Europe: Germany, last for pay but not for labor costs

Figures on the evolution of wages in the European Union, published on September 8th by the very serious German Federal Statistical Office, could fuel unions’ – and some neighboring countries’ – argument that pay restraint in Germany in recent years has restrained German domestic growth while allowing for competitive exports to grow.  According to Destatis, European wages increased by 35.5% (annual average) between 2000 and the first 2010 quarter.  To compare, wage increased by 21.8% in Germany, 30.5% in France, and 45.5% in the UK.  Regarding hourly labor costs, rating is the same.  Over the same period, average growth in the EU is 36.1% versus 18.9% for Germany, 33.1% for France and 47.4% for the UK.  For its part, the Cologne Economic Institute (IW) put these statistics back in a long-term perspective by focusing on the industry: “The argument that Germany has neglected domestic growth and improved exports via pay restraint over several decades is not enough” wrote IW’s Christoph Schröder.  He thinks the German slam on labor costs is far from enough to “erase past sins.”  “In the 90s, labor cost soared in Germany, because of the reunification and a policy of working time cuts without pay cuts.  So yes, growth was slower over the past decade, but we started much higher” he told Planet Labor.  Thus, Mr. Schröder said that average labor cost in the German industry in 2009 is still 2,9% higher that in other big European economies.  As an example, hourly costs are €36.05 in Germany (€21.11 in eastern Germany) as opposed to €31.31 in France.