Contrary to general perception, the Covid-19 pandemic has not given digitalization in Germany the boost it had hoped for, according to a survey conducted by the ZEW - Leibniz Centre for European Economic Research in Mannheim. Although companies invested more in technologies that enable working from home and virtual collaboration, spending on advanced production equipment, modern analysis and planning tools and digitally supported customer management decreased at the same time. Larger projects in particular were postponed or even completely discontinued.
This is the result of a study conducted jointly by ZEW Mannheim, the Institute for the Future of Labor (IZA), the Institute for Employment Research (IAB), the Luxembourg Institute of Socio-Economic Research (LISER) and other research institutions on the basis of a representative company survey.
Investment activity declined with the pandemic
“On the one hand, these pandemic-related investments helped companies to mitigate the negative consequences of the pandemic. They were able to increase the use of home office and make less use of short-time working. However, these adjustment investments came at the expense of other technology investments, which may be contributing to the current weak productivity growth in Germany,” explains Professor Melanie Arntz, deputy head of the ZEW Research Department ‘Labour Markets and Social Insurance’ and co-author of the study.
The majority of investments in modern digital technologies were made before the pandemic, while investment activity declined overall during the pandemic. The pandemic-related investment gap amounts to around 50%. Contrary to public perception, the pandemic did not provide a boost to digitalization, but actually set technology development in Germany back by almost 1.5 years.
Ukraine war causes further postponement
Based on the results of the study, Arntz predicts the following for the period after the pandemic: “We suspect that the energy price and uncertainty shock that occurred in Germany immediately after the pandemic due to the war in Ukraine has contributed to the further postponement of major investments even after the pandemic has subsided. These are not good conditions for productivity growth in Germany and the recovery of the economy.”
Around 3,000 German companies took part in the new representative “IAB-ZEW-Arbeitswelt 4.0” (BIZA II) company survey, which was funded by the Federal Ministry of Labor and Social Affairs. It compares the use of state-of-the-art digital technologies in German companies between 2016 and 2021, covering modern production equipment such as self-controlling machines and systems as well as analysis tools with big data, cloud computing systems, collaboration and communication tools and artificial intelligence.
Further information is available at www.zew.de.