An analysis by the Institut der deutschen Wirtschaft shows that, although the ratio of non-wage labour costs to direct compensation fell, non-wage labour costs in Germany increased again in 1997.
Non-wage labour costs are those elements of the enterprise's total labour costs which are other than direct compensation (DE9705111F). The Institut der deutschen Wirtschaft (IW) has recently published its annual analysis of non-wage labour costs, based on official statistics from the Federal Statistical Office, which conducts surveys on labour costs every four years. The IW trend extrapolation is based on long-term trends, data from the institutions of the social insurance system, and the annual analysis of collective agreements by the Federal Ministry for Labour and Social Affairs. The official statistics distinguish between compensation for hours actually worked and non-wage labour costs. Non-wage labour costs are differentiated into pay for days not worked, special payments, statutory social welfare costs and other non-wage labour costs.
Table 1. Labour costs in manufacturing industry in DEM per employee and year (1992-7), western Germany
| Direct compensation | 41,671 | 47,980 | 49,190 |
| Non-wage labour costs | 33,526 | 38,720 | 39,400 |
| Total | 75,197 | 86,700 | 88,590 |
Source: "Personalzusatzkosten in der deutschen Wirtschaft", E Hemmer in IW-trends 1/1998 .
As Table 1 above indicates, in west German manufacturing industry non-wage labour costs reached an all-time high of DEM 39,400 in 1997. However, from 1996 to 1997, the ratio of non-wage labour costs to direct compensation fell by 0.6 percentage points from 80.7% to 80.1%. An increase in social insurance contributions of 1.1 percentage points was entirely offset by cost reductions stemming from a drop in the sickness rate by 0.58 points to 4.64% and changes in the regulations governing continued payment of remuneration in case of sickness (DE9709131F).
Table 2. Labour costs in manufacturing industry in DEM per employee and year (1992-7), eastern Germany
| Direct compensation | 24,957 | 36,490 | 37,450 |
| Non-wage labour costs | 16,537 | 25,980 | 26,770 |
| Total | 41,494 | 62,470 | 64,220 |
Source:"Personalzusatzkosten in der deutschen Wirtschaft", E Hemmer in IW-trends 1/1998.
In eastern German manufacturing industry, annual non-wage labour costs reached DEM 26,770 in 1997 - see Table 2 above. From 1996 to 1997, the ratio of non-wage labour costs to direct compensation grew by 0.3 percentage points from 71.2% to 71.5%. The main reason for this was the increase in costs of social security contributions, which rose at a significantly higher rate in eastern than in the western Germany.