CEOInterviews.AIInterview mit Mag. Georg Kapsch

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Host0:04

On Sunday a week ago, the government's negotiations were on a knife's edge; a failure would have meant new elections. The result is a new work program for the next 18 months. Good morning and welcome to the Pressestunde. Today we discuss this program with Georg Kapsch, President of the Federation of Austrian Industries, and my colleague Esther Mitterstieler asks the questions.

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Esther Mitterstieler0:36

The new government work program contains many points the economy should be satisfied with: lower non-wage costs, higher research premiums, investment incentives, support for SMEs, and better framework conditions for industry. That sounds like Austria is becoming a land of milk and honey for business. Do you see it that way?

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Georg Kapsch1:01

We're not yet a land of milk and honey, but these are essential steps. Small but significant. We've been negotiating for many months, if not years, and we're proud to have gotten some things through.

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Esther Mitterstieler1:17

Let's talk about financing. There was quick criticism that it doesn't add up. The package is 800 million euros per year, 4 billion total. Finance Minister Schelling said the counter-financing is secured: one-third through more growth, two-thirds through savings. Do you see it that optimistically?

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Georg Kapsch1:39

I am a skeptic of financing through growth. Relying on growth is risky. Everything should be financed through savings. But that's not common here. With a tax and contribution ratio of 44%, we must finally cut spending. Even the Chancellor has said the ratio must come down.

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Esther Mitterstieler2:32

On flexible working hours, you criticized the government for outsourcing this to the social partners. They've been negotiating for years, and it's always about trade-offs. Shouldn't the government have decided? Instead, they gave the social partners another ultimatum until June. Is that a sensible approach?

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Georg Kapsch3:56

If the government says it must be this way and the social partners oppose it, then nothing happens. The government should show strength. I am frustrated it was delegated again. But we were always negotiating. We opposed a deal that would cost the economy 390 million. The employment bonus with a 50% reduction in non-wage costs for new hires is a significant step forward.

Regarding the 1500 euro minimum wage, another point delegated to the social partners: Can industry live with it? We have collective bargaining agreements covering over 90% of workers. A legal minimum wage is unnecessary here. It takes something out of collective agreements and writes it into law. For industry, our collective agreements already have high minimum wages, so it doesn't affect us materially, but I don't like the system.

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Esther Mitterstieler8:21

It was also decided that dismissal protection for older workers will be eased. Does that really bring as much as the government believes?

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Georg Kapsch8:26

That has been our demand for many years, and it benefits older workers. We have seen a disproportionate increase in employment of over-50s. The current restrictions make companies reluctant to hire them. Loosening it will help. We want to use their experience. The problem is the seniority principle; I've been saying for 20 years we need to change it so younger workers earn more and older ones a bit less, so that lifetime earnings are equal.

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Esther Mitterstieler11:43

The union is against it. Josef Muchitsch already announced opposition. So there will be resistance. Then the government will have to decide. What do you think?

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Georg Kapsch12:05

This is the same as the working time issue. Politics must make the decisions; that's what they were elected for.

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Esther Mitterstieler12:17

The Economic Research Institute says taxes on work must be cut, but in return it also called for an inheritance and wealth tax. That is an anathema to you. Why?

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Georg Kapsch12:40

We are against inheritance and wealth tax because the volumes are small and cannot compensate for revenue losses elsewhere. It penalizes those who invest and create jobs in Austria, while those who move assets abroad avoid it. According to OECD, Austria has a low taxation of wealth compared to other European countries. Our problem is that net income for people has declined over 20 years, not because of wealth distribution but because public services and taxes have become more expensive.

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Esther Mitterstieler15:01

But the Ministry of Social Affairs says wealth distribution in Austria is extremely unfair. How do you explain that?

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Georg Kapsch15:10

That contradicts all the studies we have. Austria has a relatively good equality distribution. People feel poorer because their net income has fallen despite wage increases, due to rising public service costs and higher tax burdens.

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Esther Mitterstieler16:34

But working conditions have changed dramatically: more temporary contracts, leased labor, involuntary part-time. Doesn't that affect distribution?

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Georg Kapsch16:40

That affects other sectors more than industry. There is more part-time, but that is also the wish of many employees. We fully support better childcare to reconcile family and career. The Federation of Austrian Industries advocates for improved elementary education and extended kindergarten hours.

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Esther Mitterstieler17:45

We have half a million unemployed, yet 80% of companies say they can't find skilled workers. How do you explain this gap?

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Georg Kapsch18:05

It's a combination of education and flexibility. Education is no longer seen as a value in itself. We have a serious problem in primary schools: up to 20% of fourth graders cannot read with comprehension. That creates difficulties in apprenticeship training. We need to massively improve quality in compulsory schooling. I hope the current education minister, who works evidence-based, can achieve this.

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Esther Mitterstieler19:07

The government also decided on a mandatory 30% women's quota for supervisory boards of companies with over 1000 employees. The Federation of Austrian Industries criticized it. Why?

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Georg Kapsch19:36

We are fundamentally against quotas, whether for age, ethnicity, or gender. The quota in supervisory boards has almost doubled in the last ten years, but I would rather see a quota for executive boards, where the real business decisions are made. I searched for two years for a female executive board member but couldn't find one with the right profile. The problem is not a lack of women, but a lack of suitable candidates in technical fields. I prefer to see more women in top management, but quotas for supervisory boards lead to the same women sitting on multiple boards.

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Esther Mitterstieler21:21

In Scandinavia, the quota has been in place since 2008 and the economy hasn't collapsed. It works. Is it a mentality problem in Austria?

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Georg Kapsch21:35

Scandinavia has a completely different elementary education and school system that enables both parents to work full-time. In Austria, we have a different mentality. But we have many women in leadership positions. The Federation itself employs more women than men. The numbers speak for themselves. However, we must not forget that the school system there allows it.

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Esther Mitterstieler23:32

Let's talk about Brexit. The British decision to leave the EU came as a surprise. German companies are putting investments in the UK on ice. How is Austrian industry reacting?

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Georg Kapsch23:55

Brexit must be seen politically and economically. Politically, we lose a significant liberal factor in the EU, which will strengthen statist forces. Economically, we need to wait. I can't imagine companies completely freezing their UK activities. My own company has a subsidiary there. We will see how it develops.

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Esther Mitterstieler24:46

You are personally active in the UK. Are you making any preparations?

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Georg Kapsch24:58

As an entrepreneur, I'm letting it come to me. We deliver to the UK and will see. I don't have a Plan B; we have a subsidiary and will monitor developments.

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Esther Mitterstieler25:31

Marine Le Pen has announced a referendum on French EU membership. Why is there so much skepticism in Europe?

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Georg Kapsch25:54

It hurts me deeply because I am convinced that peace and prosperity can only be guaranteed in a united Europe. Every country that believes it is better off alone is mistaken. Even Germany is too small. We are interconnected. The skepticism comes from mistakes made in Europe, but people forget that national governments make the decisions in Brussels. When things go well, it's a national success; when they go badly, it's blamed on Europe. Renationalization would question the four fundamental freedoms and harm our economy. The Austrian government's plan to restrict EU labor migration is both against EU law and harmful.

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Esther Mitterstieler29:58

There was also a referendum on CETA. People signed because they feel like losers of globalization. How do you explain the benefits?

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Georg Kapsch30:23

First, that referendum wasn't among the top ten concerns. The debate is fueled by misinformation and fear. Free trade has always increased prosperity. It is easier to scare people than to explain positive effects. 140,000 jobs in Austria are directly or indirectly dependent on exports to the US. The standards in Europe remain; the fears about chlorinated chicken are absurd. The consumer has the responsibility. We have the same issue with child labor in cheap T-shirts: we complain but buy the cheapest. The ultimate regulator is the consumer.

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Esther Mitterstieler33:44

You mentioned 140,000 jobs depend on US exports. With Trump's protectionist policies, can you remain calm?

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Georg Kapsch34:00

The way Trump makes policy is new and dangerous. It puts populism before evidence-based policy. Canceling the Trans-Pacific Partnership hands Southeast Asia to China on a silver platter. A 20% border tax would hurt US consumers because intermediate products come from Mexico. In the long run, protectionism always leads to lower prosperity and even wars. But I don't believe there will be a trade war. Companies that produce in the US are safe; those that export will have problems. My own company is seen as American because we produce locally. If Trump cuts taxes, we will invest more. Europe needs to strengthen its position and negotiate free trade agreements with the US and Russia.

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Esther Mitterstieler36:00

But Trump is quickly implementing his campaign promises. Isn't that a lesson for other politicians?

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Georg Kapsch36:07

While I reject his positions, his speed in implementing promises is admirable. Many politicians don't do that. However, a state is not a company, though one can learn from corporate management.

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Esther Mitterstieler37:58

What should European companies do? The US is Austria's second most important export market with 9 billion euros.

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Georg Kapsch38:08

We need a stronger European position and free trade agreements, not bilateral deals. Many Austrian companies are already well established in the US with local production. Those who export will face problems. I don't have a Plan B for the US; I bought American companies to be seen as American. We will benefit if taxes are cut.

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Esther Mitterstieler41:01

The head of the German industry association says the opposite: invest more in Germany and expand broadband, because a trade war would hit Germany hard, with a million jobs at stake. You say invest more in the US?

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Georg Kapsch41:24

At the end of any trade war, there are only losers. But I don't think it will come to that. Infrastructure investment is a state task. Companies go where markets are. The Voestalpine might have problems if tariffs are imposed on exports from Linz to Texas. Trump may need to grant exceptions. He acts quickly but hasn't thought through the consequences. Still, I don't expect a massive trade war.

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Esther Mitterstieler43:25

American companies have become global leaders in digital technology: Amazon, Google, Facebook. Europe has fallen behind. What do they do better?

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Georg Kapsch43:55

Americans give entrepreneurs incredible freedom and have a different attitude towards failure. In Europe, especially Austria, if you fail, you are stigmatized. They are also more risk-taking in investing in startups. But in Vienna, a startup scene is developing. I don't think it should be heavily state-subsidized; that's not the right approach.

If you subsidize investment in a startup, if I have to pay 200,000 euros in taxes, why should I get a 50,000 euro bonus? A default guarantee would be different, but a grant for someone who can already afford the investment only increases their margin. I was always against that. But fundamentally, I support startup funding and state initiative programs. Startups should be funded, but private investment in startups should not be subsidized.

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Host45:49

Isn't that contradictory? Startups stand for digitalization and Industry 4.0. But how many jobs will remain? You say many new ones will be created, but how does that work in a tight labor market?

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Georg Kapsch46:17

If we don't change job profiles and social prestige, we'll have a problem. Conventional industrial jobs will decrease, but qualifications will rise, boosting exports. Digitalization will bring production back to Europe as labor costs become less important. There are shortages in care, health, and education. We need to raise prestige and pay for those jobs. In Switzerland, elementary teachers earn as much as professors, which is justified.

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Host48:00

People feel change is fast, but you say it's too slow. How can they be led?

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Georg Kapsch48:17

We overestimate digitalization. It's been around for 30 years. The key is integrating value chains, which affects SMEs, not large firms. We need to bring them along and train employees. But 900,000 Austrians lack computer skills. Schools still lack WiFi. The picture of industry losing all low-skilled jobs to a small elite is wrong. We need to upskill the medium-qualified. The low-qualified already have problems, but there will always be some jobs. Education must be improved, but it's not just about playing on smartphones.

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Host50:38

So neither companies nor employees are prepared. Many jobs will disappear with automation. We must change job profiles. Social professions need human touch. Robots may eventually dress people, but emotionality is irreplaceable. Society must care for the weak.

That's a call for subsidiarity, not state control. We need smaller communities caring for each other.

Thank you for this conversation. That was the press hour. Thanks to my colleague Esther Mitterstieler from News. We continue on ORF 2 with the parliament magazine.

What happened? Europe was the technological leader, now left behind. What can Americans do that Europeans can't?

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Georg Kapsch53:53

Americans give freedom to companies and have a different attitude toward failure. In the US, failure is a learning curve; in Austria, it stigmatizes. People are more risk-tolerant, investing in startups without immediately crying for help.

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Host54:51

Vienna's startup scene is developing. Is it too state-subsidized? I've said I don't like subsidizing private investment. A default guarantee would be better than a grant for those who can already afford it.

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Georg Kapsch55:50

Startups drive digitalization, but the question of job numbers remains. You say many new jobs will be created, but how in a tight labor market?

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Host56:41

It pains me. Peace and prosperity only in a united Europe. Each country is too small. Germany is too small. Skepticism arises because nation states blame Brussels for failures while taking credit for successes. There's no common foreign or economic policy. The refugee crisis showed national egoisms.

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Georg Kapsch59:32

Education is not seen as a value in itself. 20% of fourth graders can't read with comprehension. We need to raise quality in compulsory schooling. I'm hopeful the education minister can do that.

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Host1:00:47

The government's women's quota for supervisory boards is criticized by the Federation of Austrian Industries. Why are we against quotas? I'd prefer a quota for executive boards, where real business happens. You don't have a woman on your executive board.

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Georg Kapsch1:01:59

I searched for two years for a female executive. Only 3% of applicants were women, and they didn't fit the technical profile. I would have gladly hired one.

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Host1:02:22

There's a database of 450 potential female supervisory board members. Norway has had a quota since 2008. You criticized outsourcing flexible working hours to social partners. Can't they handle it?

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Georg Kapsch1:02:43

Social partners have negotiated for years, but it's always about quid pro quo. The government should decide. They gave another deadline until June. If no agreement, the implicit decision comes. Outsourcing is not the right way.

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Host1:04:37

Frustration shows because you're not part of the social partners. You've said certain contracts within companies should be possible. Still your opinion?

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Georg Kapsch1:04:58

I'm frustrated it was delegated again. We were involved in negotiations, but not as social partners. We didn't agree to a deal: 12-hour day vs. easier 6th week. One costs employees nothing, the other would cost the economy 390 million.

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Host1:05:49

Your company is active in the UK. How are you preparing for Brexit?

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Georg Kapsch1:06:00

I'm letting it come. We have a subsidiary in the UK and will see how business develops. We have no influence anyway.

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Host1:06:48

Why are there so many EU-skeptical movements? The peace project is not perceived as such.

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Georg Kapsch1:07:36

It pains me. Only a united Europe guarantees peace and prosperity. Each country is too small. Skepticism arises because nation states blame Brussels. There's no common policy. The EU must prove it's crisis-proof.

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Host1:08:42

But nation states are the problem. Renationalization questions the four freedoms. The Austrian government does the same by restricting labor influx.

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Georg Kapsch1:09:02

Education is key. 20% of fourth graders can't read. We need to raise quality in compulsory schooling.

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Host1:09:15

The Economic Research Institute says taxes on labor must be reduced, but also calls for inheritance and wealth tax. Is that an abomination?

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Georg Kapsch1:09:25

We need to fundamentally reconsider tax structure. Inheritance and wealth tax are feel-good measures with small volumes. They penalize those who invest in Austria, while those who take wealth abroad are advantaged. That's counterproductive.

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Host1:10:17

OECD shows Austria has low taxation. Why is it a problem for the rich to contribute more?

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Georg Kapsch1:10:47

Austria already has the smallest rich-poor gap and massive redistribution. Countries with wealth taxes have lower income taxes. OECD comparisons largely refer to property taxes, which in Austria are low but exclude services like garbage collection that we pay extra for.

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Host1:11:41

A Social Ministry study says wealth distribution is extremely unfair. How do you explain that?

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Georg Kapsch1:12:24

People feel that way because of changes in society. We have half a million unemployed but eight of ten companies can't find skilled workers. That's an education and flexibility problem. Education is not valued for itself. We need to improve compulsory schooling.

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Host1:13:48

Back to the women's quota. Why are you against it? I'd prefer a quota for executive boards.

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Georg Kapsch1:14:41

I searched for two years for a female executive. Only 3% of applicants were women, and they didn't fit the profile.

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Host1:15:55

There's a database of 450 potential female supervisory board members. Norway has had a quota since 2008. You criticized outsourcing flexible hours to social partners.

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Georg Kapsch1:16:50

Social partners have negotiated for years with quid pro quo. The government should decide. They gave another deadline. Outsourcing is not the right way.

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Host1:17:43

Frustration shows because you're not part of the social partners. You've said certain contracts within companies should be possible.

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Georg Kapsch1:18:41

I'm frustrated it was delegated again. We were involved but not as social partners. We didn't agree to a deal that would cost the economy 390 million.

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Host1:19:38

The Economic Research Institute says taxes on labor must be reduced, but also calls for inheritance and wealth tax.

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Georg Kapsch1:20:11

We need to reconsider tax structure. Inheritance and wealth tax are feel-good measures that penalize investors in Austria.

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Host1:21:09

OECD shows Austria has low taxation. Why is it a problem for the rich to contribute more?

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Georg Kapsch1:22:22

Austria already has the smallest rich-poor gap and massive redistribution. Countries with wealth taxes have lower income taxes. OECD comparisons refer to property taxes, which exclude services we pay extra for.

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Host1:23:34

A Social Ministry study says wealth distribution is extremely unfair. How do you explain that?

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Georg Kapsch1:24:00

People feel that way because of societal changes. We have half a million unemployed but eight of ten companies can't find skilled workers. That's an education and flexibility problem. We need to improve compulsory schooling.

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Host1:25:32

The union opposes making it easier to let go of 50-year-olds. The government must decide.

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Georg Kapsch1:26:06

The Economic Research Institute says taxes on labor must be reduced, but also calls for inheritance and wealth tax.

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Host1:26:41

We need to reconsider tax structure. Inheritance and wealth tax are feel-good measures that penalize investors in Austria.

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Georg Kapsch1:27:23

OECD shows Austria has low taxation. Why is it a problem for the rich to contribute more?

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Host1:27:55

Austria already has the smallest rich-poor gap and massive redistribution. Countries with wealth taxes have lower income taxes. OECD comparisons refer to property taxes, which exclude services we pay extra for.

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Georg Kapsch1:28:40

A Social Ministry study says wealth distribution is extremely unfair. How do you explain that?

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Host1:29:02

People feel that way because of societal changes. We have half a million unemployed but eight of ten companies can't find skilled workers. That's an education and flexibility problem. We need to improve compulsory schooling.

Interview mit Mag. Georg Kapsch

About Georg Kapsch