Labour cost index - recent trends
From Statistics Explained
- Data from March 2013, most recent data: Further Eurostat information, Main tables and Database.
The labour cost index (LCI) shows the short-term development of the labour cost, the total cost on an hourly basis of employing labour. In other words, the LCI measures the cost pressure arising from the production factor “labour”. This article takes a look at the most recent evolutions of the LCI, both at the level of the European Union (EU) and the Member States.
In addition, Eurostat estimates of the annual labour cost per hour in euros are provided for some European countries; they were obtained by combining the four-yearly Labour cost survey (LCS) with the quarterly labour cost index. Since the release in April 2013, these figures have been moved to Hourly labour costs.
Main statistical findings
Eurostat publishes labour cost index data for NACE Rev. 2 sections B to S. The aggregate is referred to as "whole economy" for the purpose of simplification. For the EU and EA aggregates, these series are available from 2008 onwards. The previously published aggregate (NACE Rev. 2 B to N) is referred to in this article as "business economy". The aggregate of NACE Rev. 2 sections O to S is referred to as "mainly non-business economy". Please note that any private firm providing services in any of the sections O to S (e.g. education or health services) is also included in this aggregate.
EU and euro area
Hourly labour costs in the euro area rose by 1.3% in the year up to the fourth quarter of 2012, compared with 1.8% for the third quarter of 2012. In the EU, the annual rise was 1.3% up to the fourth quarter of 2012, compared with 1.8% in the previous quarter.
The two main components of labour costs are wages & salaries and non-wage costs. In the euro area, wages & salaries per hour worked grew by 1.4% and the non-wage component by 1.0% in the year up to the fourth quarter of 2012, compared with 2.0% and 1.4% respectively for the previous quarter. In the EU27, hourly wages & salaries rose by 1.4% and the non-wage component by 1.2% in the year up to the fourth quarter of 2012, compared with 1.9% and 1.7% respectively for the third quarter of 2012.
Business and mainly non-business economy
Hourly labour costs for the business economy in the euro area rose by 1.9% in the year up to the fourth quarter of 2012, compared with 2.2% for the third quarter. In the EU-27, the annual rise was 2.1% up to the fourth quarter of 2012, compared with 2.3% for the third quarter. Hourly labour costs for the mainly non-business economy remained stable in the euro area in the year up to the fourth quarter of 2012, compared with 0.9% in the third quarter. In the EU27, hourly labour costs fell by 0.4% in the year up to the fourth quarter of 2012, compared with 0.8% in the previous quarter. A breakdown of the business economy by economic activity shows that in the euro area hourly labour costs rose by 2.5% in industry, by 2.1% in construction and by 1.5% in services in the year up to the fourth quarter of 2012. In the EU27, labour costs per hour grew by 2.6% in industry, by 1.2% in construction and by 2.0% in services.
Among the Member States for which data are available for the fourth quarter of 2012, the highest annual increases in hourly labour costs for the whole economy were registered in Romania (+7.6%) and Estonia (+6.7%) and the smallest in Cyprus and Malta (both +0.5%) and Italy (+0.6%). Decreases were recorded in Spain (-3.4%) and Slovenia (-2.1%). In the business economy, the highest growth rates in the year up to the fourth quarter 2012 were observed in Estonia (+7.1%) and Hungary (+6.5%). Decreases were recorded in Malta (-0.9%) and Slovenia (-0.7%). In the mainly non-business economy, the highest increases in the year up to the fourth quarter 2012 were recorded in Romania (+14.1%), Austria (+5.6%) and Estonia (+5.1%). Decreases were observed in Spain (-11.5%), Slovenia (-5.3%), the United Kingdom (-4.0%), the Czech Republic and Italy (both -0.5%) and Ireland (-0.3%).
Hourly labour cost in euros
Since the release in April 2013, these figures have been moved to Hourly labour costs.
Data sources and availability
Labour cost index
The labour cost index is defined as the Laspeyres index of labour costs per hour worked, chain-linked annually and based upon a fixed structure of economic activity at NACE Rev.2 section level. The current reference year of the index is 2000. In addition to the index numbers, annual and quarterly growth rates of labour cost are also calculated.
EU Member States produce the necessary estimates by using surveys, other appropriate sources such as administrative data and statistical estimation procedures.
Also, different estimation methods are used, as for example estimations of separate growth rates for labour costs and hours worked, or the application of growth rates of some labour cost components to all labour cost components.
Since annual or even 4-yearly benchmark surveys as well as estimation methods play an important role for the production of quarterly LCI figures in most Member States, revisions are frequent and can go back several years.
EU aggregates are obtained as weighted aggregates of the national data. The weights reflect the share of labour costs that each Member State has in the total EU aggregate. While the LCI itself is compiled in national currency and thus not influenced by exchange rate movements, the share of the Member State for the EU aggregates is measured in euro and can therefore vary according to the value of the national currency against the euro. In practice, these variations are however very small and have no influence on the comparability of the LCI series over time.
Eurostat has labour cost index data available for all Member States, the euro area and the EU on a quarterly basis from the year 2000 on. Data are broken down by cost items (Total cost, Wages and salaries, Other labour costs) and by economic activity (NACE sections). Index numbers and growth rates are made available for the total cost index as well as for the subdivisions wages and salaries and non-wage labour cost by economic activity.
All series are available in working-day adjusted form; this means that differences in hourly labour cost which arise due to a varying number of working days are corrected for. Also, all series are available on a seasonally adjusted basis. Seasonal adjustment corrects for infra-annual variations in the labour cost index which can arise due to recurring events, such as new school and university graduates entering the labour market in the autumn. Quarter-on-quarter growth rates are based on seasonally adjusted data, year-on-year growth rates are based on working-day adjusted data.
New data are released every quarter, about 75 days after the end of the reference quarter.
The labour cost index 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 labour cost index 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 market statistics - 2011 edition
- Principal European Economic Indicators - A statistical guide - 2009 edition
- Labour costs
- Main tables
- Labour costs (t_lc)
- Labour cost index (teilm100)
- Labour costs (t_lc)
- Main tables
- Labour costs
- Data base
- Labour costs (lc)
- Labour cost index (lci)
- Labour cost index - Quarterly data (lc_lci_r1_q)
- Labour cost index - Annual data (lc_lci_r1_a)
- Labour cost index - Country weights (lc_lci_r1_cow)
- Labour cost index - Item weights (lc_lci_r1_itw)
- Labour cost index - Quarterly data (Nace R2) (lc_lci_r2_q)
- Labour cost index - Annual data (Nace R2) (lc_lci_r2_a)
- 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