According to figures from the WSI Collective Agreement Archive, issued in January 2002, collectively agreed pay increased on average by 2.1% in Germany in 2001. Pay increases varied from sector to sector between 3.2% and 1.3%. Recent figures from the Federal Statistical Office indicate that in 2001 increases in actual pay (1.8%) and total labour costs (1.6%) were somewhat below the rise in collectively agreed pay. This might be explained by continuing 'negative wage drift' and a further slight reduction in employers' social security contributions.
In January 2002, the Collective Agreement Archive (WSI-Tarifarchiv) of the Institute for Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) within the Hans Böckler Foundation (Hans Böckler Stiftung) published its annual collective bargaining report, covering the 2001 bargaining round (Tarifpolitscher Jahresbericht 2001 – Moderate Lohnabschlüsse plus Altersvorsorge, Reinhard Bispinck/WSI-Tarifarchiv, WSI-Informationen zur Tarifpolitik, Düsseldorf, January 2002).
According to the WSI report, the average collectively agreed pay increase stood at around 2.1% in 2001, which was lower than the 2.4% increase in 2000 (DE0102206N) and significantly lower than the 3.0% increase in 1999 - see table 1 below. The pay increases varied from sector to sector, between 1.3% in energy, water and mining, and 3.2% in banking and insurance.
Table 1. Annual increases in collectively agreed pay, by sector, 1999-2001*
| Sector | 2001 | 2000 | 1999 |
| Banking, insurance | 3.2% | 2.0% | 3.1% |
| Commerce | 2.8% | 3.0% | 3.2% |
| Food industry | 2.7% | 2.8% | 2.7% |
| Consumption goods industry | 2.4% | 2.5% | 2.6% |
| Private services | 2.1% | 2.3% | 2.1% |
| Investment goods industry | 1.8% | 2.6% | 3.6% |
| Raw material and production industries | 1.8% | 2.5% | 2.4% |
| Horticulture, agriculture, forestry | 1.8% | 2.3% | 2.3% |
| Public services | 1.8% | 1.9% | 3.2% |
| Trade and transport | 1.7% | 2.3% | 3.0% |
| Construction | 1.6% | 1.6% | 2.0% |
| Energy, water, mining | 1.3% | 1.9% | 1.9% |
| All sectors | 2.1% | 2.4% | 3.0% |
* Increases against the previous year.
Source: WSI Collective Agreement Archive 2002.
Differences between west and east Germany
In 2001, the average increase in east German pay levels (2.3%) was slightly higher than the average increase in west Germany (2.1%). Average collectively agreed pay in east Germany thus now amounts to around 92.3% of west German levels. In some sectors - such as the iron and steel industry, metalworking, banking and insurance - collectively agreed pay in east Germany has now reached the same level as in west Germany. However, in other sectors - for example, private transport, hotels and restaurants and agriculture - the difference in collectively agreed pay rates is still about 25% or more – see figure 1 below. In addition, east Germany has an average collectively agreed weekly working time of 39.1 hours, which is nearly two hours longer than average agreed weekly working time in west Germany (37.4 hours). Therefore, the difference in collectively agreed pay per hour between west and east Germany remains much higher than indicated by the overall percentage figures.
Actual pay and labour costs
According to figures issued by the Federal Statistical Office (Statistisches Bundesamt, Destatis), average gross annual wages and salaries per employee stood at EUR 25,900 in 2001. According to sectoral data provided by the Federal Statistical Office, average gross annual wages and salaries in 2001 varied between EUR 32,800 in the industry sector and EUR 17,100 in agriculture, forestry and fishing – see table 2 below. Average total annual labour costs per employee in 2001 stood at EUR 31,900, which included about EUR 6,000 in employers' social security contributions. The latter amount to 18.8% of total labour costs.
Table 2. Actual annual pay and labour costs per employee by sector, 2001
| . | Gross wages and salaries | Employers' social security contributions | Total labour costs |
| Agriculture, forestry and fishing | EUR 17,100 | EUR 3,600 | EUR 20,700 |
| Industry | EUR 32,800 | EUR 7,600 | EUR 40,400 |
| Construction | EUR 23,100 | EUR 5,500 | EUR 28,600 |
| Trade and transport | EUR 21,500 | EUR 4,700 | EUR 26,200 |
| Financial, renting and business activities | EUR 27,400 | EUR 6,000 | EUR 33,400 |
| Other public and private services | EUR 24,300 | EUR 6,100 | EUR 30,400 |
| In total | EUR 25,900 | EUR 6,000 | EUR 31,900 |
Source: Federal Statistical Office 2002.
In 2001, actual pay per employee increased by about 1.8%, which was slightly higher than in 2000 (1.6%) and in 1999 (1.4%). Comparing the growth rates of collectively agreed pay and actual pay, since the 1990s Germany has constantly been affected by 'negative wage drift', which means that the former is always above the latter – see table 3 below. The main reasons for the negative wage drift are a reduction in the level of extra payments awarded at company level and a decline in collective bargaining coverage (DE0201299F).
Table 3. Development of collectively agreed and actual pay, total labour costs and unit labour costs, 1992-2001*
| Year | Collectively agreed pay | Actual pay per employee | Consumer prices | Total labour costs per employee | Unit labour costs |
| 1992 | 11.0% | 10.4% | 5.0% | 10.5% | 6.4% |
| 1993 | 6.5% | 4.4% | 4.5% | 4.1% | 3.8% |
| 1994 | 2.9% | 2.0% | 2.7% | 3.0% | 0.5% |
| 1995 | 4.6% | 3.2% | 1.7% | 3.6% | 2.1% |
| 1996 | 2.4% | 1.4% | 1.4% | 1.3% | 0.2% |
| 1997 | 1.5% | 0.3% | 1.9% | 0.8% | -0.7% |
| 1998 | 1.8% | 1.0% | 1.0% | 1.0% | 0.2% |
| 1999 | 3.0% | 1.4% | 0.6% | 1.2% | 0.6% |
| 2000 | 2.4% | 1.6% | 1.9% | 1.2% | -0.2% |
| 2001 | 2.1% | 1.8% | 2.5% | 1.6% | 1.2% |
* Increases against the previous year.
Source: WSI Collective Bargaining Archive (column 2); Federal Statistical Office (columns 3-6).
A comparison of pay developments and consumer price increases shows that since the middle of the 1990s German employees have often had to accept a decrease in real pay. In 2001, the increases in both collectively agreed pay and actual pay were below the 2.5% rise in consumer prices.
Since the mid-1990s, the growth of total labour costs has in most years been below the increase in wages and salaries, which indicates a slight decline in employers' social security contributions. Moreover, the increase in unit labour costs has been significantly below the increase in total labour costs, which means that labour productivity has grown much faster than labour costs.
Commentary
The increase in collectively agreed pay in 2001 continued the overall moderate development in wages since the mid-1990s in Germany. Moreover, the increases in actual pay and total labour costs were even lower than that in agreed pay, due to 'negative wage drift' and a slight reduction in employers' social security contributions. The development of unit labour costs indicates that the increase in pay is lagging clearly behind the increase in productivity.
To sum up, recent pay and labour cost developments have continuously contributed to an improvement of the price competitiveness of German business. In contrast to the expectations of 'neoclassical' mainstream economists, however, this has not contributed to an overall improvement in economic performance. On the contrary, Germany has suffered one of the lowest growth rates in Europe and has now seen a further increase in unemployment, which recently reached the 4 million mark. As a recent comparative study of pay and labour costs developments in Germany and France has indicated (DE0201239N), German pay restraint is more a part of the problem than part of the solution to Germany's unemployment problem. (Thorsten Schulten, Institute for Economic and Social Research, WSI)
