Hourly labour costs
From Statistics Explained
- Data from April 2013. Most recent data: Further Eurostat information, Main tables and Database.
In 2012 average hourly labour costs were estimated at EUR 23.4 in the EU-27 and at EUR 28.0 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 39.0.
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.
Main statistical findings
Hourly labour costs ranged between EUR 3.7 and EUR 39.0 in the EU-27 Member States in 2012
In 2012, the average hourly labour costs in the whole economy (excluding agriculture and public administration) were estimated to be EUR 23.4 in the EU-27 and EUR 28.0 in the euro area (EA-17). However, this average masks significant differences between EU Member States, with hourly labour costs ranging from EUR 3.7 in Bulgaria, EUR 4.4 in Romania, EUR 5.8 in Lithuania and EUR 6.0 in Latvia, to EUR 39.0 in Sweden, EUR 38.1 in Denmark, EUR 37.2 in Belgium, EUR 34.6 in Luxembourg and EUR 34.2 in France. 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 24.2 in the EU-27 and EUR 30.3 in the euro area), followed by services (EUR 23.7 and EUR 27.6 respectively) and construction (EUR 21.0 and EUR 24.3). In the mainly non-business economy (excluding public administration), labour costs per hour were EUR 22.9 in the EU-27 and EUR 27.2 in the EA-17.
Labour costs are made up of costs for wages and salaries plus non-wage costs such as employers' social contributions. The share of non-wage costs for the whole economy was 23.7 % in the EU-27, while it was 26.1 % in the EA-17. The share of non-wage costs also varies substantially across Member States. The highest shares of non-wage costs for the whole economy were estimated for France (33.6 %), Sweden (33.3 %), Lithuania (28.3%), Italy (27.9 %) and Belgium (27.4 %). The lowest shares of non-wage costs for the whole economy were recorded for Malta (8.2 %), Denmark (12.4 %), Luxembourg (13.4 %), Slovenia (14.7 %) and the United Kingdom (15.1 %).
Developments since 2008
Compared to 2008, the hourly labour costs in euro increased by 8.6 per cent in the EU-27. There were increases in 23 countries and decreases in 4. Within the EA-17, the labour costs per hour increased by 8.7 per cent. The largest increases were recorded for Austria (15.5 %), Slovakia (13.8 %), Finland (13.7 %) and Belgium (13.1 %). There was a major decrease in Greece (-11.2 %), while costs increased only slightly in Portugal (0.4 %) and Ireland (0.8 %).
Outside the EA-17, the largest increases were in Bulgaria (42.6 %) and Sweden (23.3 %). There were decreases in Hungary (-4.6 %), Poland (-2.6 %) and Lithuania (-1.4 %). 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 9.7 % from 2008 to 2012 in forint, but decreased by 4.6 % in euro. In Sweden they increased by 11.6 % in kronor, while increasing by 23.3 % in euro. In Poland, hourly labour costs decreased by 2.6 % in euro, but increased by 16.1 % in zloty. In Romania labour costs for the whole economy increased by 26.7 % in lei, but only by 4.6 % in euro, while in the United Kingdom there was an increase of 5.2 % in hourly labour costs in pounds, and a slightly lower increase of 3.3 % in euro.
Data sources and availability
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%|
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.
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).
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.
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.
Further Eurostat information
- News release
- Labour costs
- Data base
- Labour costs (lc)
- Labour cost index (lci)
- Labour cost levels (lc_lci_lev)
- Labour costs (lc)
- Data base
Methodology / Metadata
- Labour cost index (ESMS metadata file - lci_esms)
- Regulation 450/2003 of 27 February 2003 concerning the labour cost index
- Regulation 1216/2003 of 7 July 2003 implementing Regulation 450/2003 concerning the labour cost index
- Corrigendum to Regulation 1216/2003 of 7 July 2003
- Regulation 224/2007 of 1 March 2007 amending Regulation 1216/2003 as regards the economic activities covered by the labour cost index
- Employment Cost Index (U.S. Bureau of Labour) - An alternative measure of changes in labour costs