Manufacturing labour costs still high by international standards

According to a study published in August 2003 by the Cologne Institute for Business Research (IW), in 2002 western Germany lost its long-standing top place in the international league table of manufacturing labour costs to Norway. However, total hourly labour costs in the German manufacturing sector were still 28% above the average for the 20 industrialised countries examined in the research.

In late August 2003, the Cologne Institute for Business Research (Institut der deutschen Wirtschaft Köln, IW) published its latest report on international labour costs in manufacturing. In 2002, total hourly labour costs in the west German manufacturing sector amounted to EUR 26.36 - EUR 2.16 less than in Norway, which has taken over from western Germany at the top of IW's international ranking of labour costs (see the table below). Norway attained the number one position due to a 5% increase in Norwegian labour costs (NO0302104F) and the depreciation of the Norwegian kroner against the euro.

The difference between total hourly labour costs in western Germany and the average for the 20 major industrialised countries examined in the IW research amounted to EUR 5.78 in 2002 - ie total hourly labour costs were 28% higher in western Germany than the average for the 20 major industrialised countries. In 2001, the difference was 25%. Much of this difference can be accounted for by German non-wage labour costs (EUR 11.62 per hour), such as holiday and Christmas bonuses, and, in particular, social insurance contributions levied on payrolls.

In eastern Germany, total hourly labour costs in 2002 of EUR 16.43 (of which non-wage labour costs made up EUR 6.47) were still more than one-third lower than in the west. Between 1992 and 1996, hourly labour costs rose by an annual rate of 9% in the five new eastern federal states, but the increase has slowed since then and amounted to 3.1% in 2002. Eastern Germany’s cost advantage will, therefore, presumably continue for some years. IW expects there to be an increase in non-wage labour costs in Germany in 2003 as social insurance rates are likely to rise.