EU Labor Cost Comparison Germany Becoming More Competitive

German labor remains expensive, but an European Union-wide comparison shows Germany is getting more competitive because its labor costs grew by just one percent in 2007 -- the smallest percentage increase of all EU members.

A Siemens employee measuring a steam turbine.

A Siemens employee measuring a steam turbine.

Germany's labor costs rank seventh highest in Europe behind Denmark, Sweden, Belgium, Luxembourg, France and the Netherlands, according to 2007 figures released by Germany's Federal Statistical Office on Tuesday.

Average labor costs per hour worked in Germany stood at €29.10 ($46.5), significantly less than in Denmark and Sweden with €35 and €33.40 respectively. Not surprisingly, Eastern European countries are far down the table, with Bulgaria at the bottom with €2.10 per hour.

However, Germany's labor costs are higher in the manufacturing sector at €33 per hour, the fourth highest in the European Union.

Even though differences in labor costs across the EU remain high, the gap is gradually narrowing, the statistics office said. "In member states with a level of more than €20, the labor costs in the private sector increased by less than five percent. Where the level was less than €10, growth amounted to between 10 and 30 percent," the office said.

Labor Costs*

Country euros Change in percent
European Union average 22.80 3.4
Denmark 35.00 3.6
Sweden 33.40 3.5
Belgium 33.10 3.7
Luxembourg 32.70 1.9
France 31.90 3.3
Netherlands 29.29 2.5
Germany 29.10: 1.0
Austria 28.50 3.2
Finnland 28.30 3.0
Great Britain 27.90 4.9
Ireland 25.50 -
Italy 24.50 -
Spain 18.30 4.2
Poland 6.70 14.5
Romania 3.90 30.2
Bulgaria 2.10 16.9

* for every hour worked in 2007 Source: German Federal Statistical Office

In Germany, labor costs grew just one percent last year, the smallest increase of all EU countries. That's good news, says Christoph Schröder, labor cost expert at the German Business Institute (IW). "We're still high up in the ranking in industry, so it was very necessary for us have only a moderate increase in costs," he said.

Recent growth in industrial employment in Germany was partly due to weak labor cost growth, he added.

Non-Wage Labor Costs

Country Non-Wage Labor Costs*
EU Average 36
France 50
Sweden 50
Belgium 45
Italy 45
Hungary 42
Lithuania 40
Austria 39
Greece 38
Romania 37
Slovakia 37
Estonia 36
Germany 32
Netherlands 31
Portugal 30
United Kingdom 28
Finland 28
Latvia 27
Bulgaria 27
Poland 25
Slovenia 22
Denmark 20
Malta 10

*per €100 Euro gross wages, Source: Federal Statistics Office

When it comes to non-wage labor costs -- the statutory social insurance contributions paid by businesses on behalf of their staff -- Germany is well down the table, ranking 14th with €32 per €100 gross wages. France and Sweden lead the table with €50 each.

Economists say high pay deals reached in recent months could push up labor costs by around two percent in 2008, but Germany will still gain competitiveness because costs are rising faster in other EU states.



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