Study: The Growth Potential of Germany’s Industrial Health Economy
On behalf of the Federation of German Industries (BDI), WifOR has analyzed the growth potential of Germany’s Industrial Health Economy. The study establishes best and worse-case scenarios for labor shortages, digitalization, and Research and Development (R&D) up until 2030. Concrete points of action are delivered for each dimension based on the findings. In addition, international comparisons analyze Industrial Health Economies in Japan, France, the United Kingdom, and four other regions, with the aim of improving conditions in the German sector for healthcare provision, value creation, and growth.
Rabea Knorr, Head of BDI’s Health Industry Department, joined us for an interview. The discussion covers key findings, how the study can shape the future of the Industrial Health Economy, and the importance of making decisions based on valid data. Read the interview here.
Definition: Industrial Health Economy
WifOR’s Health Economy Reporting defines the Health Economy as a cross-sectoral industry. It is divided into three components: Healthcare Economy, Services and Support, and Industrial Health Economy.
The Industrial Health Economy includes pharmaceuticals, medical technology, biotechnology processes, e-health, wholesale, and entrepreneurial R&D activities. This definition is the result of many years of research by WifOR for Germany’s Federal Ministry of Economic Affairs and Climate Action (BMWK).
Key findings: skills shortages, innovation & strategic investments
WifOR’s study, commissioned by BDI and co-authored with IGES Institute, analyzed three core areas of Germany’s Industrial Health Economy: skilled labor shortages, R&D, and digitalization. These areas have a significant influence not only on economic growth, but also the efficiency and advancements in health systems – with significant impact on the standard of care provided for Germany’s population over the upcoming years.
Skilled labor
The Industrial Health Economy in Germany is currently missing 125,000 skilled workers, resulting in a yearly loss of €10.3 billion in gross value added. Without counteractive measures, a worst-case scenario would see the labor shortage rise to 320,000 by 2030. This scenario would not only result in a negative impact on value added of up to €26.6 billion, but also significantly impair the capacity of the health system.
Research & Development
Strategically linking digitalization with innovation has the potential to drive efficiency in the healthcare system and foster growth. In the Industrial Health Economy, current annual investments amounting to €135 billion generate a growth rate of 3.5% per annum. By 2030, a realistic best-case scenario of €140 billion invested in R&D yearly would raise annual growth to a rate of 4% per annum. However, a fall in investment to €129 billion, resulting in 2.9% growth per annum, constitutes a possible worst-case scenario.
Digitalization
From electronic patient records and telemedicine to AI-driven tools, strategic investments in digitalization have the potential to uplift annual gross value added by 39% by 2030 – an increase of €140 billion. However, a lower digitalization intensity could result in a foreseeable worst-case scenario of 24% compared to 2022. Advancing digitalization forms the basis for foundational improvements to the provision of healthcare.
Alongside these core areas, the study also compares Germany’s Industrial Health Economy with international competition in France, Japan, Finland, Singapore, Massachusetts (USA), Israel, and the United Kingdom. Findings show that the Covid-19 pandemic has increased the strategic significance of Industrial Health Economies.
Interview with Rabea Knorr (BDI): The Growth Potential of Germany’s Industrial Health Economy
Commissioned by the Federation of German Industries (BDI), WifOR has published “The Growth Potential of the Industrial Health Economy – Scenario Analysis and International Comparison”. Head of the BDI’s Health Industry Department Rabea Knorr joined us in an interview to discuss the study.
WifOR: Rabea, what was the motivation for commissioning a study from WifOR to analyze the growth potential of the Industrial Health Economy?
Rabea Knorr: In 2021, the BDI published a strategy paper for the future of the Industrial Health Economy based on research conducted by WifOR. This initial paper was very extensive, providing concrete recommendations for action in areas throughout the sector – from supply chain security to global health. With the recently published study, we sought to carry out deep dives into specific areas. The objective was to provide a numerical basis for what the Industrial Health Economy could achieve if we succeed in driving positive development in these areas, especially digitalization and R&D.
From your perspective, what are the most significant findings?
A very important finding is the insight into the skilled labor shortage, with a potential deficit of up to 320,000 employees by 2030. Simply having a figure is impactful, seeing how dramatic the development can be, and understanding that we have to act. This is significant because, previously, the challenge was abstract. We now have evidence-based data to support us.
But the study also shows digitalization and R&D can, in turn, work as levers to counteract this impending shortage of skilled workers. Expanding these areas are critical when it comes to harnessing growth potential and healthcare provision.
Meanwhile, the international comparison makes clear that other countries are thinking and acting more strategically in the wake of the Covid-19 pandemic. We see comprehensive political measures being implemented there to strengthen the Industrial Health Economy.
Are there results from the study which were unexpected?
The insight into skilled labor shortages. 2030 is no longer a far-off timeframe. For the health sector, demographic change – a key driver of labor shortages – has a double impact: more workers leaving the job market, greater patient-demand as populations age.
Another unexpected finding came from the international comparison. In some countries, decisive action is being taken to address the challenges facing health systems. For example, Finland enables access to health data for the Industrial Health Economy – and has done so for years. This has supported the effective deployment of digitalization in health. In Japan, the Industrial Health Economy is a top political priority. The sector is seen as central pillar for not only raising quality of life in an ageing society, but also tackling significant challenges facing humanity such as climate change. Anonymized data from millions of patients is shared with healthcare providers while R&D investment targets the implementation of AI tools throughout the health system.
During the Covid-19 pandemic we saw an enhanced focus on the industry in Germany, but this momentum has since resided. Those countries which have sustained their efforts are building a more resilient Industrial Health Economy with a focus on long-term objectives. We can’t wait for the next pandemic; we need to develop and implement measures now.
Rabea Knorr (BDI)
Head of Health Industry Department
Since the publication of the study, politicians – including Germany’s Health Minister Dr. Lauterbach – have taken up the findings directly. This demonstrates the importance of providing political decision-makers with valid, reliable data.
Why is it important to provide scientific data when it comes to the contributions of the Health Economy?
Making the value of health investments clear to stakeholders throughout society is essential. Thanks to WifOR’s research, we already knew the Industrial Health Economy is one of the most significant sectors in Germany’s economy – with a gross value added of €103 billion in 2022. The existing research goes a long way towards demonstrating the importance of the sector, and also why we must strengthen it.
Meanwhile, this study provides a glimpse into the future. On the one hand, digitalization and R&D promise huge potential for growth. On the other, international comparisons show that many countries are investing here. If we don’t succeed in improving the conditions of Germany’s Industrial Health Economy, there is a very real possibility that companies will decide in favor of other locations where the framework conditions are more attractive.
How will the BDI apply the findings from the study?
We want to communicate the value of the Industrial Health Economy to stakeholders, with a view to highlighting the sector as an attractive area for targeted investments in digitalization and R&D. The study reveals that if these measures are implemented quickly and comprehensively, there is the potential to generate so much added value – in well-being and economic terms.
Since the publication of the study, politicians – including Germany’s Health Minister Dr. Lauterbach – have taken up the findings directly. This demonstrates the importance of providing political decision-makers with valid, reliable data.
One final question. How could the findings help to shape the future of Germany’s Industrial Health Economy?
The study enables discussions between politics and industry to draw on concrete recommendations for action. The resulting measures have the capacity to define the framework conditions and growth trajectory of the Industrial Health Economy. In addition, international comparisons identify what is working in other countries – and help us to learn, with the potential to secure a prosperous future for the sector and the value added it brings to society.
As a final word, I would like to highlight that the study has allowed us to refocus on the most significant developments in the future. The BDI now has concrete points of action to push progress in digitalization and R&D, thereby proactively addressing the challenges posed by skill shortages and competition on the international stage. The next step is to act on these findings.
Thank you, Rabea.
