Manager Salaries Compared

The salaries of Germany's company managers are among the highest in Europe. Does this reflect an increase in wages for all of the country's workers? Photograph: Olivier Holmey

The salaries of Germany’s company managers are among the highest in Europe. Does this reflect an increase in wages for all of the country’s workers? Photograph: Olivier Holmey

In Europe, Germany is more likely to be associated with low unemployment rates than high salaries. Now that could be about to change: according to a recent report comparing the wages of company directors across the continent, Germany is ranked first in the euro zone and second after Britain in the European Union as a whole.

The extensive survey, conducted by the consulting firm ECGS across 392 companies throughout Europe, established that German managers earn an average pay of €4.3m annually. It also ranked Martin Winterkorn, the head of Volkswagen, Europe’s largest car manufacturer, third on its list of individual top-earning company directors, with an annual salary estimated at €16m.

Yet historically, since the country’s reunification, the average salary in Germany has scored poorly in comparison with the rest of Europe, owing to considerable economic imbalance between its Eastern and Western parts. For a time, even the unemployment rate was high, occasionally reaching 12% in the early 1990s.

Over the past few years, however, the situation has gradually changed, and other figures published over the course of this year indicate that the rise in manager salaries is symptomatic of the country’s broader economic health. Last December German unemployment fell to its lowest rate since 1991, at 6.8%. It has remained at a similar level throughout 2012, oscillating between 6.5 and 7.4%, compared with over 25% and 26% in Greece and Spain respectively. Although Germany’s Purchasing Managers Index (PMI) indicates a contraction of its industry, its manufacturing sector remains the most vigorous in the euro zone, and its trade surplus was as high as €18bn last August, largely owing to the enduring popularity of its products abroad.

German businesses have long been highly successful, and their managers accordingly well remunerated. This ranking, the first of its kind, is further evidence of this. From a German standpoint, these latest data also put into perspective the salaries of economic leaders in other euro zone countries, which are coming under increased scrutiny and have become a source of controversy and unrest: although the highest paid manager on the individual ranking is the French director of Publicis, an advertising and public relations company, the national salary average in France remains 25% lower than in Germany.

But salaries in Germany have not just risen for company directors. Last May Volkswagen, Europe’s largest car manufacturer, agreed with the IG Metall Union to raise wages for its engineering staff by 4.3% for an initial period of 13 months, the largest increase in the sector in two decades. Such moves have been echoed in other companies. Chancellor Angela Merkel, whose conservative party has long supported the combined policies of job market liberalisation and low wages to keep the German industry competitive internationally, has over the past year praised and supported these pay rises, seen as a boost to domestic consumption.

As a result, Germany now ranks highly in Europe not only for its manager salaries, but also for its overall average salary.

Yet the country remains one of only very few in Europe without a uniform statutory minimum wage. Although specific industries do have minimum wage policies, it is still possible for employers to legally hire workers for an hourly wage of little more than one euro. In 2007, as many as 3.7m people were paid under €7 an hour, and 1.2m under €5.

The low wage and temporary work sector grew three times as fast as other sectors between 2005 and 2010, and now accounts for a significant part of the German economy. As a result, according to data from the European Statistics Office, 7.2% of the employed in Germany live in poverty, compared to 4.8% in 2005.

These data, when reviewed in the light of the manager salary ranking, highlight a widening gap between rich and poor. Last September, the Süddeutsche Zeitung obtained a report on poverty and wealth in Germany commissioned by Ms Merkel’s government. This report confirms that trend: in it we learn that the sum of private net assets, including property and financial investments, has increased by  €1.4 trillion over the past 5 years, in spite of the economic slump. The lower half of German households possesses only 1% of the country’s net total assets, while the upper 10% control more than half the country’s entire wealth. High and middle-income salaries may be rising, but low-income ones are becoming increasingly widespread as well, reflecting a growing polarisation of Germany’s job market.


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