German labour costs higher than in other industrialised countries, study shows

BERLIN (Reuters) -Unit labour costs in German industry were 22% higher last year than the average of 27 industrialized countries examined by the Germany Economic Institute IW in a report seen by Reuters on Wednesday.

Unit labour costs in Germany were 15% higher than in the euro zone average in 2024, the study showed. Only Denmark and Belgium have higher industrial labour costs.

Unit labour costs are considered an important measure of price competitiveness and indicate how high labour costs are per unit of value added.

The above-average productivity in Germany was not sufficient to compensate for the disadvantage of high labour costs, according to the study.

"The shortage of skilled workers is pushing wages further up," said Christoph Schroeder, the author of the study. "Costs at the German location are likely to continue rising in the coming years."

In the period from 2018 to 2024, which was marked by multiple economic and geopolitical crises, unit labour costs in German industry rose by 18%.

However, real value added declined in Germany during the same period due to structural problems such as demographic change, uncertainty in the business sector, concerns about rising social security contributions, and China's technological catch-up, the study said.

(Reporting by Rene Wagner, writing by Maria Martinez, editing by Friederike Heine)