In 2010, the unit labor cost position of Germany’s manufacturing industry recovered significantly. It is still well above the pre-crisis level, however. In the period from 2007 to 2010, which includes the economic downturn in 2008 and 2009 and the recovery in 2010, German unit labor costs rose by 5.9 percent on average – the sharpest increase of all countries compared. The reason for this upward surge is the slump in productivity as a result of collapsing demand during the global economic crisis while the employment level remained almost unchanged. Nevertheless, the German productivity level is still fairly high leaving its competitors by 13 percent behind. This gap is not big enough, however, to compensate for Germany’s high labor costs. In 2010, the country ranked fifth in terms of unit labor costs, together with Norway. Here Germany’s competitors had a cost advantage of 12 percent on average.
International Comparison of Productivity and Unit Labor Costs
German Economic Institute (IW)
More on the topic
Supply-side stimulus for growth
The stagnation of the German economy is entering its sixth year. The economic weakness threatens to turn into a structural crisis. Structural reforms on the supply side must be on the agenda in order to provide the necessary economic policy impetus for more ...
IW
Defense economy: Industrial policy instead of „war economy”
For a long time, the defense industry was not the focus of economic policy debate. The export of weapons and dual-use goods is handled restrictively in Germany. Compared to other countries, spending on equipment for the Bundeswehr was low, which put the ...
IW