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backGLOBALtalk April, 2012

German labor costs rising faster than EU average

The costs of an hour of work in Germany surged in 2011 at a pace unseen in the past 15 years. However, workers benefitted only partially from the rise.

Labor in Germany was 3.2 percent more expensive last year than in 2010, according to data released by the German Statistics Office (Destatis) Friday.

The figure marked the "steepest annual rise" since the so-called Labor Cost Index (LCI) was introduced at the European Union level in 1997, Destatis said.

Wage hikes of 3 percent on average, as well as 4 percent higher social insurance costs, were "prime causes" for the rise.

"Outlay for sick pay rose considerably in 2011, as more people fell ill requesting wage compensation," Destatis said.

The data by the Wiesbaden-based organization showed that the German manufacturing industry saw the biggest increase in labor costs with a rise of 4.3 percent.

The smallest rise was reported for employees in education – up 1.4 percent - and workers in the transportation and logistics sector who cost 0.2 percent more in 2011 compared with the previous year.

EU comparison

The statisticians noted that the German cost increase in 2011 was "higher than the EU average" which according to latest available EU data rose by 2.6 percent on average in 2011.

However, according to the European Union Statistical Office (Eurostat), German workers rank only 7th place by comparison, costing employers 29.1 euros ($38.46) an hour on average in 2011.

With 38.2 euros, Belgium has the highest labor costs in the 27-nation European Union, while Bulgaria has the lowest with just 3.1 euros for an hour of work.

Bulgaria was also the country which reported the steepest rise in labor costs in 2011 – up 9.8 percent, followed by other low-cost countries such as Romania – plus 7.9 percent – and Slovakia which saw an increase of 7.2 percent.

In 2011, there were only two EU countries in which labor costs "declined," Destatis said. One of them was debt-laden Greece where labor costs slumped by 7.5 percent due to a steep 12.5 percent decline in social insurance premiums. The other one was Ireland, where the debt crisis "took its toll" too, sending down labor costs 1.1 percent.

Source: Deutsche Welle - GAI

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