An International Comparison of Unit Labour Costs

Although productivity in Germany is above average, this fails to fully compensate for the drawback of high labour costs. Nor has Germany achieved any significant advantage in the way unit labour costs have developed. Compared to the competition, they have improved only marginally since the introduction of the euro. Germany is performing slightly better than the Eurozone as a whole: Between 1999 and 2016, German unit labour costs improved by 6.4 per cent. Nonetheless, the unit labour cost trend in five Eurozone countries was slightly or significantly more favourable than in Germany over the same period. However, when the euro was introduced, Germany’s economy was in poor shape. Compared with the other Eurozone countries its unit labour costs were the worst not only in the observation period, but also since German reunification in 1990. Between 1999 and 2007, Germany managed to improve its cost competitiveness significantly, thus correcting the preceding deterioration. Only in this phase did unit labour costs in domestic manufacturing develop more favourably than in other euro countries. Since 2011, however, they have risen more steeply in local currency terms than for the competition as a whole and also mor e than in the Eurozone.