International comparison of labour costs: Why Germany cannot afford strong wage increases

According to the Federal Statistical Office or the Institute of the German Economy (DIW), Germany still has the highest hourly wage costs for industrial workers among the major industrialised countries. Only smaller countries such as Denmark, Norway, Belgium or Luxembourg are similarly expensive, but their overall labour productivity is higher. The reason for the extreme German position is high gross wages and not non-wage labour costs. The proportional non-wage labour costs in Germany are considerably below the EU average. The high labour costs in Germany are also not justified by the supposedly superior productivity of the German economy. Germany has the highest labour costs in an international comparison for industrial workers in relation to the amount of its aggregate labour productivity (GDP per working age person). For this reason, despite favourable business activity the number of industrial jobs in Germany continues to decline.