The Land of the highly paid lazy bums

0
1733

Competition

The Land of the highly paid lazy bums

“Germany’s competitiveness is eroding,” warns the Institute of the German economy, while the southern countries in the Euro area is still about the strict reform calls groaning. Now, who has the right?

If you believe the newspaper “The world”, then Greece’s Prime Minister Alexis Tsipras in the past week at the world economic forum in Davos, quite disgraced. “We need not only more competitive but more productive”, had Tsipras in a star-studded Forum said. “We must not only labour costs have in view.” For this he reaped in the audience puzzled looks and head-shaking, because with labor, it’s never about the absolute height, but always by unit labour costs, i.e. the ratio of wages to productivity.

Those who efficiently manages, that is: highly productive, high wages make, because the unit labour costs in a global comparison still are competitive. But it is precisely this relation between competitiveness, wages and productivity seems to Tsipras not to know. Rather, he criticised once again with the rescue program by the ECB, the IMF and the EU Commission-related reform conditions.

The editorial recommends

Refugee crisis, terrorism, poor growth – the world economic forum discussed the European leaders about the numerous problems and drew a gloomy picture. From Davos, reports Andreas Becker. (21.01.2016)

The Chinese supply reasonably priced standard products, the German high-tech and quality – as it was once. Meanwhile, to compete the two countries in the world is always more to orders. Who wins the race? (14.12.2015)

The economy of the Euro Zone is growing slightly slower. The European Central Bank (ECB) wants to do with their policy of ultra-cheap money in addition to the Inflation, also the economy a boost. (13.11.2015)

Zeugnisvergabe for economies: The world economic forum graded annually its competitiveness. Germany lies far ahead, as the fourth from 140 Nations. But the VW scandal is still not included. (29.09.2015)

To high Burdens?

These arguments are since the Greek debt crisis sufficiently well-known, and they are not only of the countries of the South, but also from some US scientists are discussing: Germany had for almost a decade by Wage moderation within the Euro area, more and more become more competitive and create order in crisis-stricken countries such as Greece, greater Reform or adaptation, is accused of.

Exactly this Thesis is doubted but Christoph Schröder, Senior Researcher at employer Institute of German economy (IW) in Cologne. He has worked in a Monday post “study examines whether the Thesis of a high German competitiveness at all empirically verifiable, and any damage to the other members of the Euro area has arisen.”

No Price Advantage?

His conclusion: “Germany has no Price,” writes Schroeder. On the contrary: “Germany’s competitiveness is being eroded.” This must, of course, the scientific employee of an employer Institute to write, even if only to the unions from high wage demands, to warn. But now, who has the right? Build Germany due to its great competitiveness in other countries, too high a pressure for reform on, or there is this supposedly high level of competitiveness in fact not at all?

Funnily enough, use both parties of your argument is the same measure that Alexis Tsipras does not seems to know: The unit labour costs. Because as I said, not the labour costs are crucial, but what and how much of these costs is produced. But both parties consider differently long periods of time. “On average, increased unit labor costs in Germany between 1991 and 2014 each year by 0.5 percent. With the foreign competition remained the unit labour costs, however, approximately constant. The increase in the Euroausland was with an annual 0.5 percent as high as in this country, according to the IW study. So it could hardly be a competitive advantage to speak of.

A question of time

However, the critics of The German Wage moderation have always a very different period of time considered, also IW-researchers Christoph Schröder certainly acknowledges: “If ever from an improved competitiveness of Germany can be spoken about, concerns only the period from 1999 to 2007 – and only in comparison to the other countries in the Euro area. The expansive wage policy of the past few years has this cost advantage, however, partly counteracted”, it says in the IW study.

And this is also clear, what are the recommendations of the Institute of the German economy, pronounces: “The negotiating parties should therefore be careful in case of further wage increases,” warns IW Director Michael Hüther. “Additional increases in the world’s closely-contested product markets, not the prices, so the consumers pass.” Even more: To high wage settlements, the beschäftigungsfeindlich had, would the consumption and thus the economy in Germany weaknesses.

Unit labour costs no Exklusivmaß

A crude argument is that, because high wage settlements mean only even more money for private consumption, which is by no means the German economy weakens, but on the contrary has become a major pillar of the economy has become. That employer wage setting in a reflex with the predicate “beschäftigungsfeindlich”, is understandable, given the current situation on the labour market, but by no means applicable.

Maybe grab both parties to short. Unit labour costs are, at best, an indication of where a country in the international competition. Other factors are less well quantified, but also play an important role. So can Germany, for example, with stable energy and raw materials, high legal certainty, a market-based order, good infrastructure, constructive working relations and efficient suppliers to come up.

“Furthermore, the German industry by means of a differentiated range of services important unique selling points developed,” adds IW-researchers Schröder. With other words: Not only the price decides about competitiveness, but also a Mix of factors, qualified employees and innovative products.