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Labour cost trends and international competitiveness in Europe

Listed author(s):
  • Alexander Herzog-Stein
  • Heike Joebges
  • Ulrike Stein
  • Rudolf Zwiener

Based on data from Eurostat 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, and disaggregated for private services and manufacturing industry, for a selection of European countries, the Euro Area and the European Union. Additionally, results of a new study investigating the extent of the labour-cost relief for industrial production in Germany associated with the use of intermediate inputs from the service sector are presented. Furthermore, labour cost trends in public services are presented. Next, the development of unit labour costs in Europe and more specifically the relationship between international price competitiveness, export prices, and unit labour costs are investigated.In 2012 hourly labour cost in the German private sector averaged 31.0 euro. Despite a recent normalisation in labour-cost trends in Germany, and an annual rate of change of 2.8 per cent, well above the European average, the German economy is in eighth place in the ranking of EU countries, one place down from the previous year. Hourly labour costs in private services are one fifth lower than in manufacturing industry; in no other European country does the service sector lag manufacturing to such an extent. Due to the use of cheaper intermediate inputs from the service sector, labour costs in the German industry are reduced by eight to ten per. Overall, the picture of a highly competitive German economy is confirmed.In recent years as a consequence of dramatic unit-labour-cost developments the so called European crisis countries regained their price competitiveness. However, German demand for imports remains relatively modest and hence is still a handicap for the ongoing economic adjustment processes in these countries. Therefore wages in Germany need to increase by more than 3 % per annum for an extended period.

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Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Report with number 88e-2013.

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Length: 23 pages
Date of creation: 2013
Handle: RePEc:imk:report:88e-2013
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  1. Udo Ludwig & Hans-Ulrich Brautzsch, 2008. "Globalisierung und Beschäftigung - eine Untersuchung mit der Input-Output-Methode," IMK Studies 01-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  2. Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc.
  3. 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.
  4. Neligan, Adriana & Schröder, Christoph, 2006. "Arbeitskosten im verarbeitenden Gewerbe unter Berücksichtigung des Vorleistungsverbunds," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft Köln (IW) / Cologne Institute for Economic Research, vol. 33(1), pages 61-72.
  5. Udo Ludwig & Hans-Ulrich Brautzsch, 2010. "Arbeitskosteneffekte des Vorleistungsbezugs der Industrie an Dienstleistungen in Deutschland im Vergleich mit Frankreich und den Niederlanden," IMK Studies 4-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  6. Udo Ludwig & Hans-Ulrich Brautzsch & Brigitte Loose, 2011. "Dienstleistungsverbund stärkt Bedeutung der Industrie," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 91(9), pages 648-650, September.
  7. Ulrike Stein & Sabine Stephan & Rudolf Zwiener, 2012. "Zu schwache deutsche Arbeitskostenentwicklung belastet Europäische Währungsunion und soziale Sicherung," IMK Report 77-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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