EU Economy
German manufacturing wages are the highest of big industrial nations
By Michael Hennigan, Finfacts founder and editor
Dec 3, 2014 - 6:24 AM

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Deutsche Bundesbank data show that in the period from Q4 1999-Q2 2014, German consumer prices rose by 25.5% while hourly manufacturing wages increased by 41.6%. 

German manufacturing wages are the highest of the big industrial nations contrary to the common argument that it has stolen an export advantage on its fellow member countries of the euro area, through low wages.

Excluding non-wage costs, average hourly manufacturing pay in Germany in 2013 was €30.2 and €27.8 in France. The rate was €19.5 in the UK and €21.9 in Italy -  see Eurostat data here.

According to US Bureau of Labor Statistics (BLS) data, direct hourly manufacturing pay in 2012 was $36.07 in Germany; $27.15 in the US; $28.94 in Japan: $16.27 in Korea; $27.89 in France; $24.29 in Italy and $26.37 in the UK.

For chemicals, machinery and motor vehicles, German rates ranged from $49 to $59 compared with US rates from $39 to $45.

The rise in compensation costs in the period 2000-2012 was 115% in Korea; 105% in Italy; 86% in France; 80% in Germany; 51% in UK; 43% in US and 41% in Japan (changes in the US dollar rate vs. the euro, yen, won and pound sterling, have an impact but Germany, France and Italy are all in the euro system).

US Conference Board data show that the percentage change in real output per labour hour in manufacturing in 2002-2012 was 91% in Korea; 53% in US;  36% in Japan; 33% in Germany; 25% in France and 8% in Italy.

On general pay, David Leonhardt of The New York Times wrote in 2011: "From roughly 1985 to 1995, German workers enjoyed considerably larger real hourly wage increases than American workers. From 1995 through the present, wages in the two countries have grown at a similar pace – growing initially and then slowing down, to a pace more recently not much faster than inflation."

According to Leonhardt: "Inflation-adjusted average hourly pay has risen almost 30% since 1985 in Germany, the kind of gains American workers have not enjoyed since the ’50s and ’60s. In this country, hourly pay has risen a scant 6% since 1985.

See charts here.

Paul Krugman wrote in The New York Times this week: "to the extent that there’s anything like a competitiveness problem in Europe, it’s overwhelmingly caused by Germany’s beggar-thy-neighbour policies, which are in effect exporting deflation to its neighbours."

Germany does have a low-pay problem in low-skilled services and a common minimum wage of €8.5 will take effect from next January.

Germany benefits from imported Polish deflation with its industry hourly rate of  €7.

The Chinese have in the past given export subsidies to reduce the price of export products like steel and solar panels - that could be called direct deflation.

Japan has also engaged in direct deflation by pushing down the value of the yen.

Lidl and Aldi, German retailers, are shaking up the UK retail scene and it's not only price that matters - they have different brands/ products to Tesco, Sainsbury and so on.

In cars Germany has Audi, BMW, Mercedes and Porsche in the luxury market - UK couldn't compete and France is wise to sell in other niches.

The real pay rise in the German economy is about 3% this year.

The problem for the southern European countries is that in the shoes and textiles sectors, they were particularly hit by Chinese competition while there has been little competition with German firms.

VW owns motor plants in Portugal and Spain that export to third countries.

France has some big successful food companies but among Deloitte's top 250 global consumer products companies, the first Italian company is at 84 - Ferrero, the maker of tasty chocolates.

Ireland has one entry, Total Produce at 241.

The top 3 are Samsung, Apple, and Nestlé of Switzerland - founded by a German pharmacist in 1866.

Five non-euro area countries together with France and Austria accounted for 79% of Germany's merchandise trade surplus of €198bn in 2013, according to data published by Destatis, the German federal statistics office.

US, France, UK, Austria, Turkey, United Arab Emirates and Switzerland accounted for surpluses of €40bn, €36bn, €33bn, €20bn, €9bn, €9bn and €9bn respectively, totalling €156bn according to the data [pdf].

In 2013 almost 800,000 enterprises were active in foreign trade with about 340,000 companies exporting.

Other issues:

Dreams of European Growth: Euro began with Germany, France and Italy in sick ward

Eurozone inflation fell to 0.3% in November; Jobless rate in Germany lowest in Europe in October

Manufacturing PMI surveys show Germany, France & Italy contracted in November

GDP up by 0.2% in Eurozone in Q3 2014 and up by 0.3% in EU28

German employment at record high

France's 10-year bond yield below 1% for first time; Draghi pushes for economic union

Stagnation in the Eurozone as German aversion to inflation to continue

German industrial production may expand only ¾% in 2015

European Commission forecasts slow recovery with very low inflation

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