.

Continental and Deutsche Bahn, for example, have set up a partnership to retrain staff no longer needed at the auto parts maker for jobs at the railway group, with the costs split.

"We know the social cost of unemployment, and we want to avoid that," Ariane Reinhart, board member responsible for human resources (HR) at Continental and chief spokesperson of the business-led initiative, told Reuters.

Reinhart, who said that she believed the scheme to be the first of its kind, pointed to data showing unemployment cost the German economy 63 billion euros ($68 billion) in 2020.

While German unemployment is relatively low, at 5% in March, there are warnings of a wave of job losses if companies do not move quickly to adapt to stringent climate targets and step up in areas like software in the face of new competitors abroad.

A study by think-tank Ifo Institute warned that 100,000 jobs linked to the internal combustion engine could be lost by 2025 if carmakers failed to transition fast enough to electric vehicles and retrain workers.

The initiative comes as the number of open vacancies in Germany is rising steadily, from around 320,000 in 2009 to 850,000 in March this year, national statistics show.

Engineering, metalwork and logistics are among the sectors seeking high numbers of people in Germany, alongside care work, catering and sales.

The demand for skilled workers is coming from overseas companies too, highlighted by Tesla's (TSLA.O) decision to build its European electric vehicle and battery plant in the state of Brandenburg, where it will create 12,000 new jobs.

This will ramp up competition for skilled workers with rival carmakers Mercedes-Benz and Volkswagen (VOWG_p.DE) who both have factories of their own only hours away. read more

Retraining across sectors and within companies is also a means of maintaining good relations with Germany's powerful unions, who often sit on company boards and have negotiated multi-year job guarantees for staff.

"Some of these people have no prospects any more in the combustion engine world," said Fevzi Sikar, head of the workers' council at Mercedes-Benz's (MBGn.DE) Marienfelde plant, where assembly line production workers are being offered retraining in software engineering. read more .

"But they are reliable employees, and it just makes more sense to retrain them ... the market is sucked dry."

Sikar said Mercedes is seeing enthusiasm among younger workers who want to become more resilient by gaining new skills. While older workers faced with a job loss or change may opt to retire early, younger colleagues need a future elsewhere.

While the scheme can provide some of the skills that Germany needs, attracting talent from abroad is also essential, Thomas Ogilvie, board member in charge of HR at Deutsche Post, said.

Germany's new coalition government has pledged to make it easier for workers from abroad by enabling dual citizenship and improving access to apprenticeships. read more

"Leaving it to the free market is not enough – it would not be what's best for workers, or the economy," Reinhart said.

Germany's federal labour agency declined to comment.