Accounting for the German Miracle

Finally I’ve been getting a flood of German data.  I’ll rely on data from Mark Sadowski, but would also like to thank Johannes Fritz, libertaer, and Martin.  Here’s Mark:

The data is as follows:

RGDP (annual rate)
2006Q1 – 2,263,994.4 million euro
2008Q1 – 2,429,934.8 million euro
2012Q4 – 2,463,022.8 million euro

The average rate of growth fell from 3.6% to 0.3%

Productivity
2006Q1 – 40.7 euro
2008Q1 – 42.6 euro
2012Q4 – 42.6 euro

The average rate of growth fell from 2.3% to 0.0%

Employment (1000)
2006Q1 – 38,940.0
2008Q1 – 40,250.0
2012Q4 – 41,719.0

The average rate of growth fell from 1.7% to 0.8%.

Hours worked at an annual rate (calculated)
2006Q1 – 1,428.5
2008Q1 – 1,417.2
2012Q4 – 1,385.9

The average rate of increase fell from (-0.4%) to (-0.5%).

Unemployment Rate
2006Q1 – 10.6%
2008Q1 – 8.0%
2012Q4 – 5.4%

So employment rose by 7.1% over a period of nearly 7 years, and hours per worker fell by 3.1%.  That means hours rose by 4%.  Productivity rose by 4.7% and RGDP rose by 8.8% (roughly half from more hours worked, and half from improved hourly productivity.)

Many commenters pointed to various job sharing programs, or subsidies to keep workers employed during the recession.  Libetaer used the metaphor of putting 2 workers in one chair.  The one chair reflects relatively meager growth in NGDP, and the two workers represent job sharing.

It would be a mistake to assume that the German miracle was an illusion due to all this job sharing and slow productivity growth (caused by keeping excess workers around.)  The welfare loss to a society from a 5% RGDP shock is much greater if 5% of workers lose their jobs, as compared to all workers staying employed, but working 5% less hard.  Yes, the miracle seems marginally less impressive, but I’d still prefer Germany’s labor market to France’s.

Mark’s data doesn’t show an significant break in hours worked after 2008, so that factor may be overrated.

The low level of hours worked in Germany shows the absurdity of blaming economic problems elsewhere on “lazy workers.”

About Scott Sumner 492 Articles

Affiliation: Bentley University

Scott Sumner has taught economics at Bentley University for the past 27 years.

He earned a BA in economics at Wisconsin and a PhD at University of Chicago.

Professor Sumner's current research topics include monetary policy targets and the Great Depression. His areas of interest are macroeconomics, monetary theory and policy, and history of economic thought.

Professor Sumner has published articles in the Journal of Political Economy, the Journal of Money, Credit and Banking, and the Bulletin of Economic Research.

Visit: TheMoneyIllusion

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