Study compares pay developments in Germany and France

Di Pasquale, Verena

Overview

Article

Study compares pay developments in Germany and France

Published: 14 February 2002

The German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung, DIW) published a study [1] in October 2001 which compares French and German pay developments and their impact on growth and employment. While in Germany the number of unemployed people is approaching the 4 million mark, France has been successful in reducing unemployment since the middle of the 1990s (FR0007179F [2]). The DIW study finds that France's considerable increase in employment and noticeable reduction of unemployment can be ascribed to a combination of various economic policy measures, such as growth policy, labour market policy and reduction of working time.[1] http://www.diw.de/deutsch/publikationen/wochenberichte/docs/01-50-2.html[2] www.eurofound.europa.eu/ef/observatories/eurwork/articles/labour-market-undefined/new-job-creation-pushes-unemployment-below-10

In late 2001, the German Institute for Economic Research (DIW) published a study which compares pay developments in Germany and France and their impact on growth and employment. French pay increases have far outstripped those in Germany since 1997, and the study concludes that this has been a major factor in increasing domestic demand and employment in France.

The German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung, DIW) published a study in October 2001 which compares French and German pay developments and their impact on growth and employment. While in Germany the number of unemployed people is approaching the 4 million mark, France has been successful in reducing unemployment since the middle of the 1990s (FR0007179F). The DIW study finds that France's considerable increase in employment and noticeable reduction of unemployment can be ascribed to a combination of various economic policy measures, such as growth policy, labour market policy and reduction of working time.

A particularly emphasis of the study is on pay developments in France and Germany. While German trade unions have pursued a moderate wage policy since the middle of the 1990s, wage policy in France between 1997 and 2000 was not geared to a reduction of unit labour costs. While in Germany unit labour costs increased by a total of about 1.6% over this period, in France they increased by about 5.7% - see tables 1 and 2 below.

**Table 1: Development of pay and other main economic indicators in Germany and France, 1997-2001**
.	Germany					France
.	1997	1998	1999	2000	2001	1997	1998	1999	2000	2001
Unit labour costs*	-1.0	0.0	1.1	0.0	1.5	0.9	0.3	1.4	1.3	1.7
Hourly pay*	1.2	2.0	1.9	1.6	-	3.0	2.4	2.8	3.7	-
Productivity per hour*	2.2	1.9	0.8	1.7	-	2.1	2.1	1.4	2.4	-
Gross Domestic Product *	1.4	2.0	1.8	3.0	1.0	1.9	3.5	3.0	3.4	1.7
Private consumption*	0.6	1.8	3.1	1.5	1.0	0.1	3.6	3.3	2.7	2.2
Employment*	-0.2	0.9	1.1	1.5	0.9	0.5	1.4	1.4	2.4	1.6
Standardised unemployment rate (%)	9.9	9.3	8.6	7.9	7.9	12.3	11.8	11.2	9.7	8.7

* Change in % against previous year.

Source: DIW Wochenbericht 40/2001.

From 1997 to 2000, the French economy grew by around 3% per year, compared with around 2% in Germany. The economic growth in France can, according to the study, mainly be traced back to the increased domestic demand. On the basis of various economic policy measures, the level of private consumption was raised over a prolonged period. The DIW study concludes that the higher pay developments in France were one important element in the increase of domestic demand and growth in employment.

**Table 2: Development of unit labour costs, gross domestic product, private consumption and employment 1997-2001 (1996=100)**
.	Germany	France
Unit labour costs	101.6	105.7
Gross Domestic Product	109.5	114.2
Private consumption	108.2	112.3
Employment	104.3	107.5

Source: DIW Wochenbericht 40/2001.

In January 2002, the German Federal Statistical Office (Statistisches Bundesamt, Destatis) and the French Institute for Statistical and Economic Studies (Insitut national de la statistique et des études économiques, INSEE) jointly published current figures on pay developments which confirm the results of the DIW study. According to these figures, real earnings in France and Germany show a development in opposite directions, with those in France rising and those in Germany falling.

Taking into consideration pay developments in France, the president of the German Metalworkers' Union (IG Metall), Klaus Zwickel, confirmed the pay claims recently made by IG Metall in the current collective bargaining round (DE0112248F). According to Mr Zwickel, the French experience has proved that a positive development in growth and employment requires equitable pay developments.

Eurofound recommends citing this publication in the following way.

Eurofound (2002), Study compares pay developments in Germany and France, article.