In an international comparison, Germany is still a country with the highest labour costs in the manufacturing industry. In principle German wages can be higher than elsewhere to the extent that German labour is more productive. In order to remain competitive vis-à-vis Eastern European and Asian locations, wages do not have to fall to the level of these countries. Nevertheless, the dismantling of the Iron Curtain as well as globalisation itself have led to a sharpening of competitive pressure on the labour markets and have made the advantages of cautious wage policy more evident.
One way to increase the competitiveness of German jobs without endangering earnings is to extend working hours without pay adjustments. Ten percent longer working hours corresponds to an increase of the working week of a full time employee of just four hours. For most employees this would mean working about 42 hours a week instead of 38 hours. In an international comparison Germany would rise from the third-lowest annual working times of OECD countries into mid-field, but it would still be behind countries such as the UK, Finland, Ireland or Spain.
Ifo Viewpoint No. 47: Working Longer Published as "Wieder 42 Stunden arbeiten", Frankfurter Allgemeine Zeitung, No. 168, 23.07.2003, p. 11. Text
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