Germany's Industrial Wage Premium Shrinks as Manufacturing Employment Drops to Decade Low
19.06.2026 - 18:26:43 | boerse-global.de
The once-significant wage advantage that lured workers into German factories is fading fast. Entry-level salaries in manufacturing now sit just 10.4 percent above the national average — down from 20.4 percent in 2014. For long-term employees, the premium has slipped from 16.5 percent to 8.7 percent over the same period, according to a study by the Institute of the German Economy (IW) on behalf of the Bertelsmann Foundation.
That shrinking pay gap helps explain why the number of people working in Germany's manufacturing sector — the Verarbeitendes Gewerbe — has fallen to around 6.6 million in 2025, the lowest in ten years. The sector's share of total employment dropped from 22 percent in 2014 to 19 percent today.
The decline is not driven by mass layoffs but by a quiet, deliberate slowdown in hiring. Companies are increasingly reluctant to backfill positions as workers leave. Between 2019 and 2025, roughly 420,000 jobs disappeared this way, the IW found. Up until 2019, new hires and departures had kept pace with each other; then a gap opened, with recruitment falling far more sharply than exits. An IW survey from April confirms the mood: 37 percent of industrial firms plan further staff reductions, while only 14 percent intend to hire.
Regional patterns add another layer. The picture across eastern Germany is starkly divided. In the Oder-Spree district, the arrival of Tesla's factory doubled local manufacturing employment. In contrast, the Altenburger Land district — after building up its industrial base until 2019 — has seen a decline since. Western regions also diverge dramatically. Stuttgart posted a 33 percent gain in industrial jobs between 2014 and 2024, while Erlangen lost 34 percent. Gelsenkirchen shed roughly one-third of its manufacturing base. Even traditionally strong areas in the south are feeling the strain.
Job requirements are shifting too. Classical manufacturing trades are losing ground, while demand for electrical engineers and mechanical engineers rose by five percentage points over the same decade. Notably, industrial-typical jobs found outside the manufacturing sector — such as in services — grew by 15 percent, signaling an increasing "industrialization" of service work.
Industry associations sound alarms. Volker Schmidt, managing director of NiedersachsenMetall, has called for competitive energy prices, less bureaucracy, and faster permitting processes. The BDI (Federation of German Industries) warns that the "Made in Germany" brand is under severe pressure.
Some companies have already taken drastic steps. Chemical giant Evonik plans to cut 3,200 positions by the end of 2029, with 2,150 of those in Germany. It intends to exit the polyester business and close its Witten site in 2027. In Kaiserslautern, an investor process for the battery cell production facility began at the start of June.
The federal government has promised a reform package, due by mid-July, focusing on pension security, cutting red tape, and making the labor market more flexible. Those issues are expected to dominate the Tag der Industrie (Industry Day) in Berlin on June 22 and 23 — an event Chancellor Merz is scheduled to attend.
