Relative Unit Labor Costs in Manufacturing Decline in 1996

Price competitiveness of Austria's manufacturing sector, which had deteriorated significantly in the first half of the 1990s, improved markedly in 1996. Modest increases in labor costs (+3.4 percent) together with persistently high productivity gains (+4½ percent) resulted in a drop in unit labor costs by 1 percent in Austria's manufacturing industry, while unit labor costs were on the increase in Austria's major trading partners. With the currencies of several important trading partners gaining in value since the spring of 1995 (Italy, USA, U.K., Sweden), the trade-weighted exchange rate of the schilling decreased by 1.5 percent; thus, unit labor costs measured in a common currency declined by 3 percent relative to the major competitors by 3½ percent relative to the EU. Exchange rate fluctuations have brought about substantial changes in Austria's international labor costs position since the beginning of the 1990s. Today, Austria counts among the countries with the highest labor costs. In 1996, hourly labor costs were as high as ATS 270. Labor is more costly only in Germany (ATS 333) and in Switzerland (ATS 307). Belgium, Denmark, and Norway pay only slightly more, and Finland, Sweden, and the Netherlands slightly less for labor than Austria. In the hierarchy of labor costs, Austria took tenth place as late as 1991. In 1996, manufacturing hourly labor costs in Germany exceeded those in Austria by 23 percent; the corresponding rate was 14 percent in Switzerland. Labor costs were considerably lower, however, in most other countries, by 14 percent in the EU, by one fourth in Italy, by 30 percent in the USA and by 40 percent in the U.K.