Krugman: Germany's high wages and remarkable export story

I gather from some of the reactions to my post on innovation hype that many readers don’t know about the remarkable German export story. Here’s the key point: German labor is very expensive, even compared with the United States:



And this has been true for decades. Yet Germany is a very successful exporter all the same. How do they do it? Not by producing the latest trendy tech product, but by maintaining a reputation for very high-quality goods, year after year.

If Germany seems remarkably competitive given its high costs, the United States is the reverse; our productivity is high, but we seem consistently bad at exporting — and have all my professional life. I used to think it was our cultural insularity, our difficulty in thinking about what other people might want. But is that still plausible?

http://krugman.blogs.nytimes.com/2014/06/17/german-labor-costs/?_php=true&_type=blogs&_r=0

Wages are even higher in several European countries and Australia than they are in Germany. In Germany exports are 40% of the economy (vs. 9% in the US) but German imports are much bigger as well (35% vs 13% in the US). Unions are much stronger incomes much more equal in Germany than in the US. The same is true of the economies of the other countries at the top of the list that Krugman provided.