FRANKFURT?Rising labor costs and a growing bureaucratic burden leave German businesses with "little room to breathe," the incoming head of Europe's largest engineering federation said.

Carl Martin Welcker said that the trend, if left unchecked, would undermine the international competitiveness of businesses in Europe's largest economy.

Mr. Welcker, the managing director of machine-tool maker Schuette GmbH, is slated to be elected as president of Germany's VDMA industry group on Friday. The VDMA represents almost 3,200 German engineering firms.

"A series of massive increases in negotiated wages is hurting us badly," he said. In Germany, pay terms are often negotiated for an entire industry.

Taking aim at Berlin ahead of general elections next fall, Mr. Welcker said productivity has been hurt by a "growing catalog of demands" on businesses, including complex requirements for factory lighting and recycling as well as equal-opportunity employment.

Economists point to data supporting Mr. Welcker's complaints. The Cologne Institute for Economic Research recently calculated that personnel costs in Germany's manufacturing industry?including wages and contributions to social insurance, pensions and health insurance?have risen about 10% over the last four years, making Germany one of the world's most expensive production locations.

"That's a concern, especially in light of weak productivity gains in Germany," said Christoph Schroeder, an economist at the institute.

Unit labor costs in German manufacturing, which take account of different levels of productivity, are now on average one-third higher than in the U.S. and 10% higher than in Spain, Mr. Schroeder said.

"We need more of the U.S. system, which does not try and dictate the tiniest of details," said Mr. Welcker. He made his comments before Donald Trump won the U.S. presidential election, in part on promises to reduce business regulation.

Many economists say measures introduced in Germany over the last three years by Chancellor Angela Merkel's government have increased labor-market regulations. The measures include a statutory minimum wage, a new law easing retirement at age 63 and a tightening of collective-bargaining rules.

Write to Nina Adam at

(END) Dow Jones Newswires

November 10, 2016 22:35 ET (03:35 GMT)

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