Unit labor costs in Germany were on average 22 percent higher than in 27 compared industrial nations.
Germany's industry faces significant competitive challenges: according to a study, companies in the country produce at around one-fifth higher costs than their international competitors. Last year, unit labor costs were on average 22 percent higher than in 27 compared industrial nations. Only in Latvia, Estonia, and Croatia were costs even higher; in almost all other countries – both within and outside Europe – industry operates more cost-effectively.
Although Germany is characterized by high productivity, surpassed among major industrial nations only by the United States, this strength alone is not enough to offset the substantial cost disadvantages, as reported by Der Tagesspiegel. For instance, Japan and the U.S. have unit labor costs that are 24 and 32 percent lower, respectively. Even within the Eurozone, these costs average 13 percent below German levels.
A key driver of this trend is the shortage of skilled workers, which continuously pushes wages upward – and is expected to further increase location costs in the future. The German Economic Institute (IW) warns of the consequences: without reforms to curb the growth of non-wage labor costs and better address demographic challenges, the long-term risk is deindustrialization.
Additionally, many German companies have lost their technological edge – particularly to Chinese competitors. As a result, it has become more difficult for them to enforce pricing and stabilize profit margins. Since 2018, unit labor costs in Germany have risen by 18 percent, while abroad the increase was even higher, at 20 percent. Thus, relative cost discipline domestically is insufficient to catch up in international comparison.
MK
