“Industry 4.0” –
a major employment
opportunity Essay

Digitization is increasingly shaping the world of work. Future analysts at the Massachusetts Institute of Technology are tracking the breathtaking pace at which computer technology is developing and have dubbed this “the Second Machine Age”. At the same time, “Industry 4.0” – the way in which machines, products and humans will interact in future – is a major focus of attention for engineers, management and IT experts, production specialists, trade union officials and politicians alike. They are modelling scenarios in which man and machine work “fist-in-glove” or in which the factories of tomorrow are run entirely by machines. But how realistic are these scenarios? And will they be a blessing or a curse? It is neither realistic nor desirable to envisage factories without human beings. However, anyone who visits trade fairs, research labs, top-ranking universities or pilot plants at industrial companies can see that we are on the threshold of a further paradigm shift in automation. The astonishing pace at which digitization and networking are developing has triggered a surge of innovation in robotics, and over the next few years, robots will become significantly more efficient and safer.

“We have the opportunity to do away with unergonomic work, increase the proportion of skilled jobs we offer and drive down our production costs, while also safeguarding employment.”

More than five million people in Germany currently work in industry; Volkswagen alone employs 120,000 people in the production sector. So will further automation mean a renewed rise in unemployment? The answer is no. Demographic trends over the next 20 years will actually help us safeguard jobs. Between 1955 and 1975, a combination of Germany’s “economic miracle” and the baby boom produced two decades of above-average population and employment growth. And the impact was particularly marked at Volkswagen: when demand for the Golf soared in the 1970s, we recruited above-average numbers of new employees. Consequently, between 2015 and 2030, we will be seeing a disproportionate number of older employees moving into retirement: some 32,000 more than the long-term average across the Volkswagen Group. This gives us the opportunity to replace some human employees with robots while at the same time maintaining our existing recruitment levels. We could not, in any case, have replaced all these retirees with young people. So in terms of employment policy we can afford another surge in automation. But why should we welcome that or even encourage it? There are two reasons. First, we want to offer good, skilled work to all our employees. To date we have done our utmost to make assembly-line jobs as ergonomic as possible, but some jobs are onerous and will stay that way. It takes concentration and precision to feed eight drops of oil into six points on one camshaft after another for seven hours a day. It’s also monotonous and tiring – or in other words: hard work. Assembly work in the vehicle interior, the positioning of components and working overhead are further jobs that will not be missed when there are better ways of doing them. And there are. If we have an opportunity to eliminate unergonomic work and to leave it to robots, we should do so.

“Digitization and networking will transform our training professions. We are already upgrading our vocational education and training accordingly.”

In future, there will be more skilled work available in our factories than there is now. Robots and networked production equipment need to be programmed and maintained, supervised and reconfigured. The qualifications of our skilled workers, Meister and engineers will increase; alongside mechanical and electronic engineering skills, IT skills will be increasingly important. So the advances in automation will need to be matched by a surge in initial and in-service training. And we have already begun that process. New apprentices starting their training with Volkswagen from 2015 will be acquiring new, job-specific skills, such as controlling digital systems. Partnering with Germany’s Federal Institute for Vocational Education and Training (Bundesinstitut für Berufsbildung, or BIBB), we have launched an initiative to develop new training professions for the digital world of work. And 2015 will also see the rollout of a wide-ranging qualification offensive at Volkswagen. We are equipping our employees with the fundamental digital skills they will need as well as with the specific technical skills for their particular “Berufsfamilie” or professional family. These new skills are in areas such as programming and the use of networked applications, online diagnostics and real-time analysis, networked collaboration, and the use of learning platforms.

“In Germany, we have the opportunity to use our strengths to drive forward the next wave of automation.”

The second reason for driving forward automation is our labor cost structure. Labor costs in Germany’s automotive industry are more than €40 per hour, compared with €11 in Eastern Europe and less than €10 in China. No one seriously believes that we can significantly reduce the competitive disadvantage that such high wage costs imply. But we would not want to do so either: after all, we want our skilled workers to be able to afford a decent car, to give just one example. So what does a robot cost by comparison? The robots already in use at Volkswagen cost between €3 and €6 per hour, a figure that includes maintenance and energy costs. And future generations of robots will probably cost even less. We have to make use of that cost advantage. And that is why at Volkswagen we are driving forward automation with moderation, using it to benefit our employees and reduce onerous work. Other sectors, too, can follow this path. “Industry 4.0” has the ability both to modernize the economy and to improve the quality of employment. The good news is that Germany’s demographic situation is making these changes sustainable in employment terms as well.

Dr. Horst Neumann, Member of the Group Board of Management responsible for
Personnel Management and Organization