An International Comparison of Industrial Labour Costs

Schröder Christoph

IW-Trends No. 2 21. June 2019 Christoph Schröder An International Comparison of Industrial Labour Costs

In 2018, labour costs in German manufacturing were running at 41.0 euros per employee hour. This puts Germany in fifth place in the German Economic Institute’s comparison of labour costs in 42 countries and means that its costs are almost one-third higher than the average for industrialised countries.

IW-Trends No. 2 21. June 2019 Christoph Schröder

An International Comparison of Industrial Labour Costs

IW-Trends

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In 2018, labour costs in German manufacturing were running at 41.0 euros per employee hour. This puts Germany in fifth place in the German Economic Institute’s comparison of labour costs in 42 countries and means that its costs are almost one-third higher than the average for industrialised countries.

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There are still large differences in cost levels between eastern and western Germany. At 27.8 euros per hour, eastern German industry produces 35 per cent more cheaply than its western counterpart (42.9 euros). Since the turn of the millennium, whilst worsening slightly compared with other foreign competitors, German labour costs have improved relative to the Eurozone. However, this development has been by no means continuous. Although Germany succeeded in continuously reducing its cost disadvantage vis-à-vis the rest of the Eurozone in the 2000s, after flattening out for four years its labour cost position deteriorated again and by 2018 had worsened by 5 percentage points. The country’s long-lasting boom has thus not only led to growth in employment, but also to an above-average increase in labour costs. German industry’s network of component suppliers and service providers means that manufacturing also involves other sectors, such as the transport sector. The German Economic Institute (IW) therefore also calculates the labour costs of the manufacturing sector including its intermediate consumption network. Taking this combined effect reduces labour costs in German industry in 2018 by a good 2 euros to 38.8 euros. This is the strongest effect in Europe, showing that German industry’s upstream suppliers have particularly favourable labour costs compared to manufacturing itself. Nevertheless, Germany still ranks sixth and is thus in the top group of this cost ranking as well.

IW-Trends No. 2 21. June 2019 Christoph Schröder

Christoph Schröder:Industrielle Arbeitskosten im internationalen Vergleich

IW-Trends

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Longer working hours

The German labor market will face major challenges in the coming years because of demographic change. The current economic crisis and the associated weakness in labor demand do not alter the fact that the labor force is shrinking dramatically.

IW-Trends No. 4 25. December 2014 Christoph Schröder

Industrial Labour Costs: An International Comparison

In 2013 labour costs in western German manufacturing were running at 38.77 euros per employee hour. This puts western Germany in sixth place among the 44 countries covered by the IW Labour Costs Comparison with labour costs more than a quarter higher than the average for fully industrialised countries. For Germany as a whole the cost disadvantage falls to a fifth since, at 23.93 euros, the east German level is 38 per cent lower than that in the west. Although in the last three years labour cost growth in Germany has sometimes been above average, the country has done well overall since the turn of the millennium – in contrast to its performance in the 1990s. Among EU Member States Germany’s annual av-erage increase of some 2 per cent between 2000 and 2013 was undercut only by Portugal. Greece has recently attracted attention with its high labour cost discipline. Labour costs there have dropped for three years in a row.