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Sharp Drop in Relative Labor Costs and Unit Labor Costs in Manufacturing in 1997

  • Alois Guger

    (WIFO)

The price competitiveness of Austria's manufacturing sector improved substantially over the last two years, following a marked deterioration during the first half of the nineties. Relative unit labor costs (measured in a common currency), after having risen by 5.7 percent during the revaluation phase between 1992 and 1995, dropped by 7 percent in 1996 and 1997. Moderate increases in labor costs (+1.9 percent) as well as high productivity gains (+7.3 percent) lowered unit labor costs in Austrian manufacturing by 5 percent in 1997, while unit labor costs in Austria's major trading partners fell by only 2 percent on average. With the British pound, the U.S. dollar and the Italian lira continuing on their steep upward path, the effective exchange rate of the schilling dropped by 2 percent, engendering improvement in the international cost position of Austria's manufacturing improved by 4.9 percent (by +4.4 percent vis-à-vis the EU). The competitive position of Austria's economy has changed significantly several times since the beginning of the nineties as a result of fluctuations in exchange rates. Today, Austria is one of the countries with the highest labor costs and takes sixth place in the hierarchy of labor costs; in 1991, Austria was ranked number 10. In 1997, hourly labor costs in Austria were as high as 274 ATS. Labor is more costly only in Germany (+23 percent), Switzerland (+11 percent), and Norway (+7 percent). Denmark and Belgium pay only slightly more, and Sweden and Finland slightly less for labor than Austria. For the EU on average, labor costs were 10 percent lower than in Austria; the corresponding rate was 18 percent for Italy, France, and the USA, and 25 percent for the U.K. A reduction in the number of hours paid but not worked (such as sick leave) reduced indirect labor costs as a percentage of direct labor costs from 98,7 percent in 1996 to 97.7 percent in 1997.

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Article provided by WIFO in its journal WIFO-Monatsberichte.

Volume (Year): 71 (1998)
Issue (Month): 9 (September)
Pages: 609-615

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Handle: RePEc:wfo:monber:y:1998:i:9:p:609-615
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