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German labour costs have risen only moderately

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  • Alexander Herzog-Stein
  • Heike Joebges
  • Torsten Niechoj
  • Ulrike Stein
  • Rudolf Zwiener

Abstract

Based on Eurostat data the Macroeconomic Policy Institute (IMK) regularly analyses the development of labour costs and unit labour costs in Europe. This report presents labour cost trends in the private sector, disaggregated for private as well as public services and manufacturing industry, for a selection of European countries, the Euro Area and the European Union. In addition the development of unit labour costs in Europe is analysed, so allowing for labour productivity. Subsequently, the report examines the development of unit labor costs and the relationship between price competitiveness, export prices and unit labor costs.In 2014 hourly labour cost in the German private sector averaged 31.9 Euros. The German economy is in eighth position in the ranking of EU countries as in the previous year. With an annual rate of change of 1.8 %, the rise in labour costs in the German private sector was slightly above the European average. In the so-called European crisis countries hourly labour costs decreased again. Hourly labour costs in German manufacturing rose by 2.5 %. This is a slightly faster rate than in private services, where labour costs grew by 1.7 %. Consequently, the difference in labour costs between the two sectors diverged further and is now equal to 21 %, the largest intersectoral wage gap of all the EU countries.The adjustment process in the European crisis countries continued in 2014. Hence, the average rate of change in unit hourly labour cost in the Eurozone of 1.2 % was significantly below the ECB's inflation target of slightly below 2 % per annum. Therefore, the development of unit labour costs in the Euro Area as a whole does not comply with the ECB's inflation target. In Germany unit labour costs rose by 1.9 %. Overall, since the start of the currency union the rate of growth of unit labour costs in Germany was substantially below the ECB's inflation target. Therefore, wages in Germany should grow at an above average rate for several years to support the adjustment process in the European crisis countries.

Suggested Citation

  • Alexander Herzog-Stein & Heike Joebges & Torsten Niechoj & Ulrike Stein & Rudolf Zwiener, 2015. "German labour costs have risen only moderately," IMK Report 109e-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:report:109e-2015
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    References listed on IDEAS

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    1. Alexander Herzog-Stein & Heike Joebges & Ulrike Stein & Rudolf Zwiener, 2013. "Arbeitskostenentwicklung und internationale Wettbewerbsfähigkeit in Europa," IMK Report 88-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Horn, Gustav A. & Logeay, Camille, 2004. "Kritik am lohnpolitischen Konzept des Sachverständigenrats," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 84(4), pages 236-242.
    3. Alexander Herzog-Stein & Fabian Lindner & Rudolf Zwiener, 2013. "Nur das Angebot zählt?," IMK Report 87-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Hubrich, Kirstin & Karlsson, Tohmas, 2010. "Trade consistency in the context of the Eurosystem projection exercises – an overview," Occasional Paper Series 108, European Central Bank.
    5. Gadatsch, Niklas & Stähler, Nikolai & Weigert, Benjamin, 2014. "German labor market and fiscal reforms 1999 to 2008: Can they be blamed for intra-Euro Area imbalances?," Working Papers 05/2014, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    6. Ca' Zorzi, Michele & Schnatz, Bernd, 2007. "Explaining and forecasting euro area exports: which competitiveness indicator performs best?," Working Paper Series 833, European Central Bank.
    7. Udo Ludwig, 2013. "Arbeitskosteneffekte des Vorleistungsverbundes der deutschen Industrie unter Berücksichtigung der Arbeitszeiten," IMK Studies 34-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    8. Alexander Herzog-Stein & Ulrike Stein & Rudolf Zwiener, 2014. "Deutschlands Lohn- und Arbeitskostenentwicklung wieder zu schwach," IMK Report 100-2014, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Gustav A. Horn & Jan Behringer & Alexander Herzog-Stein & Peter Hohlfeld & Fabian Lindner & Katja Rietzler & Sabine Stephan & Thomas Theobald & Silke Tober, 2015. "Deutsche Konjunktur trotz globaler Unsicherheit aufwärtsgerichtet," IMK Report 106-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    10. Alexander Herzog-Stein & Heike Joebges & Ulrike Stein & Rudolf Zwiener, 2013. "Labour cost trends and international competitiveness in Europe," IMK Report 88e-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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