Since the start of the new millennium wage unit costs fell by on average 2% each year. Only in Taiwan and Japan costs fell even more. There are to main reasons to this development: on the one hand labour costs per hour increased by just 2.2% per year in the German industry in the period from 2000 to 2007 while in countries outside Germany the cost of a labour hour increased by 3.6% on average. On the other hand, German productivity increased at quite an impressive rate.
Since the year 2000, output per working hour has increased by 4.3% each year in Germany. Competitors outside Germany reached an average productivity increase of 3.5% each year. These are the findings of studies by the Institute for the German Economy (IW) in Cologne.
However, quite often the costs incurred by foreign competitors of German manufacturers are still smaller than those in Germany. Even though productivity outside Germany is on average 21% smaller than in Germany, the high German labour costs are so high that Germany has the fifth highest labour unit costs by international comparison. On average, labour unit costs are 7% smaller in countries other than Germany.
A more detailed analysis of this subject matter is presented in the article called „Produktivitat und Lohnstuckkosten im internationalen Vergleich” („Productivity and wage unit costs by international comparison” written by Christoph Schroder. This article is published in the “IW-Trends” brochure, edition 4/2008, and is available for free-of-charge download. 