In 2007, total annual labor costs per full-time worker amounted to 54,870 euro in the West German industry. In East Germany the figure was 36,280 euro, two-thirds of the West German level. This cost advantage has remained relatively stable over the last few years. Within the German service sector labor costs in 2007 varied between 34,840 euro in retail trade and 69,600 euro in insurance and banking. The overall cost structure did not change much. Total labor costs rose slightly slower than wages mainly because of the reduction of employer contributions to social insurance. Other changes resulted from the extension of occupational pension schemes, increased sick leave and the reduction of bonuses which are not linked to individual or collective performance. In 2008, contributions to the unemployment insurance are further reduced and, although health and long-term care premiums are rising, the total rate of social insurance contributions will continue to go down. The share of total labor costs which is determined by legal requirements and can, therefore, not be agreed upon voluntarily by the contracting parties makes up 24.9 percent in the West German industry and 26.8 percent in the East German industry. It has remained almost unchanged since the beginning of the 1990s.

Dialogue partner in the IW:

Christoph Schröder, Phone +49 221 4981-773, schroeder.christoph@iwkoeln.de