Does Germany need to increase wages?

30 Aug 2014 9:53 AM | John Heap (Administrator)

"For about 10 years now wage increases in Germany have not kept up with the development of productivity, by a long stretch" said European Employment Commissioner Laszlo Andor in an interview with German newspaper Welt am Sonntag recently.


This, of course, makes Germany highly competitive compared to other European states.


Is this a problem?


Is this unfair?


If you are German, it might not seem like a problem (unless you think that those who have helped create the improved productivity should share in the benefits it brings). 


If you are a European, perhaps it matters more fundamentally - a trading imbalance (and a competitive advantage for one state over others) harms the European economy.


Presumably it is difficult to 'blame' Germany for its good performance and its 'prudence'.  We might urge them to take off the brakes and spend a little more .... but, much more importantly, we have to urge other European states to address their own productivity - and 'fight back'. 

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