Slight Rise in the Manufacturing Industry's Relative Unit Labour Costs in 1998

Austria ranks ninth in the international hierarchy of labour costs. Labour is most expensive in Germany, even when including Eastern Germany – one working hour in German manufacturing costs 27 percent more than in Austria (+21 percent in Switzerland). The U.S. and French manufacturing industries pay about 10 percent less; the rate is lower by some 15 percent in Italy, Japan and the U.K. WIFO previously analysed the competitive standing of Austria's economy on the basis of labour cost and productivity data obtained from the Austrian industry. As a consequence of statistics being harmonised with the EU system, data from the SME sector are now available as well. In order to facilitate comparison with other countries, WIFO has included SME data in its analysis which now comprises the entire manufacturing sector. Based on the new method, i.e., including SME data, the cost of one working hour in manufacturing is lower by 8 percent than in industry, amounting to ATS 256.80 in 1998. Of this, ATS 135.00 was paid in direct compensation for work, and ATS 122.00 were non-wage labour costs, so that non-wage labour costs amounted to 90.4 percent in manufacturing. Austrian businesses have found their price-driven competitive position to change repeatedly over the 1990s. In the first half of the decade, the labour cost position of Austrian industry deteriorated by almost 3 percent mainly as a consequence of the gain of the schilling in the train of the EMS crisis; but relative unit labour costs then declined in 1996 and 1997 as a result of substantial gains in productivity and the recovery of some major euro currencies by 5 percent. In 1998, Austrian manufacturing was once again faced with a dent in its labour cost position. Relative unit labour costs rose by 0.4 percent over the average of its trading partners and the EU, and by 1.4 percent vis-à-vis Germany. The main cause was the modest pace of productivity growth in Austria: employment responded tardily to the upswing of 1997, so that manufacturing jobs still grew by about 1 percent in 1998 even though the recovery slowed down and production growth was checked in the wake of the crisis in South-East Asia.