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

1.2.4 Labour input and labour productivity
Table 1.2 used the average number of persons employed per year to derive growth rates for
employment. If the intention is to measure total annual labour input in an economy it would
be preferable to use instead the total number of hours worked per year. In the absence of
comparable data for total hours worked a second best solution is to use employment on a full-
time equivalents basis. The latter data are derived from the “raw” employment figures by
using the ratio between the actual hours worked by an average worker and the standard (e.g.
statutory) working hours as an adjustment factor.
Table 1.6 shows the evolution of labour input in full-time equivalents
11
. Comparison with
Table 1.2 suggests that the growth rate of labour input in Germany during the 1990s was
much below the growth rate of the number of persons employed. This contrasts with the other
countries where the transition to full-time equivalents reduces labour input growth only
slightly (France and Italy) or even increases it (USA)
12
. Several factors are behind the
significant downward correction in measured labour input for Germany: first, the “raw”
employment figures hide a rapid increase in part-time employment in the 1990s; second, the
most dynamic element in overall part-time employment were jobs with a very low working
time content (so-called “630 DEM jobs“), resulting in a decline in the hours worked for an
average part-time worker; third, overtime hours were reduced as a result of subdued output
growth and an increase in the working-time flexibility included in tariff agreements. As a
result, moving from employed persons to full-time equivalents reduces the annual average
labour input growth by 0.9 percentage points for the 1990s. While labour input as measured
by persons employed shows positive - albeit in comparison with other countries still rather
subdued - growth, full-time equivalents indicate that labour input growth was negative to the
tune of 0.7% per year, revealing the actual scale of the German labour market slack in this
period.