3 March 2006 • Austria's International Unit Labour Cost Position Improved in 2004 • Alois Guger

The unit labour cost position of Austrian businesses improved clearly in the second half of the 1990s and has remained largely stable since the year 2000.

In Austrian manufacturing, one hour of blue-collar labour cost 20.80 Euro in 2004, hence approximately 2.25 percent less than the average paid by the country's trading partners in the EU 15. Of this amount, 11.40 Euro were paid in wages and 9.40 Euro in non-wage labour costs. The latter thus made up 82.6 percent of wages, a decline of 1 percentage point against 2003, due essentially to a reduction of health insurance contributions for workers and a decrease in sickness times.

Austria currently ranks ninth in the international hierarchy of labour costs. Viewed in the short term, this position changes chiefly with exchange-rate variations. Labour is most expensive in Denmark, Norway and Germany: in Denmark, the cost of one hour of work in manufacturing is 35 percent higher than in Austria, in Norway 31 percent, and in Germany a good 28 percent, followed by Switzerland, Belgium and Finland (approximately +20 percent). While in France the costs are similar to those in Austria, they are lower in UK (–4.50 percent), Ireland and the USA (approximately –10 percent), Italy (–17 percent) and Spain (–20 percent). For Slovenia the difference vis-à-vis Austria is –60 percent, followed by Hungary (–75 percent), the Czech Republic and the Slovakia (about –80 percent).

In the second half of the 1990s, productivity of Austria's manufacturing sector rose considerably (+5.3 percent per year), exceeding the average of the trading partners by 2.2 percentage points. The rise in productivity slowed down simultaneously with lower economic growth after 2000, but again reached 5.6 percent in 2004. The annual rate of output growth per employee since 2000 has been 3.0 percent on average, exceeding the average of the competing countries by 0.5 percentage point.

With exchange-rate relations stabilised, and wage inflation running at a low rate while productivity continued to grow briskly, the unit labour cost position of Austrian manufacturing improved considerably in the second half of the 1990s and has remained largely unchanged on average since 2000. Relative unit labour costs have been falling by a good 20 percent since the mid 1990s compared with both EU trading partners and the average of all trading partners in a single currency. As in 2004 labour costs grew only slightly and productivity was increased significantly (+5.6 percent), unit labour costs in Austria decreased by 3.5 percent. As the slowdown in costs of the trading partners in a single currency was smaller on average, Austria's unit labour cost position improved by 1.5 percent compared with the EU, and by 0.9 percentage point compared with all trading partners.

Figure 1: Labour costs in manufacturing, 2004

In a single currency, Austria = 100

Source: Austrian Economic Chamber, US Labor Office, Institute of the German Economy, WIIW, WIFO. –  1 EU 15 excluding Austria. –  2 2003. –  3 2002.

For further information, please refer to Alois Guger, phone (1) 798 26 01, ext. 264, Alois.Guger@wifo.ac.at

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