Will German Wage Increases Help US Exports?

Germany, the 4th largest economy in the world, could provide a boost to the larger world economy through higher domestic wages.  Germany’s export-driven economy has helped to drive their unemployment level to near record lows, but a boost in their domestic wages could spur greater consumer demand, which in turn could lead to greater imports from countries such as the US.

According to the WSJ, a recently enacted minimum wage of € 8.50 ($9) per hour will provide more discretionary spending power for German consumers.  Germany has long been criticized for large trade surpluses and lower consumer demand for imports, so these recent wage increases should spur US manufacturers to focus more attention on potential export opportunities (see Share of Exports of GDP Chart  – source United Nations)

Some analysts caution that there will need to be sustained growth over a number of years to have a really significant effect on US exports to Germany. The other note of concern for US exporters is the current value of the US dollar vs the Euro, which has certainly placed US products at a more competitive disadvantage compared to several years ago.

Most importantly, US companies that take a long term approach to the benefits of revenue diversification through exports will be in the best position to take advantage of any shorter-term gains in market conditions.  While larger US manufacturers have been fully invested in an export growth strategy for decades, it’s the SME that can benefit the most from a focused and sustained export plan.  The good news is that there is plenty of experienced help available for those willing to expand globally, not just to Germany and other European markets, but other high growth markets that can provide huge opportunities for those willing to invest in international growth.