Labor lessons
December 13, 2011
Germany's booming economy has filled the order books of companies countrywide but hasn't necessarily put more money into the pockets of their employees.
Despite 4 percent economic growth last year, Germany continues to see its wages rise noticeably slower than those in many other European countries.
Labor costs in Germany grew only 0.6 percent in 2010, putting the country in the midfield after a number of high-wage Scandinavian and Benelux countries, according to a new study published by Germany's Macroeconomic Policy Institute (IMK).
Three times faster
On average, labor costs in the European Union grew last year nearly three times as fast, at 1.7 percent, and 1.6 percent in the eurozone.
Between 2000 and 2010, German labor costs grew on average 1.7 percent per year, compared with 2.8 percent in the eurozone and 3.3 in the EU.
Labor costs comprise gross pay and the employer's share of social security and health care contributions.
German labor costs, or the costs per manufactured unit, have grown far slower over the past few years than those of nearly all its European trade partners, according to IMK.
The level of labor costs is an important indicator of a country's competitiveness. And since the launch of the European common currency, Germany has persistently increased its price-based competitiveness, authors of the IMK study maintain.
Last year, the cost of one hour of work to companies in the private sector averaged 29.10 euros ($38.67) in Germany. That puts Germany in seventh place - no change from the year before - behind countries with higher labor costs such as Belgium, Sweden, Denmark, France and Netherlands
At the high end of the scale is Belgium, with an average 38.20 euros per hour of labor. At the low end is Poland, at 7 euros.
Public sector labor costs
For the first time, IMK market researchers also looked at labor costs in the public sector in 2010. Germany ranked fifth at 26.80 euros per hour, behind the Netherlands, Ireland, France and Finland. Although Germany's average hourly labor costs in the public sector are below those in private sector, they have risen more, on average, 1.1 percent, between 2000 and 2011.
As competitive as Germany's labor costs appear to some, they're still too high to others. In a prompt reply to the IMK report, the German Employers' Association (BDA) said Germany remains "an expensive labor market."
Author: John Blau
Editor: Martin Kuebler