2011-06-28 Natixis Do Germans Work More Than Southern Europeans - No, They Work Much Less, And Not More Intensely

8/6/2019 2011-06-28 Natixis Do Germans Work More Than Southern Europeans - No, They Work Much Less, And Not More I

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3 June 2011 - No. 401

Do Germans work more than SouthernEuropeans? No, they work much less, andnot more intensely

ECONOMIC RESEARCH

Author:

Patrick Artus

Chancellor Angela Merkel has highlighted the short working time of the

Southern Europeans as one of the main reasons for their economic problems;

she has actually suggested that the length of holidays and the retirement age

should be harmonised for the Southern euro-zone countries to "deserve"

Germany's support.

We will first compare the working time in Germany and in the Southern euro-

zone countries (France, Italy, Spain, Portugal and Greece) over one year and

over their lifetime.

We will then try to identify the factors, other than the working time, that can

explain the difference between the economic situation of Germany and the

Southern euro-zone countries: productivity, productive specialisation, labour

cost, savings; quality of the labour force.We show that:

- the Germans work much less (over one year, over their lifetime) than the

Southern Europeans; and they do not work more intensely either;

- Germany's better economic performance is above all explained by the

innovation drive and by the higher household and corporate savings rate.


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The major differencesbetween Germany and

the Southern euro-zonecountries

We use the term "Southern euro zone" for France, Italy, Spain, Portugal andGreece.

We know the major differences between Germany and the Southern euro-zonecountries, which are:

- the weight of industry (Charts 1A and B), which is higher in Germany (Italy isnot a "Southern" country from this point of view);

- as a result, foreign trade, where Germany runs a surplus while the Southerneuro zone runs a deficit (Charts 2A and B), due to Germany's far greaterexposure to countries enjoying rapid growth (Chart 2C);

- the use of credit prior to the crisis - and fiscal deficits since the crisis - toboost growth in the Southern euro zone, but not in Germany (Charts 3A andB); this is currently weakening the economy of the Southern euro-zonecountries, given the deleveraging needed in the private as well as in the publicsector;

- the ability to obtain growth in the current situation, which is markedlybetter in Germany (Chart 4), since there is no need for deleveraging inGermany, and since the high corporate profitability (Chart 5A) and the low levelof unemployment (Chart 5B) is paving the way for quite rapid wage growth(Charts 5C and D), which is not the case in the Southern euro-zone countries.

Chart 1A

Manufacturing employment (as % of total)

10

12

14

16

18

20

22

24

99 00 01 02 03 04 05 06 07 08 09 10 11

10

12

14

16

18

20

22

24

Germany France Italy

Spain Po rtugal Greece

Sources: Datast ream, Eurostat, Nat ixis

Chart 1B

Value added in the manufacturing sector

(in volume terms, as % of GDP)

6

8

10

12

14

16

18

2022

24

99 00 01 02 03 04 05 06 07 08 09 10 11

6

8

10

12

14

16

18

2022

24Germany France Italy


Sources: Datastream, EIU, OECD, Eurost at, Natixi s

Chart 2A

Trade balance (EUR bn, annualised)

-150

-100

-50

0

50

100

150

200

250

99 00 01 02 03 04 05 06 07 08 09 10 11

-150

-100

-50

0

50

100

150

200

250



Sources: Datastream, Nat ixis

Chart 2B

Current-account balance (as % of GDP)

-20

-15

-10

-5

0

5

10

99 00 01 02 03 04 05 06 07 08 09 10 11

-20

-15

-10

-5

0

5

10



Sources: Datastream, Nati xis

Flash 2011 401- 2


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Chart 2C

Exports to emerging countries as a whole incl.

Russia and OPEC (as % of GDP)

0

2

4

6

8

10

12

99 00 01 02 03 04 05 06 07 08 09 10 11

0

2

4

6

8

10

12

Germany France Spain

Italy Greece Po rtugal


Chart 3A

Loans to the private sector* (Y/Y as %)

-5

0

5

10

15

20

25

30

35

40

45

99 00 01 02 03 04 05 06 07 08 09 10 11

-5

0

5

10

15

20

25

30

35

40

45Germany France

Italy Spain

Portugal Greece


(*) Households + companies

Chart 3B

Fiscal de ficit (as % of GDP)

-16

-12

-8

-4

0

4

99 00 01 02 03 04 05 06 07 08 09 10 11 12

-16

-12

-8

-4

0

4



Sources: Datastream, Nati xis f orecasts

Chart 4

Real GDP grow th (Y/Y as %)

-8

-6

-4

-2

0

2

4

6

8

99 00 01 02 03 04 05 06 07 08 09 10 11 12

-8

-6

-4

-2

0

2

4

6

8



Sources: Datastream, Natixis f orecasts

Chart 5A

Self-financing rate

20

40

60

80

100

120

140

160

180

99 00 01 02 03 04 05 06 07 08 09 10 11

20

40

60

80

100

120

140

160

180



Sources: Datastream, Eurostat, Natixis

Chart 5B

Unemployment rate

3

6

9

12

15

18

21

99 00 01 02 03 04 05 06 07 08 09 10 11

3

6

9

12

15

18

21Germany France

Italy Spain

Portugal Greece


Flash 2011 401 - 3


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Chart 5C

Nominal per capita wage (Y/Y as %)

-6

-3

0

3

6

9

12

99 00 01 02 03 04 05 06 07 08 09 10 11

-6

-3

0

3

6

9

12



Sources: Datastream, ECB, OECD, Natixis

Chart 5D

Real per capita wage

(deflated by consumer price deflator, Y/Y as %)

-10

-8

-6

-4

-2

0

2

4

6

8

99 00 01 02 03 04 05 06 07 08 09 10 11

-10

-8

-6

-4

-2

0

2

4

6

8



Sources: Datastream, national sources, Eurostat , Natixis

Is Germany's economicadvantage over the

Southern euro-zonecountries a result of

the working time?

Angela Merkels recent statements about the length of holidays and the retirementage, blame the short working time (over the year, over a lifetime) in theSouthern euro-zone countries for these countries problems relative toGermany.

What is the real situation?

Table 1 shows that the annual working time is much shorter in Germany thanin the other countries (France, Spain, Italy, Portugal and Greece); Tables 2A andB show that while the legal retirement age is high in Germany (65 years, and 67years in the future), the effective average retirement age is the same inGermany as in Spain, Portugal and Greece.

Table 1Average annual working time (number of hours)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Germany 1,492 1,473 1,458 1,445 1,439 1442 1,434 1430 1,431 1,430 1,390France 1,630 1,591 1,579 1,537 1,533 1561 1,557 1536 1,556 1,560 1,554Spain 1,732 1,731 1,727 1,721 1,706 1690 1,668 1656 1,637 1,647 1,654Italy 1,876 1,861 1,843 1,831 1,826 1826 1,819 1815 1,816 1,807 1,773Portugal 1,812 1,765 1,769 1,767 1,742 1763 1,752 1757 1,727 1,745 1,719Greece 2,107 2,121 2,121 2,109 2,103 2082 2,086 2148 2,116 2,116 2,119

Source: OECD Employment Outlook 2010

Table 2AEffective average retirement age

Germany 62.2France 60.0Spain 62.3Italy 60.1Portugal 62.6Greece 61.5


Flash 2011 401- 4


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Table 2BEuropean Union

Comparison table of basic pension schemes

EligibilityCountry

Minimum durationNormal retirement age

Maximum contributionperiod

Calculation of pension

Germany 5 years

M 65 yearsW 65 years

Early retirement at 60 years withdefinitive reduction of 3.6% per

year

None Proportional

Spain15 years o/w 2 years in the past 8years



Proportional

France 1 quarterM 60 yearsW 60 years

(62 years in 2018)

M 40 years*W 40 years* *

Gradual changeover to 41years in 2012

Proportional

Greece 12.5 years giving rise tocontributions


M 28 years and 9 monthsW 28 years and 9 months

Lump-sum andproportional

Portugal15 years o/w 2 years in the past 8years


M 40 years W 40 years Proportional

Sources: OECD, Eurostat

How can Germany'seconomic performancerelative to the Southerneuro-zone countries be

explained?

So that the working time (over the year, over a lifetime) does not explainGermany's performance.

We can then surmise that Germany's economic performance is due to:

- the level of productivity and productivity gains;

- the innovation drive and the specialisation in upmarket industry;

- the control of labour cost;

- the high private sector savings;

- the quality of the labour force.

No. 1 - Labour productivity

Charts 6A and B show that the performance of Germany's per capitaproductivity is in line with the average of the "Southern" countries; that of

hourly productivity is above average, but not better than that of France orGreece.

Flash 2011 401 - 5


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Chart 6A

Per capita productivity (1999:Q1 = 100)

90

95

100

105

110

115

120

125

130

99 00 01 02 03 04 05 06 07 08 09 10 11

90

95

100

105

110

115

120

125

130

Germany France

Italy Spain

Portugal Greece


Chart 6B

Hourly labour productivity (1999:1 = 100)

90

95

100

105

110

115

120

99 00 01 02 03 04 05 06 07 08 09 10 11

90

95

100

105

110

115

120


Po rtugal Greece Spain


No. 2 - Innovation and sophistication of products

Germany has maintained its export market shares (Chart 7), which is not thecase with the Southern euro-zone countries. This is to a large extent explained bythe much greater innovation drive in Germany (Tables 3A and B).

Chart 7

Total exports in value term s

(as % of global exports ex Russia and OPEC)

0

2

4

6

8

10

12

99 00 01 02 03 04 05 06 07 08 09 10 11

0

2

4

6

8

10

12

Germany France

Italy Spain

Portugal Greece

Sources: Datastream, customs authorities, Natixis

Table 3A

Total expenditure on R&D (as % of GDP)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Germany 2.40 2.45 2.46 2.49 2.52 2.49 2.49 2.53 2.53 2.68 2.82France 2.16 2.15 2.20 2.23 2.17 2.15 2.10 2.10 2.07 2.11 2.21Italy 1.02 1.05 1.09 1.13 1.11 1.10 1.09 1.13 1.18 1.23 1.27Spain 0.86 0.91 0.92 0.99 1.05 1.06 1.12 1.20 1.27 1.35 1.38Portugal 0.71 0.76 0.80 0.76 0.74 0.77 0.78 0.99 1.17 1.50 1.38Greece 0.60 0.59 0.58 0.57 0.57 0.55 0.59 0.58 0.58 0.58 -

Source: Main Science and Technology Indicators 2010

Table 3BNumber of triadic patents (per million inhabitants)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Germany 77.82 75.87 75.63 74.22 69.42 69.00 70.51 73.67 74.85 73.18 77.82France 38.04 37.50 36.93 38.26 36.40 39.11 38.60 39.31 40.52 39.66 38.04

Italy 13.45 11.47 11.98 11.45 12.13 13.32 13.13 13.34 13.16 12.82 13.45Spain 2.86 3.73 4.03 4.07 3.91 5.11 5.19 5.25 5.77 5.77 2.86Portugal 0.50 0.40 0.60 0.70 0.90 0.65 1.24 1.03 1.13 0.94 0.50Greece 1.04 0.85 0.57 0.85 1.13 0.86 1.36 1.24 1.27 1.26 1.04

Source: Main Science and Technology Indicators 2010

Flash 2011 401- 6


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No. 3 - Labour cost

Unit wage costs have increased markedly less in Germany than in France, Italy,Spain, Greece or Portugal (Chart 8A); welfare contributions have been reduced inGermany (Chart 8B), but when we look at total labour costs, we can see that

only France is in a difficult situation relative to Germany (Table 4).

Chart 8A

Unit wage costs (1999:1 = 100)

90

100

110

120

130

140

150

160

99 00 01 02 03 04 05 06 07 08 09 10 11

90

100

110

120

130

140

150

160Germany France

Italy Spain

Portugal Greece


Chart 8B

Welfare contr ibutions (as % of GDP)

10

12

14

16

18

20

99 00 01 02 03 04 05 06 07 08 09 10 11

10

12

14

16

18

20Germany France

Italy Spain

Portugal Greece

Sources: Datastream, OECD, Nat ixis

Table 4Hourly wage in industry (incl. welfare contributions, in EUR)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Germany 25.3 26.6 27.5 28.2 28.9 29.1 29.3 30.3 30.6 31.4 30.6 30.2France 23.7 24.8 25.9 26.9 27.6 28.6 29.4 30.3 31.2 33.2 33.3 33.7taly* 17.5 17.9 18.6 19.6 20.6 21.7 22.3 22.9 23.5 24.3 25.1 25.6

Spain* 14.5 14.5 13.4 14.0 14.7 15.3 15.8 16.4 17.1 19.1 19.9 20.2Portugal* 6.9 7.1 7.4 7.8 8.2 8.6 8.9 9.2 9.5 9.9 10.2 10.3Greece* 10.6 10.9 11.5 12.2 12.9 12.2 11.8 12.6 12.9 13.3 13.8 14.1

(*) Series extended with growth in the hourly cost indexSources: Eurostat, INSEE, Natixis

No. 4 - Private sector savings

German households and companies save more than households andcompanies in the Southern euro-zone countries (Charts 9A and B), which alsoexplains the external surpluses.

Chart 9AGross household savings rate

-5

0

5

10

15

20

99 00 01 02 03 04 05 06 07 08 09 10 11

-5

0

5

10

15

20



Sources: Datastream, Natixi s

Chart 9BProfits after taxes and interes t, before

dividends (as % of GDP)

46

8

10

12

14

16

18

20

22

24

99 00 01 02 03 04 05 06 07 08 09 10 11

46

8

10

12

14

16

18

20

22

24


Po rtugal Greece Spain

Sources: Datastream, AM ECO, Natixi s

Flash 2011 401 - 7


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No. 5 - Quality of the labour force

There are few Germans with a very low level of education, but the proportionof Germans with higher education is not higher than in France, Spain orGreece (Table 5A), while Portugal and Italy have a clear problem in terms of

education. The unskilled unemployment rate is higher in Germany than in theSouthern euro-zone countries (Table 5B).

Table 5AStructure of the labour force by level of education (aged 25 to 64)

Germany France Spain

As %Lower

secondaryeducation

Highersecondaryeducationand post-secondary

non

tertiaryeducation

Tertiaryeducation

Lowersecondaryeducation


non

tertiaryeducation

Tertiaryeducation



non

tertiaryeducation

Tertiaryeducation

1995 16 61 23 43 38 19 72 12 161997 17 61 23 41 39 20 69 13 191998 16 61 23 39 40 21 67 13 201999 19 58 23 38 40 21 65 14 212000 18 58 23 37 41 22 62 16 232001 17 59 23 36 41 23 60 16 242002 17 60 23 35 41 24 59 17 242003 17 59 24 35 41 24 57 18 252004 16 59 25 34 41 24 55 19 262005 17 59 25 33 41 25 51 21 282006 17 59 24 33 41 26 50 21 282007 16 60 24 31 42 27 49 22 292008 15 60 25 30 43 27 49 22 29

Italy Portugal Greece

As %Lower

secondaryeducation


nontertiary

education

Tertiaryeducation



nontertiary

education

Tertiaryeducation



nontertiary

education

Tertiaryeducation

1995 65 27 8 80 9 11 57 25 171997 - - - - - - 56 29 161998 59 32 9 82 10 8 54 29 17

1999 58 33 9 81 10 9 52 31 172000 58 33 9 81 11 9 51 31 182001 57 33 10 80 11 9 50 32 182002 56 34 10 80 11 9 48 33 192003 52 38 10 77 12 11 47 34 192004 51 37 12 75 13 13 44 35 212005 50 38 12 74 14 13 43 36 212006 49 38 13 72 14 13 41 37 222007 48 39 14 73 14 14 40 37 232008 47 39 14 72 14 14 39 38 23

Sources: Education at a Glance 2010 (OECD)

Flash 2011 401- 8


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Table 5BUnemployment rate by level of schooling: Primary, secondary or higher

(persons aged 25 to 64)

Germany France ItalyPrimary Secondary Higher Primary Secondary Higher Primary Secondary Higher

1998 15.4 10.3 5.5 14.9 9.6 6.6 10.8 8.1 6.91999 15.9 8.8 5.0 15.3 9.2 6.1 10.6 7.9 6.92000 13.9 8.1 4.2 13.9 7.9 5.1 10.0 7.2 5.92001 13.5 8.2 4.2 11.9 6.9 4.8 9.2 6.6 5.32002 15.3 9.0 4.5 11.8 6.8 5.2 9.0 6.4 5.32003 18.0 10.2 5.2 10.4 6.6 5.3 8.8 6.1 5.32004 20.4 11.2 5.6 10.7 6.7 5.7 8.2 5.4 5.32005 20.2 11.0 5.5 11.1 6.6 5.4 7.8 5.2 5.72006 19.9 9.9 4.8 11.0 6.6 5.1 6.9 4.6 4.82007 18.0 8.3 3.8 10.2 6.0 4.9 6.3 4.1 4.22008 16.5 7.2 3.3 9.8 5.6 4 7.4 4.6 4.3

Spain Portugal GreecePrimary Secondary Higher Primary Secondary Higher Primary Secondary Higher

1998 17.0 15.3 13.1 4.4 5.1 2.8 7.7 10.7 6.8

1999 14.7 12.9 11.1 4.0 4.5 3.1 8.8 11.5 8.02000 13.7 10.9 9.5 3.6 3.5 2.7 8.2 11.2 7.52001 10.2 8.4 6.9 3.6 3.3 2.8 8.2 10.4 7.22002 11.2 9.4 7.7 4.4 4.4 3.9 7.8 10.5 6.82003 11.3 9.5 7.7 5.7 5.3 4.9 7.2 10.1 6.52004 11 9.4 7.3 6.4 5.6 4.4 8.7 10 7.42005 9.3 7.3 6.1 7.5 6.7 5.4 8.3 9.6 7.12006 9.0 6.9 5.5 7.6 7.1 5.4 7.2 8.9 6.32007 9.0 6.8 4.8 8.0 6.8 6.6 7.0 8.2 6.12008 13.2 9.3 5.8 7.6 6.6 5.8 6.8 7.2 5.7

Source: OECD, 2010 Employment Outlook, p. 118-119

Conclusion: AngelaMerkel does notpinpoint the realproblems of the

Southern euro-zonecountries

Germans work far less (over one year, over their lifetime) than wage earnersin the "Southern" euro-zone countries (France, Italy, Spain, Portugal andGreece). They do not work more intensely either.

Germany's better economic performance is explained:

- by the innovation drive;

- by the higher household and corporate savings rate;

- by the better skills of the labour force, but only relative to Portugal and Italy.

Flash 2011 401 - 9


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