Content area
Full Text
The extent to which an economy grows and prospers is largely determined by changes in productivity. In Germany the rate of productivity increased much more slowly in the 1990s than in earlier decades. At the same time, however, the rise in output per hour worked was, at an average of 2.0%, discernibly faster than the rise in output per person employed, which was 1.4% per annum. Even so, Germany is less successful than, say, the United States in incorporating the factor labour into the production process, with the result that a hard core of structural unemployment has been formed. By contrast, the degree to which capital, as a factor of production, and total factor productivity have contributed to growth is not much different from that in other industrial countries. The rate of labour productivity is partly determined by changes in real labour costs. If these rise too quickly, labour tends to be replaced by capital, and the "employment threshold", ie the growth rate at which employment begins to increase, also rises. An international comparison shows that in 2001 output per person employed was significantly lower in Germany - as in other west European countries - than in the United States. However, there were only relatively small differences in the output per hour worked by each employed person. Even so, the analysis suggests that there is a need for action on the part of economic policymakers.
Aspects of output developments in Germany
The outlook for productivity in Germany was favourable at the beginning of the 1990s. German reunification and the opening-up of central and eastern Europe appeared to provide new opportunities for greater specialisation in larger markets and consequently a more rapid increase in productivity. There were additional grounds for optimism in the middle of the decade. These were embodied in the term "new economy": new improved technologies - especially in the fields of information and communications - were seen as a means of accelerating the increase in productivity and thereby enhancing the output potential of the German economy. Yet these expectations were not fulfilled. The realisation that, even by international standards, the growth in production and productivity was only slight ultimately led to the belief that in terms of growth Germany was at the bottom...