Work is becoming more expensive than it has been in at least 24 years

Berlin Working in Germany has become more expensive in the second quarter than it has been in at least 24 years. The labor costs per hour worked between April and June were 5.1 percent higher than a year earlier, as the Federal Statistical Office announced on Tuesday. “This is the highest year-on-year increase that has ever been reported since the labor cost index began in 1996.”

Compared to the first quarter of 2020, the costs for employers – i.e. gross earnings plus ancillary wage costs – increased by 1.9 percent. “This is mainly due to the fact that many companies limited or had to limit their production and activities in the wake of the corona crisis,” said Director Sebastian Dullien from the union-affiliated IMK Institute.

The statisticians pointed out that the number of vacation days had increased noticeably since the first quarter – and this with the beginning of the restrictions on public life due to the virus pandemic with closed daycare centers, schools and companies.

The labor cost index compares the employers’ costs with the hours actually worked by the employees. These can be noticeably lower than the hours paid due to vacation, illness or overtime reduction. “In such a case, the labor costs per hour worked increase without the total labor costs increasing.”

Economist Dullien expects labor costs to decline significantly in the coming quarters. Therefore, the development in the second quarter is more of a statistical outlier “than an economic development to be taken seriously”.

So far, only data for the first quarter are available for international comparison. Here in Germany, one hour of work increased in calendar-adjusted terms by 3.4 percent compared to the same quarter of the previous year – and thus just as much as the EU average.

Lithuania (+11.2 percent), Romania (+9.5 percent) and Bulgaria (+9.1 percent) had the highest growth rates. The rise in labor costs was lowest in Luxembourg (+0.1 percent), and costs even fell by 1.1 percent in Croatia.

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