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.
The current debate on industrial policy vacillates between the extreme positions of an orthodoxy of rejecting state action and a naive belief in the state's ability to control structural change.
The automotive industry in Germany is currently facing several challenges. Car production had already fallen significantly before the Covid19 pandemic and in 2020 and 2021 suffered two slumps of historic proportions.