European Economy. Economic Papers. Germany's growth performance in the 1990's

Table 3.14: Nominal unit labour costs* in East Germany by sectors (west Germany=100)
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
agriculture, forestry, fishery
147
108
73
84
84
93
89
81
81
79
industry (excl. construction)
161
151
120
122
121
109
105
103
101
98
- of which: manufacturing
205
174
136
135
133
124
115
111
107
104
construction
120
112
106
97
96
92
96
105
107
111
trade, tourism, transport
119
109
108
106
115
114
115
115
116
117
finance, housing, business
services
209
163
127
117
119
116
113
112
111
106
public and private services
104
105
106
104
107
107
107
110
112
110
total
143
128
116
113
116
113
112
113
114
113
* compensation per employee/GVA over employment in current prices; Berlin included in West Germany
Source : Statistisches Landesamt Baden-Württemberg
In nominal terms, wages have adjusted rather quickly close to the West levels. Looking only at
collective agreements, the level of East nominal wages reaches already 92%. Complete
convergence has been reached in a number of sectors in both manufacturing and services and
further convergence remains a goal for trade unions in most of the remaining sectors. Upward
pressure from the wage bargaining side will therefore probably remain intact as long as West
wages are the benchmark for the less productive East.
However, collectively agreed wages show only an incomplete picture, and the average actual
compensation per employee in the East remains around 77% of the West level. Firstly, the
average working week is still longer in the East, secondly the coverage of collective agreements
is declining and thirdly, pay supplements, such as a Christmas or holiday bonus, which are
common in the West, are rarely applied in the East. Finally, opening and hardship clauses allow
firms to pay lower wages in specific circumstances. The individual impact of these features on
wage dynamics is however hard to assess.

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