An International Comparison of Unit Labour Costs

The level of unit labour costs in German manufacturing industry is still high. On average the unit labour costs of competing nations were 11 per cent below the German rate in 2014 though the Eurozone, with a mere 3 per cent lower costs, had only a moderate advantage. Of course, productivity is also above average in Germany, but not sufficiently to compensate for the disadvantage of high labour costs. Over time Germany’s relative position has deteriorated slightly relative to the competition, primarily due to its lower productivity growth. In the long run (1991–2014) unit labour costs remained constant on a national currency basis in comparison to the countries which now have the Euro. However, in the 1990s unit labour costs increased so dramatically that the German economy entered the Eurozone in poor economic health. Between 1999 and 2007 unit labour costs in Germany developed considerably more favourably than in the Eurozone. However, since 2011 they have again risen more steeply.