Brussels, 07/01/2013 (Agence Europe)- Austerity policy seems to be bearing fruit in some member states, at least when it comes to lowering labour costs. In its “Early Estimates of Quarterly Unit Labour Costs”, published on 20 December, the Organisation for Economic Cooperation and Development (OECD) says that, although in the eurozone the average unitary labour cost (ULC) (i.e. the ratio between total labour costs and production volume) has risen slightly (by 0.1%), it has fallen in some countries such as Spain, Ireland and Portugal. Declining ULCs “have either been driven by significant wage cuts or by productivity growth”. The improvement in productivity could, however, be largely due to employment cuts, the OECD points out.
In order to return to economic growth, some European governments recommend reducing ULCs, in order to increase their market competitiveness. Within the EU27, in 2012, ULCs rose by 0.1% on the back of rising labour compensation per unit of labour input (0.3%) and only marginally increasing labour productivity growth (0.1%). The countries that contributed the most to maintaining this upward trend are Germany, France, Finland, Belgium and Austria.
As of the first and third quarter of 2009, however, Portugal and Spain have seen a fall in ULCs, with Portugal having accepted financial assistance from the “troika” (European Commission, ECB and IMF), and Spain not having done so (at least not yet). The specific thing about these two countries in comparison with Ireland is that the fall has been uninterrupted, on one hand, and, on the other, has generated ULCs that have returned to pre-crisis levels (the first quarter of 2007). Over this period, the cost has fallen in Spain and Portugal by 7% and 5% respectively. Ireland has enjoyed the most significant fall, equivalent to 10%. Data for Greece, which are only available up to the first quarter of 2011, do not allow the trend over several years to be determined due to strong variations in 2009 and 2010. One might ask how countries that have managed to bring down labour costs have achieved this. The answer is: by reducing salaries while, at the same time, calling on workers to work harder. (JK/transl.jl)