Hephaestus, known to experts of Greek mythology as the god of blacksmiths and unskilled tasks, lived on Mount Olympus, according to legend. He was the only blacksmith on Mount Olympus and thus presumably just as valued and busy as employees are today. However, as divine skills have since become a rarity, work nowadays is shared between many shoulders, although there are fewer and fewer of these in Europe.
This has meant that many companies are now experiencing difficulties working through their backlog of orders or maintaining their operations. The current severity of the situation can be seen in the fact that, this year, more than half of the training positions advertised throughout Germany for August remained vacant in July. This also illustrates that we are only at the beginning of the problem, although it is already costing the German economy 86 billion euros a year, according to the Boston Consulting Group.
Demographic change will develop into one of the biggest challenges in many Western industrial countries, particularly Germany, in the coming years. Once those known as “baby boomers” (born between 1946 and 1964) eventually retire, the situation will become an ever greater, almost Olympic, challenge. The Federal Statistical Office estimates that the number of inhabitants of working age (15 to 67 years) in Germany will fall by around 12 million by 2060, despite moderate immigration. The current “solution” for such problems, recruiting cheap labor, preferably from various states in Eastern Europe, has long since reached its limits, as similar problems exist in the workers’ respective home countries. The United Nations also expects a significant decrease in population throughout Europe, with estimates of over 150 million inhabitants by 2060.
The labor shortage can be divided into various categories based on employee qualifications
This labor shortage can be divided into two different categories. There is a shortage of university graduates and highly skilled workers, known as the skills shortage, as well as a shortage of unskilled or low-skilled workers. While a great deal of attention is paid to the skills shortage in the media, the shortage of unskilled or low-skilled workers is often ignored. Yet it is already having a dramatic impact. Consider the shortage of truck drivers in the United Kingdom in 2021 or the lack of workers on German construction sites. And there are signs that the lack of unskilled workers is developing even more dynamically than that of skilled workers.
Firstly, the number of people with higher levels of education has been increasing steadily for years. While only 65.71% of people in the EU had completed at least an upper secondary level of education in 2006, the percentage was already 75.18% in 2021 (Source: Eurostat, EU without UK). Secondly, very strict immigration laws apply in Germany for non-Europeans who have not completed an apprenticeship or a degree. This makes it virtually impossible for these people to work in Germany or obtain a long-term residence permit.
All of this makes a short-term easing of the labor market appear more than unlikely. While this can lead to a loss of prosperity in society within the skilled workers sector, there are definitely ways to alleviate the problem when it comes to unskilled or low-skilled workers. After all, many of their activities offer untapped opportunities for automation. This can range from individual tasks to whole professions. This can boost productivity in the long term, while simultaneously eliminating working steps that are often strenuous, unhealthy, or dangerous.
This leads us to the following strategic hypothesis:
The shortage of unskilled or low-skilled workers offers a great opportunity for the automation industry to secure its competitiveness and the prosperity level of society in the long term. Companies in the automation industry must therefore tap into new markets and offer new automation solutions for many other activities.
The strategic hypothesis
A key success factor here is fully understanding the client’s system, i.e., their processes, activities, and current situation. To do this, automation companies should initially analyze their clients’ production environment or even entire professions and areas of activity that include tasks by unskilled or low-skilled workers. A few fundamental questions can be useful when identifying possible potential:
- Is there a labor shortage for the activity?
If there is a labor shortage for the considered activity, this opens up the possibility of market entry for the automation industry. Automation solutions can enable either the job description to be upgraded or the need for workers to be reduced, leading to a balance in supply and demand.
- Can the activity be implemented technically?
For an automation solution to be developed, the applicable technology should already be fully, or at least largely, mature so that it can be used straight away. However, above all, it must theoretically be possible for a technical solution to perform the activity that is being replaced. The degree of regularity and the difficulty of the task are often good indicators of whether an activity can be automated.
- Is the cost-benefit ratio reasonable?
The added value created through automation must exceed the real and opportunity costs for companies to make the investment worthwhile. In addition to the automated activity, the influence on the follow-on processes should also be considered in this. The client’s initial willingness to invest should also be considered.
- Can productivity be increased?
If automation works more efficiently and better than humans, this not only helps to counteract the labor shortage but also speeds up the work, thereby boosting productivity.
- Is the workload reduced for employees?
If automation replaces particularly strenuous or above all dangerous activities, or at least makes them easier, employees take less time off and employee satisfaction increases. It also frees up employees for other activities.
- Which other barriers could hamper market entry?
If other, non-classifiable, market entry barriers exist, it is advisable to look at these more closely to prevent any unpleasant surprises.
These questions now make it possible to assign the use case to one of the three following categories based on its attractiveness.
“All in”: These automation solutions are characterized by the fact they can be implemented technically, have a good cost-benefit ratio, and also perform an activity that is affected by a labor shortage. In addition, no other serious barriers to market entry exist. The better efficiency can be increased and employee workloads can be reduced, the more attractive the use case becomes. We recommend a detailed market assessment and a potential market entry in this category.
“Keep in Mind”: Automation solutions assigned to the category “Keep in Mind” are characterized by the fact that they meet two of the following attributes or other, high barriers to market entry exist: They can be implemented technically, have a good cost-benefit ratio, and perform an activity that is affected by a labor shortage. As not all three attributes are met in this category, market entry is currently more difficult and thus unattractive. However, once this factor ceases to exist due to changes in the market situation or technical possibilities, the use case immediately moves up to “All in”. It can be worth keeping the use case in mind to be able to respond more quickly than the competition if necessary.
“Step Back”: These automation solutions are characterized by the fact that they meet at least one of the following attributes or other, insurmountable barriers to market entry exist: They can hardly be implemented technically, have an inadequate cost-benefit ratio, or perform an activity in which there is only a minor or temporary labor shortage. In this category, market entry is hampered by several factors or is impossible due to market entry barriers and thus unattractive. Market entry should not be pursued.
A good example of an “All in” use case is the Jaibot from Hilti. The Hilti Jaibot is a semi-autonomous robot that is used in the construction industry for ceiling installations, particularly for drilling holes in ceilings. The Jaibot is informed where drilling needs to take place and what the room dimensions are with the aid of a digital map file. The Jaibot drills in the respective areas and also sucks up the dust that is created. In its practical application, this has three key advantages over the manual performance of the work.
- Quality: The Jaibot drills more precisely and reliably than a human ever could. This leads to a huge increase in quality on the construction site and less reworking is required.
- Efficiency: Thanks to its faster working method, combined with improved quality, the Jaibot is able to drill significantly more holes than a person in the same time without getting tired or needing breaks. This activity often occupies workers on large construction sites for whole days at a time.
- Health: Overhead drilling is one of the most strenuous and harmful tasks in construction, so the elimination of this activity is a huge improvement for workers.
Thanks to the boost in efficiency, it is possible to combat the shortage of workers in construction and use the capacities of the existing workers for other tasks.
What actions should automation companies derive from the shortage of unskilled or low-skilled workers and its consequences?
- Think about automation more broadly: To hold your own on the market and against the competition in the long term and be a step ahead of your competitors, it is important to take the blinkers off and look not only at the production halls but at the economy as a whole.
- Continuously analyze the market/labor shortage: Continuous screening and, alongside this, an analysis of the market and the labor shortage in various industries enables companies to identify market potential at an early stage and stay a step ahead of the competition.
- Exploit market potential quickly and consistently: After identifying market potential, it is important to analyze this precisely and develop a strategy so that the automation solution can be offered on the market quickly and consistently.
To enter new markets quickly, it is recommended to initially offer the simplest auxiliary activities and supplements to manual work. This provides a basis for collecting more information about the activities to derive new automation applications from them in the future and thus continuously expand your own product portfolio.
The labor shortage is something Europe will have to contend with for some time yet. As long as this situation lasts, it will open up many opportunities for the automation industry. This enables the providers of automation solutions to seize long-term competitive advantages for themselves and thus climb up the Mount Olympus of their industry or maintain their position. For clients, it offers the opportunity to maintain their operations and become more productive, despite the labor shortage. Hephaestus’s fate also gives us plenty of reason to be hopeful, as he helped free Athena, goddess of science and technology, from Zeus’s head and come into the world, finally giving him support.
Erdödy, S. / Kittelberger, D. / Natge, A.