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

Table 3.16: The use of opening clauses at establishment level
Germany
West
East
Establishments which do not use opening clauses
75%
77%
67%
Establishments which use opening clauses
22%
20%
30%
Establishments use opening clauses in following fields (as % of those that use opening clauses)
Working time extension
44%
48%
28%
Limited working time reduction
25%
27%
19%
"Entrance wages" for newly hired employees
20%
21%
16%
Reduction or postponement of annual bonuses
14%
11%
27%
Postponement of collectively agreed pay increases
12%
10%
21%
General "hardship clauses"
8%
3%
28%
Reduction of collectively agreed pay
6%
4%
11%
Reduction or postponement of holiday pay
6%
2%
22%
Source: eiro-online (2001)
3.2.3 Labour demand: Does job creation pay?
While wages are the largest cost component for recruitment other factors such as current costs
(e.g. social security contributions) or one-off costs (e.g. expenses associated with hiring and
firing) play a role. As aggregate figures are not very revealing, this sub-section illuminates some
problems in the institutional detail in Germany.
Unit labour costs
Differences in the long-term growth rate of real labour costs are clearly relevant when
explaining the record of employment growth in Europe as compared to the US (for a discussion
see e.g. IMF (1999)). The data on the development of real unit labour costs in European
countries in the 1980s and 1990s do not allow ad hoc conclusions on employment differentials

---

in terms of labour costs, however: Real unit labour costs (RULC) in Germany declined broadly
in line with those in France or Italy (Figure 3.16), reflecting well-behaved aggregate wages and
a rise in labour productivity. By contrast, in the UK the level of RULC was more or less
maintained over that period.