Do Health-Related Labour Costs Weaken the Competitiveness of the Economy?

Abstract

At least in Germany, it is widely assumed that healthcare-related labour costs weaken the competitiveness of national industries. However, there is a lack of knowledge about the amount of employers' financial burden in Germany and in other competing countries, as well as the impact on market prices of German goods. To quantify the health-related labour costs for employers in seven countries and different industries, and identify the effects of current reforms in Germany on the financial burden of employers. We calculated the spending on health in Germany and the burden on German employers (by branch of production). We then compared the total burden with that of six other countries. A univariate analysis was then conducted to examine the connection between health-related labour costs and employment. In 2000, employers paid 41.2% of the total of <euro>283.3 billion spent on health matters in Germany. These total costs account for 3.2% of the gross output (UK: 1.8%, Switzerland: 1.9%, Poland: 2.1%, US: 3.2%, France: 3.6%, The Netherlands: 3.7%). Health-related labour costs account for 10.6% of the total labour costs. The health-related labour costs per employee are on average <euro>3013 (from <euro>2752 to <euro>4793 in healthcare and the chemical industry, respectively). In the UK and the US there are corresponding labour costs of <euro>1836 and <euro>4256 per employee, respectively. The current health reform (2003) would reduce the labour costs by only 0.7% after 4 years (based on 2000, with all factors remaining constant). Employment increased by 3.7% from 1995 to 2000 (textile industry: -26.8%, vehicle manufacture: +18.3%). There is no empirical connection between employment and health-related labour costs. Labour costs increased by a higher amount than the health-related labour costs. The burden on German employers is moderate when compared internationally. The current reform of the German health system is not expected to improve companies' financial situation or German competitiveness. Restrictions on the range of medical services would provide a relatively small amount of relief for employers.