As was reported by the Cologne-based Institute of the German Economy (IW Köln) a comparison among 15 industrialized countries showed that Germany had the fifth highest unit labour costs in 2005 after those of Great Britain, Denmark, Italy and France. On average, Germany´s competitors in the processing industry had labour costs per production unit which were 10 percent cheaper. Labour unit costs in Japan were even 25 percent cheaper.
Germany´s poor performance in this respect is due to generally high labour costs and could not be compensated for even by a considerable productivity which came fourth in the world in 2005. However, in 2004 labour unit costs had already fallen by 4 percent followed by 3 percent in 2005. The reasons for these reductions were moderate wage rises and a boost in productivity. All this lead to German companies being able to keep their market shares on the world market. Additional information and a detailed analysis are contained in the Trends 3/2006 PDF brochure by the IW which is available for free-of charge download.