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Low productivity growth in Germany

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Growth in an economy is determined by increases in labor productivity and labor volume. Successes on the labor market which feed though into rising labor volume – the total number of hours worked by all employees – are thus an important source for growing prosperity. But the same is also true of rising labor productivity. If both factors are growing steadily, an economy is on a stable growth path.

Allianz SE
Munich, Aug 05, 2013

Since the labor market reforms implemented in the first half of the last decade, Germany's labor market has been on a marked upward trend. In 2012, there were 2.6 million (+6.8%) more people in work than in 2005 and the volume of labor was up by 2.4 million hours (+4.3%) on 2005.

But the focus on this economic success, which has also earned Germany a great deal of recognition on the international stage, makes it easy to overlook the fact that productivity growth in the German economy has continued to slacken. Whereas the increase in labor productivity per person in work was still averaging 1.0% a year between 1995 and 2005, the average annual increase in the period between 2005 and 2012 was only 0.5%. The slowdown in the pace of labor productivity growth, measured per hour worked, is even more pronounced. The average growth rate of 1.6% between 1995 and 2005 had slipped back to 0.9% between 2005 and 2012.