Hourly labour costs

From Statistics Explained

Data from March 2014. Most recent data: Further Eurostat information, Main tables and Database.

This article provides recent statistics on hourly labour costs in the European Union (EU).

In 2013 average hourly labour costs were estimated at EUR 23.7 in the EU-28 and at EUR 28.4 in the euro area (EA-17). However, this average masks significant differences between EU Member States, with hourly labour costs ranging between EUR 3.7 and EUR 40.1.

When comparing labour cost estimates in euro over time, it should be noted that data for those Member States outside the euro area are influenced by exchange rate movements.

Figure 1: Hourly labour costs for the whole economy, 2013 (EUR)
Enterprises with ten or more employees
Source: Eurostat (lc_lci_lev)

Main statistical findings

Figure 2: Relative change in hourly labour costs 2013/2008 for the whole economy (%)
Source: Eurostat (lc_lci_lev)
Table 1: Labour costs per hour, 2008-2013, whole economy excluding agriculture and public administration (EUR)
Source: Eurostat (lc_lci_lev)
Table 2: Labour costs per hour in national currency for non-euro area Member States, whole economy excluding agriculture and public administration, 2008-2013
Source: Eurostat (lc_lci_lev)
Table 3: Labour costs per hour, breakdown by economic activity, 2013 (EUR)
Source: Eurostat (lc_lci_lev)
Table 4: Labour costs per hour in national currency for non-euro area Member States, breakdown by economic activity, 2013
Source: Eurostat (lc_lci_lev)

Hourly labour costs ranged between EUR 3.7 and EUR 40.1 in the EU-28 Member States in 2013

In 2013, average hourly labour costs in the whole economy (excluding agriculture and public administration) were estimated to be EUR 23.7 in the EU-28 and EUR 28.4 in the euro area (EA-17). However, this average masks significant differences between EU Member States, with the lowest hourly labour costs recorded in Bulgaria (EUR 3.7), Romania (EUR 4.6), Lithuania (EUR 6.2) and Latvia (EUR 6.3), and the highest in Sweden (EUR 40.1), Denmark (EUR 38.4), Belgium (EUR 38.0), Luxembourg (EUR 35.7) and France (EUR 34.3).When comparing labour cost estimates in euro over time, it should be noted that data for those Member States outside the euro area are influenced by exchange rate movements. Figure 1 shows the levels across the Member States.

Within the business economy, labour costs per hour were highest in industry (EUR 24.6 in the EU-28 and EUR 31.0 in the euro area), followed by services (EUR 23.9 and EUR 28.0 respectively) and construction (EUR 21.0 and EUR 24.5). In the mainly non-business economy (excluding public administration), labour costs per hour were EUR 23.2 in the EU-28 and EUR 27.7 in the euro area.

Non-wage costs

Labour costs are made up of wages and salaries plus non-wage costs such as employers' social contributions. The share of non-wage costs in the whole economy was 23.7 % in the EU-28 and 25.9 % in the euro area, varying between 8.0 % in Malta and 33.3 % in Sweden.

These preliminary estimates for 2013, published by Eurostat, cover enterprises with 10 or more employees and are based on the 2008 Labour cost survey and the Labour cost index .

Developments since 2008

Between 2008 and 2013, hourly labour costs in the whole economy expressed in euro have risen by 10.2 % in the EU-28 and by 10.4 % in the euro area. Within the euro area, the largest increases were recorded in Austria (+18.9 %), Slovakia (+17.0 %) and Finland (+15.9 %). Decreases were observed in Greece (-18.6 %) and Portugal (-5.1 %). Outside the EA-17, the largest increases were in Bulgaria (+44.1 %) and Sweden (+26.9 %). There were decreases in Hungary (-5.2 %), Croatia (-4.0 %) and the United Kingdom (-0.3 %). Figure 2 analyses the growth since 2008.

Exchange rate effects

When comparing labour costs in euro over time, it should be noted that data for Member States outside the euro area are influenced by exchange rate movements. Most strikingly, the hourly labour costs for the whole economy in Hungary increased by 11.9 % from 2008 to 2013 in forint, but decreased by 5.2 % in euro. In Sweden they increased by 14.2 % in kronor, while increasing by 26.9 % in euro. In Poland, hourly labour costs were almost unchanged with an increase of 0.1 % in euro, while they increased by 19.6 % in zloty. In Romania labour costs for the whole economy increased by 32.8 % in lei, but only by 10.6 % in euro, while in the United Kingdom there was an increase of 6.3 % in hourly labour costs in pounds, compared to a small decrease of 0.3 % in euro. All differences can be analysed by comparing tables 1 and 2.

Data sources and availability

Data sources

Labour cost survey

The labour cost survey (LCS) provides structural information on labour costs. The survey is conducted every four years. The most recent LCS refers to information for the year 2008. The LCS covers observation units with 10 or more employees and all economic activities except agriculture, forestry and fishing, public administration, private households and extra-territorial organisations. The labour cost per hour from the LCS is calculated as:

Compensation of employees + Vocational training costs + Other expenditure + Taxes – Subsidies.

For the EU-27 the weight of each variable in the labour cost per hour in 2008 was:

Compensation of employees 98.4%
Vocational training costs 0.8%
Other expenditure 0.54%
Taxes 0.54%
Subsidies 0.28%

Labour cost index

The labour cost index (LCI) is a short-term indicator showing the development of hourly labour costs incurred by employers. It is calculated dividing the labour costs by the number of hours worked. Labour costs are made up of costs for wages and salaries, plus non-wage costs such as employer's social contributions. These do not include vocational training costs or other expenditures such as recruitment costs, spending on working clothes, etc. The LCI covers all business units irrespective of the number of employees and all economic activities except agriculture, forestry and fishing, private households and extra-territorial organisations.

The index equals 100 in 2008 and is available 75 days after the reference quarter. The labour cost per hour from the LCI is calculated as:

Compensation of employees + Taxes – Subsidies

From the table above it can be concluded that for the EU-27 the LCI labour cost concept covers approximately 98.7 % of the LCS labour concept. This percentage varies from country to country. The lowest percentage is observed in the Netherlands, where the LCI concept represents 96.7 % of the LCS labour cost concept.

Estimation method

Estimates for the years after 2008 are obtained by extrapolating the 2008 LCS hourly labour cost data expressed in national currencies using the LCI transmitted by the Member States. Generally, the LCI that is not adjusted for calendar effects is used except in the case of countries Denmark, France and Sweden where only calendar-adjusted data are available. Some Member States voluntary transmit annual labour costs figures, but the coverage is not complete enough to compute European aggregates (see article on wages and labour costs).

Caveats

Using the LCI to extrapolate the LCS values means assuming the following hypothesis:

  • the labour cost per hour of all business units behaves the same way as the labour cost per hour of business units with 10 or more employees;
  • 'Vocational training costs' and 'Other expenditure' behave similarly to 'Compensation of employees', 'Taxes' and 'Subsidies'.

These assumptions, especially the first one, can lead to a small over- or underestimation of the annual labour cost per hour.

Adjustments to the LCI index

The LCI of countries is unaffected by exchange rate movements, which are only taken into account when calculating the European aggregates. In order to use the LCI for calculating monetary estimates in euro, exchange rate movements have to be incorporated. Therefore, for certain non-euro area countries a exchange-rate adjusted LCI index is used in these calculations instead of the official LCI available at Eurostat's database.

The un-adjusted LCI is used, except for those countries, for which it is not available. Here the calendar-adjusted LCI is used.

Context

The collection of labour costs is an essential part of the range of statistics that are relevant for an understanding of the inflationary process and the cost dynamics in the economy.

Information on labour costs is required for economic and monetary policies, wage bargaining and economic analyses. Labour costs are an important potential source of inflation since they account for a large proportion of the total costs borne by private businesses, which may pass higher labour costs, in particular if not reflected in higher productivity, on to consumers via higher end prices, thus fuelling inflation. A timely publication of labour cost levels is therefore of utmost importance for the European Central Bank (ECB) in order for it to be able to monitor inflation in the euro area.

See also

Further Eurostat information

Publications

  • News release
Hourly labour costs news release 27 March 2014
Previous releases
Hourly labour costs news release April 2013

Database

Labour costs (lc)
Labour cost index (lci)
Labour costs annual data (lcan)
Labour cost levels (lc_lci_lev)

Dedicated section

Methodology / Metadata

Other information

Source data for tables and figures on this page (MS Excel)

External links

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