This article compares and contrasts figures on wages and labour costs (employers’ expenditure on personnel) in the European Union (EU) Member States and in EU candidate and European Free Trade Association (EFTA) countries.
Labour plays a major role in the functioning of an economy. From the point of view of businesses, it represents a cost (labour costs) that includes not only the wages and salaries paid to employees but also non-wage costs, mainly social contributions payable by the employer. Thus, it is a key determinant of business competitiveness, although this is also influenced by the cost of capital (for example interests on loans and dividends on equity) and non-price elements such as innovation and the brand / products positioning on the market.
As far as employees are concerned, the compensation received for their work, more commonly called wages or earnings, generally represents their main source of income and therefore has a major impact on their ability to spend or save. Whereas gross wages / earnings include the social contributions payable by the employee, net earnings are calculated after deduction of these contributions and any amounts which are due to government, such as income taxes. As the amount of taxes generally depends on the situation of the household in terms of income and composition, net earnings are calculated for several typical household situations.
The diagram above summarises the relation between net earnings, gross earnings / wages and labour costs.
Main statistical findings
The average hourly labour cost in the EU-28 was estimated at EUR 23.70 in 2013 and at EUR 28.20 in the euro area (EA-18). However, this average masks significant differences between EU Member States, with hourly labour costs ranging between EUR 3.70 and EUR 40.10 (Figure 1).
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-28, while it was 25.9 % in the euro area. The share of non-wage costs also varies substantially across EU Member States. The highest shares of non-wage costs for the whole economy were in Sweden (33.3 %), France (32.4 %), Lithuania (28.5%), Italy (28.1 %) Belgium and Slovakia (both 27.4 %). The lowest shares of non-wage costs for the whole economy were recorded for Malta (8.0 %), Denmark (12.4 %), Luxembourg (13.4 %), Ireland (13.8 %), Slovenia (14.7 %), the United Kingdom (15.3 %), Croatia (15.4 %) and Bulgaria (15.8 %).