Economics and politics - comment and analysis
28. January 2016 I Will Denayer I General

A study by the Macroeconomic Policy Institute on European trends in labour costs advocates German wage growth.

The Institut für Makroökonomie und Konjunkturforschung (Macroeconomic Policy Institute) published a report on European trends in labour and unit labour costs in 2014 and the first two quarters of 2015. The researchers show that in 2014, the German industry remained near the bottom of the list of high-wage countries in the EU. Since the launch of the European monetary union, unit labour costs in Germany have risen much more slowly than in all other countries in the euro area and at a lower rate than is compatible with the ECB’s inflation target, with the consequence that Germany continues to have a significant advantage in terms of price competitiveness. The researchers advocate a change in Germany’s economic policy, adopting an expansive fiscal policy and aiming at higher long-term wage growth – a point that Heiner Flassbeck has been making for many years. A free download of the report is available here.