(Originally Published on 2/16)
Recent news coverage of the European Migration Crisis has tended
to focus on the potential negatives of this situation, while neglecting the
possible opportunities that an influx of immigrants present for European companies,
especially in Germany. Faced with an
imminent decrease in the native German population, including the working age
population, major German companies are poised to benefit from their
government’s policy of maintaining relatively open migration due to the medium
to long-term increase in available labor and potential consumers. Siemens and Daimler, two of Germany’s largest
companies, are particularly well-positioned to benefit from the government
policy due to their sizable domestic workforces and consumer bases.
Strong German growth rates, accompanied by a 24 year low in
unemployment, have painted a rosy picture for the country’s economic future and
have been critical to stabilizing Europe financially and politically but face a
pending threat from population decline. Forecasters
predict the German population declining by between 8 and 13 million people by
2060, a 10-16% decrease from today’s level.[1] In the next 15 years, Germany faces a 7%
decrease in the working age population.[2]. This has problematic consequences for German
businesses. First, a decrease in German
workers means fewer consumers with disposable income and thus more difficulty for
German companies to maintain growth.
While Siemens and Daimler are global companies, 15% of Siemens’ revenue
and 10% of Daimler’s revenue is generated domestically.[3] A still greater concern is these companies’
abilities to find and hire qualified employees.
Currently 60% of Daimler’s employees and 33% of Siemens employees are in
Germany. Already the Germany economy is
creating jobs faster than native Germans can fill them[4];
as Germany’s population ages, Daimler and Siemens will find it increasingly
difficult to find sufficient German employees. Labor tightness may lead to
higher wages, increasing costs, and declining competitiveness.
Germany’s relative open policy on migration and acceptance
of refugees has the potential to alleviate Germany’s need for working age young
people and deliver benefits to Siemens and Daimler. Germany’s response to refugees has become known
as “Willkommenskultur”, or “welcome culture” in German. Spurred on by German politicians, thousands
of German citizens have volunteered to help refugees, for example through
donating food and paying for medical bills[5]. This open door policy has been accompanied by
government action to increase integration through the matching of skilled
refugees to German jobs and job training for unskilled workers. Siemens and Daimler have already been very
forward and enthusiastic in their response to these government policies and the
refugees. For example, Daimler CEO
Dieter Zetsche stated, “In an ideal case, this can help foster another economic
miracle. Many examples of successful integration can be found in Silicon
Valley”.[6] Fifty-one percent of refugees are aged 18
years or younger and the average age of these newest immigrants to Germany is
15.[7] Germany’s policy of welcoming refugees and
other immigrants will help to blunt the difficulties arising from Germany’s
demographic problem and support Daimler and Siemens as they continue to rely on
domestic production and sales of their products.
While the potential benefits of the current government policy
for Siemens and Daimler are high, risks remain of a policy reversal. Concern
about a flood of migrants, driven in part by the New Year’s Eve sexual assaults
in Cologne and other incidents have spurred an anti-immigrant and
anti-government policy backlash. Chancellor
Angela Merkel’s approval ratings are at a four-year low, driven in large part
by perceptions of her handling of the migration crisis.[8] A surge of support for restrictive policy, as
championed by the anti-immigrant Alternative for Germany (AFD) party candidates
running in the March regional elections, could undercut the anticipated
population boost and gains for the large Germany companies. Nevertheless, after ten years in office, Merkel
remains a respected leader; despite the backlash, 38% of Germans would vote for
her party if elections were held today.[9]
The present government response to the immigration surge
creates an opportunity for growth for the large companies, giving them a much-needed
boost to the consumer base and workforce.
Siemens and Daimler are intriguing investments based off the market’s
underappreciation of the benefits they are poised to reap from the German
government’s facilitation of changing demographics.
[1] http://qz.com/394456/the-numbers-behind-germanys-demographic-nightmare/
[2] http://www.latimes.com/world/europe/la-fg-germany-refugees-demographics-20150910-story.html
[3] http://www.statista.com/statistics/278343/revenue-of-the-daimler-ag-by-region/
[4] http://www.wsj.com/articles/germany-grapples-with-growing-shortage-of-skilled-labor-1402064223
[5] http://www.theguardian.com/commentisfree/2015/sep/06/germany-refugee-crisis-syrian
[6] http://www.bloomberg.com/news/articles/2015-09-14/daimler-s-zetsche-channels-silicon-valley-integrating-migrants
[7] http://www.unhcr.org.uk/about-us/key-facts-and-figures.html
[8] http://www.theguardian.com/world/2016/feb/04/refugee-crisis-pushes-support-for-germanys-angela-merkel-to-four-year-low
[9] http://www.newsweek.com/issue-immigration-determine-germany-turns-merkel-416365
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