Pay increases lag behind overall economic development
Ippubblikat: 27 February 2000
In the 1990s, Germany saw only moderate pay increases which lagged clearly behind the overall development of the economy, according to a recent study by the Institute for Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) ("Tarifpolitik und Bündnis für Arbeit", Reinhard Bispinck and Thorsten Schulten, in WSI-Mitteilungen Vol. 52, No. 12 (1999) [1]. As tables 1 and 2 below indicate, between 1992 and 1999 the average increase in wages and salaries was, in six years out of eight, below the so-called "cost-neutral distributive margin" (kostenneutraler Verteilungsspielraum) – that is the increase in prices plus the increase in productivity. As a result, the share of labour income in the national income (the "wage ratio") declined from 75% in 1993 to 72.2% in 1998.[1] http://www.boeckler.de/ebib/volltexte/WSI_Mitteilungen-1999-12-p870n.pdf
According to a study published by the WSI research institute in late 1999, Germany saw only moderate pay increases in the 1990s, while at the same time there was an almost steady decline in employment.
In the 1990s, Germany saw only moderate pay increases which lagged clearly behind the overall development of the economy, according to a recent study by the Institute for Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) ("Tarifpolitik und Bündnis für Arbeit", Reinhard Bispinck and Thorsten Schulten, in WSI-Mitteilungen Vol. 52, No. 12 (1999). As tables 1 and 2 below indicate, between 1992 and 1999 the average increase in wages and salaries was, in six years out of eight, below the so-called "cost-neutral distributive margin" (kostenneutraler Verteilungsspielraum) – that is the increase in prices plus the increase in productivity. As a result, the share of labour income in the national income (the "wage ratio") declined from 75% in 1993 to 72.2% in 1998.
| Year | Gross domestic product (real)* | Cost of living* | Labour productivity per employee* | "Cost-neutral" distributive margin ** |
|---|---|---|---|---|
| 1992 | 2.2 | 5.0 | 3.9 | 8.9 |
| 1993 | -1.1 | 4.5 | 0.5 | 5.0 |
| 1994 | 2.3 | 2.7 | 2.7 | 5.4 |
| 1995 | 1.7 | 1.7 | 1.9 | 3.6 |
| 1996 | 0.8 | 1.4 | 1.5 | 2.9 |
| 1997 | 1.8 | 1.9 | 2.6 | 4.5 |
| 1998 | 2.3 | 1.0 | 1.9 | 2.9 |
| 1999 | 1.4 | 0.6 | 1.1 | 1.7 |
* % change on previous year; ** increase in cost of living plus increase in labour productivity.
Sources: Federal Statistical Office ; WSI Collective Agreement Archive.
| Year | Collectively agreed wages and salaries* | Gross wages and salaries per employee* | Use of the "cost-neutral" distributive margin** | Adjusted wage ratio*** | Employment in million working hours* |
|---|---|---|---|---|---|
| 1992 | 11.0 | 10.5 | 1.6 | 73.8 | 1.3 |
| 1993 | 6.5 | 4.6 | -0.4 | 75.0 | -2.5 |
| 1994 | 2.9 | 2.2 | -3.2 | 74.3 | -1.1 |
| 1995 | 4.6 | 3.5 | -0.1 | 73.8 | -1.7 |
| 1996 | 2.4 | 1.8 | -1.1 | 73.7 | -1.6 |
| 1997 | 1.5 | 0.8 | -3.7 | 72.7 | -1.7 |
| 1998 | 1.8 | 1.4 | -1.5 | 72.2 | 0.7 |
| 1999 | 3.0 | 2.0 | 0.3 | not available | not available |
*% change on previous year; **"cost-neutral"distributive margin minus increase in gross wages and salaries; *** labour income as % of national income, adjusted by a constant number of employees.
Sources: Federal Statistical Office, German Bundesbank; WSI Collective Agreement Archive, Institute for Employment Research .
Furthermore , the WSI study finds that there is a growing gap between the development of collectively agreed wages and salaries on the one hand, and the overall development of gross wages and salaries on the other hand (see table 2). This seems to be the result of an increasing "negative wage drift," which reflects the fact that a growing proportion of German employees are not covered by a collective agreement.
Finally, the WSI study states that there is no evidence for the often made assertion that pay restraint would create employment. On the contrary, in the 1990s Germany saw moderate pay increases while at the same time there was an almost steady decline in employment (measured in the number of working hours).
Il-Eurofound jirrakkomanda li din il-pubblikazzjoni tiġi kkwotata kif ġej.
Eurofound (2000), Pay increases lag behind overall economic development, article.
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