CHAPTER 3

What You Should Know About Our Economy

Labor Market and Employment

In 2017, the unemployment rate reached its lowest level in more than 25 years: 5.7 percent (Presse-und Informationsamt der Bundesregierung 2018). I am only partially enthusiastic about these figures, considering certain developments: many people with low incomes are increasingly dependent on transfer payments (e.g., an allowance for rent) to make ends meet. It goes without saying that they cannot save money for their retirement, and with the low payments they will receive from the state pension scheme and due to the fact that most (elderly) people do not live in joint families/with their grown-up children, they are later threatened by poverty in old age (Altersarmut). A recent study by the economic research institutes DIW and ZEW, commissioned by the Bertelsmann Stiftung, shows that, in 2036, one in five 67-year-olds (67 is currently the official retirement age) will be at risk of poverty in old age. According to the authors of the study, the poverty risk of new retirees will rise from 16.2 percent at present to 20.2 percent nationwide (Preker 2017). I will be talking about (the risk of) poverty a bit more later in the text.

The so-called “shortage of skilled workers” (Fachkräftemangel) is a topic controversially discussed in the media; it is not uncommon to suspect that company owners want to depress salaries, asking to (increasingly) recruit employees from abroad. Instead of paying caregivers and nurses properly (no matter where they come from, I might add) and generally improving the working conditions, they want to recruit cheap human resources—for example, from the Eastern European countries, Vietnam, or the Philippines. I am missing a social discourse about the inherent imperialistic viewpoint: instead of exploiting people by subduing foreign countries, nowadays it is better to let them come to our country and exploit them here?

Also, over the past few years, a kind of shadow economy has established itself, in which the long-term unemployed in so-called ­“1-Euro-Jobs” (EUR 1/hour) are either occupied with pointless, unsatisfactory jobs or work productively for entrepreneurs who are benefitting from the availability of a cheap labor force. The ARD/WDR documentary “Die Armutsindustrie” (The Poverty Industry) shows how grown-ups put together 5,000-piece puzzles, which are to be sold in a store selling used toys; they spend days to see whether maybe one piece was missing after all. The film also shows highly skilled engineers who are ­manufacturing trampolines, a product that you would normally rather import from China (Die Armutsindustrie 2009). Profiteers of the systems are the institutions that receive funds for “occupying” the unemployed people with nonsense tasks such as aforementioned, or manufacturers and service providers who sell their products and services at competitive prices, which they can afford by paying (state-subsidized) dumping wages to the long-term unemployed. Furthermore, (even) highly qualified (maybe sometimes overqualified) job seekers are often “parked” in “Maßnahmen” (what can be translated to “activities” or “sanctions”) of the employment office (“Arbeitsamt” or “Jobcenter,” as what we call it now), and are thus not visible in the unemployment statistics. I do not want to say that there is no “war for talent.” Many companies often spend months looking for qualified personnel; however, sometimes offering better salaries might help that situation. Anyway, I present no more social criticism at this point.

If you have landed a proper job in Germany, you are in a comparably good situation, I would say. The average full-time weekly working time is around 38 hours; part-time employees work an average of 16.4 hours (Braun and Diekmann 2017). There are extensive occupational health and safety laws (Arbeitsschutzgesetze) that regulate, for example, regular breaks and limit the maximum working time to 10 hours a day (albeit, that would not apply for managerial staff). The fact that these rules are often subverted, especially in connection with the so-called “trust-based working time” ­(Vertrauensarbeitszeit), is another story. Employees below the age of 18 years enjoy special protection rights, and employers better not violate them.

By law, employees in Germany are entitled to four weeks of vacation per year; de facto, most enjoy at least five, if not six weeks. Many companies have a works council (Betriebsrat) that represents employees’ interests. There are also regulations on maternity protection (Mutterschutz), parental leave (for mothers and fathers), and currently, the right for part-time workers to return to full-time employment is under deliberation.

If an employee survived the probationary period of (usually) six months, he or she can only be dismissed in very special cases; for example, if the company is forced to lay-off personnel due to economic difficulties. But, even then, there is a so-called social plan (Sozialplan), which ­provides that older employees who have a family should be given preference to stay in the company, rather than young employees without a family, for instance. We do not have a hire-and-fire mentality, like in the United States.

Out of the approximately 44 million people employed in 2017, 1.4 percent were working in the so-called primary sector, that is, in ­agriculture and forestry, or fishing (Land-und Forstwirtschaft, ­Fischerei). About 24.1 percent found work in the manufacturing industry ­(Produzierendes ­Gewerbe), and with 74.5 percent of all employees working in the service industry and other sectors (Übrige Wirtschaftsbereiche, ­Dienstleistungen), the tertiary sector has yet again grown (Statistisches Bundesamt 2018a).

According to the Federal Ministry for Economic Affairs and Energy (BMWi), a good 80 percent of all companies in Germany are service companies (Bundesministerium für Wirtschaft und Energie 2018a). The largest service sectors, in terms of the gross value added and share of employed persons, are public services, real estate services, business services, and trade. The service sector accounts for 69 percent of the GDP. The BMWi states that “Der Industriestandort Deutschland ist ohne Dienstleistungen kaum noch denkbar” (Germany as an industrial location is hardly conceivable without services) and emphasizes that the production of goods is increasingly interlinked with services. “Wo ein modernes Industrieprodukt die Produktionsstätte verlässt, hat eine lange Reihe von ­Dienstleistungen zu seiner Entstehung beigetragen, von der Logistik in der Zulieferung über die mechanische Wartung der ­Produktionsmittel bis zur Softwareunterstützung” (When a modern industrial product leaves the production site, a long series of services have contributed to its creation, from logistics in the supply chain through mechanical maintenance of the means of production to software support), says the institute (ibid). When the product is then sold to the customer, the BMWi sees significantly more services involved, for example, marketing, financing, logistics, and repair. As the next step, let us focus on the most important industry branches in Germany.

Things We Are (Especially) Good At

Discussing whether the economic miracle of the 1950s really had been so much of a “miracle,” Werner Abelshauser (2018, p. 8), Professor for Historical Social Sciences at Bielefeld University, argues that, although major cities like Hamburg, Cologne, Frankfurt, and Berlin were bombed to rubble and people were poor, post-war (West) Germany could quickly build on what had been achieved during the second Industrial Revolution (1870–1914). This could be largely because of the practice of setting up factories on the city outskirts (as shown in Chapter 1). So, when the cities were bombed—events that are very present in the collective memory—this did not greatly affect the German (arms) industry (ibid.). Exceptions are, for example, the cities of Essen, where Krupp’s armaments and ammunitions factories were located, and Ludwigshafen/Mannheim, where you would find BASF (then “IG Farben,” who, among other products, had equipped the Nazis with synthetic rubber, gasoline, and the lethal gas Zyklon-B). After the war, a great share of the machinery and manufacturing plants in the Soviet zone was deconstructed and shipped to the Soviet Union; however, people in the West were comparably spared from paying war reparations, and after 1947, the Allied even promoted a quick rebuild of the industry.

While the first Industrial Revolution—which began in Great Britain around 1760—mainly resulted in new manufacturing processes being applied in mechanized factories, the second Industrial Revolution highlighted the fashion in which science and technology cross-fertilized each other and drastically changed people’s working and living conditions. In this period, some major game-changing inventions were made that accelerated the technological progress yet again and resulted in increased life expectancy and higher standards of living. The invention of chemical fertilizers, for example, raised agricultural productivity, and better techniques and products were developed to store and preserve food.

Until the mid-19th century, engineering, medical technology, and agriculture were “pragmatic bodies of applied knowledge in which things were known to work, but rarely was it understood why they worked” (Mokyr 1998, p. 1). By contrast, the second Revolution increasingly saw scientists (versus polymath Renaissance men) engaged in finding out how things work rather than why. Distinctive disciplines like physics and chemistry, as we know them today, evolved, and people looked for universal laws; newly invented equipment and instruments stimulated the process and supported their work.

The 19th century witnessed quite a few Germans being ahead by a nose when it came to breakthrough discoveries: Justus von Liebig (1803–1873), Robert Bunsen (1811–1899), and Hermann Kolbe (1818–1884), for example, were scientists whose work became the foundation for the soon-to-flourish chemical and medical industries. Werner von ­Siemens (1816–1892) helped establish an entirely new discipline, namely ­Elektrotechnik (electrical engineering), and Robert Bosch (1861–1942) was yet another engineer and inventor whose name still stands for state-of-the-art machine building and automation (Watson 2010, pp. 355–81).

With the steady accumulation of useful knowledge, the way products were developed changed considerably, as did the organization of the production process: the assembly line was already there, but the advent of technology for the production of interchangeable parts rapidly changed the game and started to replace manual handicraft. Those who managed to produce standardized parts or the tools and machines necessary for their manufacturing were ahead of the others in economies of scale. Over here, the investment banks Deutsche Bank and Dresdner Bank, as well as the German state’s interventions played a major role in fueling the progress. Industrialists often collaborated (rather than competed) to implement certain desirable standard procedures and industrial norms (Fulbrook 2004, p. 138).

Today, Germans may not be especially good at, or even interested in, mass production. Rather, they are experts when it comes to building highly specialized parts and precision tools, and you’d get in touch with them when you need fully automated machines, production ­processes, and manufacturing plants engineered. However, ­machinery currently ranks “only” second (14.4 percent) when looking at the most important export items. Accounting for 18.4 percent, motor ­vehicles and parts thereof were ­Germany’s main export products in 2017 (Statistisches Bundesamt 2018f). Rudolf Diesel (1858–1913), Carl Benz (1844–1929), Gottlieb Daimler (1834–1900), and Wilhelm Maybach (1846–1929) even today stand for Germany’s most significant industry. The third important export category in 2017, by the way, was chemical ­products (9.0 percent). You may turn back a few pages and cross-check with Table 1.3 to see the extent to which the aforementioned industries are represented in the top 25 most important SMEs in Germany.1

Table 3.1 provides an overview of the export and import volumes in euros as of June 2018 in the above, and some other selected segments (Statistisches Bundesamt 2018g). In 2017, the People’s Republic of China was Germany’s most important trading partner for the second consecutive year. Next came the Netherlands, followed by the United States. In the same year, France dropped from second to fourth on the list; from 1975 to 2014, France had been Germany’s most important trading partner.

Table 3.1 Exports and imports (special trade) by division of the National Product Classification for Production Statistics 2017 (selected categories)

Division	Commodity description	In million euros
		Exports	Imports
GP09-01	Products of agriculture and hunting	9,749	31,280
GP09-06	Crude petroleum and natural gas	6,249	56,169
GP09-10	Food products	54,232	46,642
GP09-11	Beverages	5,644	5,883
GP09-13	Textiles	11,697	10,976
GP09-14	Wearing apparel	18,361	32,833
GP09-17	Paper and paper products	19,629	15,053
GP09-19	Coke and refined petroleum products	12,463	20,344
GP09-20	Chemicals and chemical products	115,001	79,107
GP09-21	Basic pharmaceutical products and pharmaceutical preparations	76,007	53,986
GP09-22	Rubber and plastic products	46,025	30,706
GP09-23	Other non-metallic mineral products	15,487	11,078
GP09-24	Basic metals	54,250	58,968
GP09-25	Fabricated metal products, except machinery and equipment	43,664	29,373
GP09-26	Computer, electronic, and optical products	111,081	113,253
GP09-27	Electrical equipment	83,373	60,560
GP09-28	Machinery and equipment n.e.c.	184,606	81,329
GP09-29	Motor vehicles, trailers, and semi-trailers	234,811	115,434
GP09-30	Other transport equipment	58,118	32,780

Talents We Might Lack

Talking about trade, what shortcomings could you experience when dealing with Germans? As we have looked at discoveries and inventions, the slogan “Customer is King” most probably wasn’t coined by a German. In service-wasteland Germany, people are fairly used to what you could easily perceive as impoliteness. Over here, some might even become wary or suspicious if someone was too nice and friendly. Many would prefer a genuinely grumpy (but competent) account representative over someone who just pretends to enjoy serving them. Plus, in a country where expertise is held in high regard and companies invest heavily in the education of their youngsters, the customer cannot always be right per se, right? That would make the staff look stupid, wouldn’t it?

Travel Writer Cal O Cal, coming from the United States, is used to a “Customer first” attitude from pretty much any business; what people understand by customer service here and there, however, differs. ­“Germany’s still got a bit of ground to cover in this regard,” he opines. “Although it is changing very rapidly, most Germans think it is quite normal not to put the customer first.” O Cal also finds it hard to digest how you “still need to send a written snail-mail letter to cancel any service,” which, he thinks, is outdated. “If I am in a Telekom service center, standing in front a representative who is looking at my account, after verifying who I am, why he cannot simply cancel a service I no longer need is beyond me,” he says, comparing German business practices with the United States, “where pretty much anything is possible via a toll-free phone call.” I can truly empathize with O Cal; however (and because it is high time a ­German high-school graduate worth his or her salt did so), let me take the opportunity to quote from Goethe’s Faust (First Part):

Denn, was man schwarz auf weiß besitzt,

Kann man getrost nach Hause tragen.

what one has down in black and white

one can carry home contentedly.

(von Goethe 2007, pp. 152, 153)

Nevertheless, just like I do not believe that every German is a great poet or thinker, it would never occur to me to argue that people over here are all gifted engineers and great inventors; although, I do observe certain traits, customs, and behaviors that somehow seem to be connected with how particular industries prosper. Even at the risk of being accused of stereotyping, I would suggest that Germans overall are more concerned about precision than people from many other countries. Not only do we expect that a screw should precisely, rather than somewhat, fit the wall plug, we also greatly value precise instructions and clear communication. Be careful when using the word “pragmatic” in a business conversation because some consider pragmatism the source of all evil. As thoroughly thought through, long-term solutions are generally preferred over quick fixes, the entrepreneurs’ and industrialists’ planning horizons might be much longer here than in other parts of the world, like in the United States, for example. Workers’ participation can sometimes slow things down further, especially when the employee representatives fear changes for the worse!

Over here, people are less inclined toward taking risks, and to some extent, prefer to build on technologies with a certain degree of maturity. However, that is not the best possible breeding ground for innovations in advanced technologies such as IT, semiconductors, or biotechnology (Abelshauser 2012, p. 48). I would suggest that Germany is also not the first place you should come to when you are looking for venture capital. What can indeed promote innovation are the regional clusters, as ­introduced in Chapter 1.

“Made in Germany” and the Dual Education System

For many people all over the world, “Made in Germany” stands for high efficiency work leading to safe, precision-made, high-tech, reliable, and long-lasting, but also expensive and not-always-customer-focused ­products. “Perfection to the last detail,” like Osman Bayazit Genc, a general manager in the tourism industry from Turkey put it. Perfectionism, if you can afford it money- and time-wise, is one thing, but sometimes, products and services can just get totally over-engineered. My favorite example of this phenomenon are the huge and robust Deutsche Bahn ticket vending machines with their big touchscreen monitors; when you have managed to complete the complicated order process (phew!), better collect all the receipts that are slowly printed one after another, so as to make sure you do not leave the actual ticket behind!

We owe the slogan to the British who, at the end of the 19th ­century, forced foreign producers to label their products with the country of ­origin. The idea was to make the Brits “buy British.” The campaign backfired and the label “Made in Germany” ultimately developed into a sign of ­superior quality (Deutsche Welle 2012). Many also associate this tagline with ­loyalty and trustworthiness, although we will see how the recent scandals involving major players in the banking and automotive industries—the Diesel emissions scandal, including unethical emissions tests—will harm the “hitherto good” (some might also say: sometimes overrated) image of German products in the long run.

How come German products are (overall) of superior quality? In task-oriented Germany, expertise is greatly valued, and many, without even reflecting on it, strive for (or suffer from) perfectionism. When you deal with a German, expect to be speaking to an expert in his or her field. According to the data published by the Federal Employment Agency (Bundesagentur für Arbeit 2018a) as of September 2017, about 62 ­percent of all people in an employment relationship subject to social insurance contribution2 had a professional qualification (mit ­anerkanntem Berufsabschluss) and approximately 16 percent were academics (mit ­akademischem Berufsabschluss).

And, how do people typically become experts in their fields? A very common start to a German’s career path, especially when you like to work in trade, is to undertake a dual vocational education and ­training (Duale Berufsausbildung). Depending on the recognized trade you want to pursue (anerkannter Ausbildungsberuf), the standard training duration is two to three years. Currently, you can choose between 326 trades (Statista GmbH 2018a), such as Shop Assistant (Verkäufer/-in), ­Management Assistant in Wholesale and Foreign Trade (Kaufmann/-frau für Groß- und ­Außenhandel), Metal Cutting Mechanic ­(Zerspanungsmechaniker/-in), Alterations Tailor (Änderungsschneider/-in), or Plant Mechanic for HVAC and ­Sanitary Engineering (Anlagenmechaniker/-in für ­Sanitär-, ­Heizungs- und Klimatechnik). In some trades, trainees also need to choose between various specializations (e.g., the aforementioned mechanic would need to pursue a career in air-conditioning, heating, or renewable energies).

The minimum entry qualification for any apprenticeship is the degree that you get when you have successfully completed nine years of schooling at a so-called Mittelschule (which could be translated as middle school). For some trades, employers prefer to hire teenagers who completed 10 years of schooling, and in some cases, even Abitur (which you can reach after 12–13 years of schooling at a secondary school) is the required entry ticket for pursuing your dream job. Depending on which of the 16 ­federal states you live in, school attendance is compulsory for up to 12 years (including trade school as described next) (Bax n.d.). The literacy rate in Germany is commonly said to have been 99 percent for years; however, a study conducted by the University of ­Hamburg in 2011 claimed that around 7.5 million people in Germany could not read and write properly (they are considered functional illiterates), while 2.3 ­million people between the ages of 18 and 64 years were completely illiterate. According to the university’s findings, they can write their names and individual words, but can neither read nor understand whole sentences (Bundesministerium für Bildung und Forschung n.d.).

Every company that takes on trainees needs to appoint at least one certified in-house education officer/mentor (Ausbildungsbeauftragte/-r) who is not only a subject-matter expert, but is also pedagogically trained and well-versed with the German Youth Employment Protection Act. This person needs to ensure that the training is organized in accordance with the criteria catalog of the Chamber of Industry and Commerce (there is one catalog for each of the specific trades), and that, for the theoretical part of the education, the trainees (Auszubildende, short: Azubis) are enrolled at the nearest trade school (Berufsschule) that offers specialized programs for the specific trade. I, for example, spent about 12 weeks a year at a trade school in Nuremberg. The final exams consisted of a highly standardized written test (multiple-choice questions) and a colloquium conducted by, if I remember correctly, two industry experts and one representative of the Chamber. The committee also went through the record book that I, like every apprentice in Germany, had to maintain for the duration of my apprenticeship. Trainees need to follow the daily protocol of noting down what they have done on each day of their apprenticeship.

If you want to launch a business, for many professions, a so-called Master Craftsman or Master Tradesman Certificate (Meisterbrief) is mandatory (Bundesministerium für Wirtschaft und Energie 2018b). For example, pastry chefs, butchers, and carpenters need to enroll in one of the more than 3,000 German master schools, where they are to enhance their theoretical and practical knowledge and also need to attend courses in business administration, law, and teaching methods and theory (so that they can train apprentices). The cost for such schooling varies from 4,000 to 9,000 euros (depending on the craft or trade) and on top of additional expenses like travel costs, about 750 euros are to be borne for examination fees as well. The pay-off can normally be enjoyed after four or five years (Deutsche Handwerks Zeitung 2016). I doff my hat to my hairdresser who invested this kind of time and money to be allowed to operate her salon. I have followed her career and enjoyed her craftsmanship for some 15 years now.

Generally speaking, Germans are loyal, think long term, and like to build things that last. Especially in Western Germany, people are not terribly interested in quick fixes (nor are they good at improvising). If you are inclined to make temporary arrangements, your patchwork fixes could be frowned upon and even considered illegal. I remember how I, during the winter (!), stopped using the instant boiler in my apartment in Delhi, “although” it had been fixed with tape and strings three times; in Germany, the bathroom area could easily have been locked down for security reasons. If you want to connect a lamp or replace an outlet, you are supposed to hire an electrician. However, please free to change a faulty light bulb yourself.

The Relevance of Chambers and Trade Associations

Even if sometimes rather unapproachable when expected to socialize in a somewhat personal context, Germans like to mix and mingle professionally. When it is to their advantage or it serves a larger cause, managers and company owners are often ready to cooperate with businesses that are in the same industry, sometimes even with their competitors (Abelshauser 2012, pp. 38–41). I am not talking about cartels and price rigging—which I do not deny may exist—but about a great variety of trade associations and initiatives. The Verband Deutscher Maschinen- und Anlagenbau (VDMA), for example, represents more than 3,200 member companies in the mechanical and systems engineering industry in Germany and Europe, mainly looking at common economic, technological, and scientific interests (VDMA e.V. – Mechanical Engineering Industry Association n.d.). When I last accessed their website, the landing page of the German Association of the Automotive Industry (VDA) read “Quo vadis, Diesel?”3 The VDA currently represents more than 600 companies that manufacture cars, trailers, bodies, and buses, as well as parts and accessories; and, it is concerned with more than just the question of how the recent diesel emission scandal will affect the industry in the long run (Verband der ­Automobilindustrie e.V. (VDA) 2018). One of their major activities is the staging of the IAA trade shows. There is even an association for enterprise federations, industry working groups, and industry-affiliated service providers, which is the Bundesverband der Deutschen Industrie e.V. (BDI). The Federation of German Industries focuses “the joint interests of its member associations and represent[s] these in dealings with parliament and society.” The BDI “represents the interests of 100,000 businesses with eight million employees” (Bundesverband der Deutschen Industrie e.V. (BDI) n.d.).

But, there are many more smaller and often very specialized associations. Just yesterday—during a dedicated networking event—did I speak to representatives of several associations that especially represent women in business: (young) professionals, entrepreneurs, company owners, and so on. deutscher ingenieurinnenbund e.V. (an association for female engineers) was there, FidAR : Frauen in die Aufsichtsräte e.V., an association promoting the increase of the women’s share on the supervisory boards was there, but I think I haven’t seen anybody from BLV : Ladies in Logistics.

As you can see, personal relationships may become less relevant when you are embedded in a quite easily accessible and tightly institutionalized network that you can rely upon; and even you can tap these networks and try to make use of their resources! Some associations, like the Association of German Engineers (VDI), explicitly seek and maintain close relationships with an international audience (VDI Verein Deutscher Ingenieure e.V. n.d.). The network of the German Chambers of Commerce Abroad (AHKs) consists of bilateral chambers of commerce abroad. They consult and represent German companies worldwide that wish to develop or expand their business activities in the respective countries (Deutscher Industrie- und Handelskammertag (DIHK) e.V. n.d.). I suggest you get in touch with your local chamber and find out whether you can participate in conferences or networking events that target German business people wanting to do business in your country.

Associations are also always a good starting point when you need to learn about certain industry standards that are (maybe) relevant for exporting your products to Germany. If you want to sell electronic goods, for example, the Waste Electrical and Electronic Equipment Directive (WEEE) or Restriction of Hazardous Substances Directive (RoHS) are matters you need to get acquainted with. For that purpose, I suggest you first try to get in touch with ZVEI, the German Electrical and Electronic Manufacturers’ Association. On their website, they inform about economic policies, business cycles and markets, and so on (Zentralverband Elektrotechnik- und Elektronikindustrie e.V. n.d.).

And, how would you identify the associations relevant for you? Either you go through the BDI’s website (https://english.bdi.eu/bdi/members/) or you check out who are the media partners of relevant trade fairs (more on that topic in Chapter 6). Very often, the events are supported, if not organized, by the relevant associations. Or, simply try a keyword search: “my industry” plus “association” or (in German) “Verband.”

How We (Like to) Spend Our Money

Since you are reading this text, I assume that, at some point, you plan to sell to or buy from Germany. Therefore, you should be interested in understanding how people generally (like to) spend their money and what they spend it on. In case you are targeting private consumers, you also need to know what their average disposable incomes are.

First of all, remember that whatever product or service you are trying to offer, chances are high that it is already here; Germany is a highly developed B2B market. Try to imagine why people would be unhappy with the existing offer, who may or may not yet have access to this kind of offer, and who may be unhappy with their current suppliers. If you’re adding a special feature or an enhanced service to a standard product (as applicable in your country), to what extent would that extra be appreciated in Germany? Is the infrastructure similar to what you might find in your own country? If, for example, you look at payment methods or Internet coverage, Germany might, in some respects, be less developed than other European countries. Trying to answer these questions can help you get a clue about whom to approach in the first place. We’ll discuss the what, why, and how at greater length later in the book (Chapter 6).

Some of the things that you should keep in mind when you want business people to spend money on your products or services are that, first of all, Germans are generally much less risk-inclined than people from many other cultures. Their understanding of the word “risk” may vary considerably from how you and your colleagues would define the term. While you might think that they want to bargain over the price, your German counterparts might be hesitant to close the deal over imponderables not yet sufficiently addressed in the (selling) process. They would very often want to consider and discuss the long-term implications of an investment with you, their team, their superiors, their lawyers, and so on; this takes time.

When you buy from them, things may (also) not always be smooth sailing, especially if they have had not-so-pleasant experiences with similar buyers (or perhaps even you) in the past. If you are from a country that does not rank especially high when it comes to political and economic stability, you should think about how you can make your sellers feel comfortable that they will, sooner or later, receive their money, preferably in euros or maybe U.S. dollars. When talking about trust-building initiatives, I am not (only) referring to trying to socialize with them; Germans rely on personal networks much less than people in most other countries of the world. They would much rather rely on iron-clad contracts and law-enforcing institutions. When they feel that people are talking about monkey business (assessing the behavior or situation from their perspective and cultural background), they might even drop the discussions at a very early stage. When I worked in electronics components distribution, we would not even discuss quotations with (former) customers with pending dues or people who, in our perception, were trying to bargain like stall owners at a bazaar; and even when you are ready to spend big money, be careful not to assume that people wouldn’t be interested in how you are using their products. If it is in conflict with their personal values (in case of smaller businesses) or code of conduct (for bigger firms), sellers might refuse to cater to your needs.

Speaking of B2C, in most cases, you would look at Germans as ­customers. With a gross domestic product (GDP) per capita of 45,229.25 U.S. dollars in 2017 (adjusted by purchasing power parity (PPP)), ­Germany can certainly be considered one of the richer countries in the world. Looking at the current G20 countries, only Switzerland, the United States, and the Netherlands rank higher. However, looking at Europe, the German GDP per capita ranks a mere 10th, and that is behind ­countries like Sweden, Denmark, Norway, and Austria. On an international level, the roughly 45,000 U.S. dollars is equivalent to 255 percent of the world’s average (TRADING ECONOMICS n.d.). If you would like to quickly look up your own country’s GDP and rank, I suggest you refer to www.tradingeconomics.com.

When researching the average disposable income of people over here, there are some points to be considered. I have already mentioned the fact that the gap between the rich and poor has widened considerably over the past years (some would say decades). According to the ­Federal Statistical Office (Destatis), in 2016, the average share of people at risk of ­poverty or social exclusion amounted to 19.7 percent, as compared to 23.5 ­percent in the European Union (Statistisches Bundesamt 2017). “People are ­considered to be at risk of poverty or social exclusion if at least one of the following three living conditions applies,” Destatis writes: “Their income is below the at-risk-of-poverty threshold” (that is less than 60 percent of the median income of the entire population ­(Bundeszentrale für politische Bildung 2018)), “the household they live in is severely materially deprived, or the household has a very low work intensity” (Statistisches Bundesamt 2017). According to the EU definition, in ­Germany, persons living alone currently are at risk of poverty if they have less than 13,152 euros per year, that is 1,096 euros per month, to live on (Europäische Kommission 2018). Destatis explains that payment of public transfer payments considerably reduces the at-risk-of-poverty rate of the population: In ­Germany, the at-risk-of-poverty rate before social transfers (except pension payments) in 2014 amounted to 25 percent (Statistisches ­Bundesamt 2015). One flaw of the method of calculation is: even students who live on their own and receive generous support from their parents can fall under the risk of poverty category (Cremer 2016, pp. 47–50).

The (only recently introduced) mandatory minimum wage is currently 8.84 euros per hour (Deutsche Welle 2018), that is, looking at a standard work week, around 1,500 euros per month. There are some exceptions—for example, for certain kinds of internships or if people are hired after long-term unemployment. The numbers certainly do not apply to freelancers and self-employed people. The minimum wage mostly applies for jobs done by less-qualified employees. Looking at the other end of the spectrum, according to career service Absolventa, the average salary of “vollzeitbeschäftigte Fach- und Führungskräfte” (full-time working specialists and executive staff) in 2017 was 4,846 euros, that is, an annual income of about 58,152 euros (Absolventa GmbH 2018).

Let us take a look at the average income per household and understand what to consider when making calculations and projections. In 2016, the average household income was 4,337 euros per month (4,555 euros in the former Federal Republic of Germany without ­Berlin, and 3,515 euros in the new Länder). Broken down into income sources, on an average, 2,718 euros were generated by employment, 33 euros by self-employment, and 961 euros by public transfer payments. On an ­average 421 euros were generated from assets, which, for sure, would only apply to the smaller share of all households, while 205 euros came from nonpublic transfer payments—that could, for example, be continued paying of ­remuneration in the event of illness—and income from subleasing (Statistisches Bundesamt n.d.). Remember, we are still talking about gross income! To arrive at the disposable income, we need to deduct social insurance contributions. On an average, that would be 583 euros for unemployment insurance, pension insurance, health insurance, and so on. We also need to subtract income or wage tax and the so-called “Solidaritätszuschlag” (solidarity surcharge)—a special tax that has been introduced in the 1990s to, among other things, finance the reunification of Germany (Djahangard 2018); added up, that are, at an average 475 euros. The average net income per household in the period under review was 3,314 euros, of which 2,480 euros would be spent on private consumption (ibid.).

The aforementioned numbers are maybe quite abstract; so, let us look at some typical incomes: a single person (e.g., a shop assistant) without children and a monthly salary of 1,900 euros (Bundesagentur für Arbeit 2018b) would arrive at a net payment of 1,334 euros (Jobware GmbH 2018). If he or she has to pay church taxes, another 13–15 euros would be deducted, the exact amount depending on which federal state our shop assistant lives in. I mention this so that, in case you have skipped the chapter about regional peculiarities, you might consider going back to it some time (Chapter 1). You can use online salary calculators that are offered by some job portals and insurance companies to do more sample calculations. Keep in mind that the percentage of income tax is progressive (currently ranking from 14 to 42 percent; 45 percent for top earners), and that deductions also depend on whether people are married and / or have kids. People with less than 8,820 euros of taxable income per year—that is, basically, salary minus tax-deductible expenses such as costs for commuting to the workplace—pay no income tax at all (Bundesministerium der Finanzen 2018). A person with the average income of a specialist or executive staff (4,846 euros) would get about 3,200 euros credited to his or her account, provided he or she is married, has two children, and has opted for the most common tax class sparing the higher income in the household (tax category III) (Jobware GmbH 2018).

On an average, a German household spends about one-third of its disposal income on housing, energy, and maintenance of the dwelling; that was 877 euros per month in 2016. About 14 percent was spent on food, beverages, and tobacco, and about the same amount (335 euros) went on transport. The average household would spend about 10 percent on recreation and culture, while budgeting 108 euros per month for clothing and footwear. At first glance, the 18 euros in Table 3.2 (Statistisches ­Bundesamt 2018c) for education might look odd, but knowing that education is basically free in Germany, the numbers start to make sense.

Those numbers alone are, yet again, just a starting point for your sales activities. You still need to define segments and research your target groups very carefully. A single person in an expensive city like Munich might need to spend up to some 40 percent of his or her disposable income on accommodation—on an average, single households in 2017 had to allocate 31 percent on gross cold lease⁴ (Ebert, et al. n.d.)—, while a couple living in the small city of Görlitz, at the Polish border, might only need to allocate some 250 or 300 euros for rent (Immowelt AG 2018); although, living in the place with the lowest average salaries in Germany (Schubert 2018), one may more easily afford buying a car—an item the city-dweller might not even wish to possess considering the rare and expensive parking spaces and air pollution, or the recently emerged threat/reality of “­Diesel-Fahrverbot” (driving bans on diesel-powered vehicles) in ­Frankfurt, Berlin, Hamburg, Stuttgart, and so on (ADAC e.V. 2018).

Table 3.2 Private consumption expenditure of households⁵

Expenditure 2016: average per household and month	Euros	%
Private consumption expenditure	2,480	100
Food, beverages, and tobacco	342	13.8
Clothing and footwear	108	4.4
Housing, energy, maintenance of the dwelling	877	35.3
Furnishings, equipment, and household maintenance	150	6.1
Health	99	4.0
Transport	335	13.5
Postal communication and telecommunication	62	2.5
Recreation and culture	258	10.4
Education	18	0.7
Restaurants and hotels	142	5.7
Miscellaneous goods and services	90	3.6

As compared to the Swedes or people in Greece, for example, ­Germans spend less money on food (Statistisches Bundesamt 2018e). The reason can be differing price levels or consumer preferences. If you are French, for example, do not suppose that the average German would value ­wining and dining as much as the average Frenchman and would spend as much money on gourmet food. While someone with a low income who needs to feed a family would most likely be happy to buy industrially produced and processed milk at 60 eurocents—no matter how concerned Germans are overall with nature protection and animal welfare—I have decided that I can still afford to spend 1.49 euros for a liter of milk that is ­supposedly produced by cows that are kept under comparably good living conditions. However, it would never occur to me to spend hundreds of euros for a (status symbol) coffeemaker or even a cent, let alone 1.50 euros for some artificial, sugary energy drink that comes in a small tin.

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