German Companies Boost Profits Despite Rising Labor Costs

Opel Production In Bochum
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The raw profits of German companies, on a per worker basis, rose considerably between 2003 and 2016 despite pressure from rising wages in a tight labor market, according to data obtained by Handelsblatt.

An examination of balance sheet data from 300,000 German companies found that raw profits per worker rose from €30,000 in 2003 to €36,000 in 2016.

“Despite rising wages, German companies and their employees managed to overcompensate for rising costs through productivity and sales increases,” Sebastian Kral, a balance sheet expert at the German Savings Bank Association, told Handelsblatt.

The data comes from Germany’s 400 savings banks, which have access to 34 key figures in the balance sheets of 300,000 German companies. Raw profit per worker is calculated by subtracting material and personnel costs from revenue.

The data could prove explosive as more than 10 million German workers seek to renegotiate collective wage agreements this year. Labor unions are pushing companies to increase wages given rising inflation, solid economic growth and record employment levels.

Companies, however, are concerned that demands to raise wages by 4 percent or more, far above the current 2-percent rate of inflation, could hurt their competitiveness.

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