Hourly labour costs Statistics Explained

Source : Statistics Explained (https://ec.europa.eu/eurostat/statisticsexplained/) - 31/03/2020 1

Data extracted in March 2020Planned article update: March 2021

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

In 2019, average hourly labour costs were estimated at EUR 27.7 in the EU-27 and at EUR 31.4 in the euroarea ( EA-19 ). However, this average masks sizeable gaps between EU Member States, with hourly labourcosts ranging between EUR 6.0 and EUR 44.7.

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

Hourly labour costs ranged between 6.0 and 44.7 in 2019In 2019, average hourly labour costs in the whole economy (excluding agriculture and public administration)were estimated to be EUR 27.7 in the European Union (EU) and EUR 31.4 in the euro area. However, thisaverage masks sizeable differences between EU Member States, with the lowest hourly labour costs recordedin Bulgaria (EUR 6.0), Romania (EUR 7.7), Lithuania (EUR 9.4), Hungary and Latvia (both EUR 9.9), andthe highest in Denmark (EUR 44.7), Luxembourg (EUR 41.6), Belgium (EUR 40.5), France (EUR 36.6), theNetherlands (EUR 36.4) and Sweden (EUR 36.3), Germany (EUR 35.6) and Austria (EUR 34.7). Figure 1shows the levels across the Member States.

Figure 1: Estimated hourly labour costs, 2019 (EUR)Source: Eurostat (lc_lci_lev)

Table 1: Hourly labour costs (EUR)Source: Eurostat (lc_lci_lev)

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Table 2: Hourly labour costs in national currency for non-euro area countriesSource: Eurostat(lc_lci_lev)

Non-wage costs highest in France and SwedenLabour costs are made up of wages & salaries and non-wage costs such as employers’ social contributions. Theshare of non-wage costs in the whole economy was 25.1 % in the EU and 25.6 % in the euro area, ranging from5.3 % in Lithuania to 32.9 % in France and 32.2 % in Sweden (see Table 1 and Figure 2).

Figure 2: Non-wage costs (% of total), 2019.png Source: Eurostat (lc_lci_lev)

These estimates for 2019, published by Eurostat , cover enterprises with 10 or more employees and are basedon the 2016 Labour cost survey , which are extrapolated through the Labour cost index .

Labour costs per hour lowest in the construction sectorIn the EU as a whole, labour costs per hour were highest in the mainly non-business economy (EUR 28.4) andlowest in the construction sector (EUR 24.8). Gaps were larger in the euro area, with industry as the highestpaying sector (EUR 34.1 per hour) and construction as the lowest (EUR 28.0 per hour) (see Table 3).

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Table 3: Hourly labour costs in euro, breakdown by economic activity in 2019Source: Eurostat(lc_lci_lev)

Table 4: Hourly labour costs in national currency for non-euro area countries, breakdown byeconomic activity in 2019Source: Eurostat (lc_lci_lev)

Hourly labour costs increased most in Romania, least in MaltaBetween 2018 and 2019, hourly labour costs in the whole economy expressed in euro rose by 2.9 % in the EUand by 2.5 % in the euro area (see Figure 3).

Within the euro area, the largest increases were recorded in Slovakia (+7.8 %), Estonia (+7.7 %) and Latvia(+7.4 %) . Hourly labour costs increased least in Malta (+1.0 %) and Finland (+1.4 %).

When comparing labour cost estimates over time, levels expressed in national currency should be used toeliminate the influence of exchange rate movements. For Member States outside the euro area in 2019, andexpressed in national currency, the largest rises in hourly labour costs in the whole economy were registered inRomania (+13.1 %) and Bulgaria (+11.7 %). The smallest increases were observed in Denmark (+1.9 %) andSweden (+2.2 %).

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Figure 3: Relative change in hourly labour costs 2019/2018 for the whole economy (%)Source:Eurostat (lc_lci_lev)

Source data for tables and graphs• Hourly labour costs - tables and figures, 2019

Data sourcesLabour cost survey

The labour cost survey (LCS) provides structural information on labour costs. The survey is conducted everyfour years and the most recent LCS refers to the year 2016. The LCS covers observation units with 10 or moreemployees and all economic activities except agriculture, forestry and fishing, public administration, privatehouseholds 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 2016 was:

Labour cost index

Compensation of employees 98.85 %

Vocational training costs 0.69 %

Other expenditure 0.44 %

Taxes 0.70 %

Subsidies 0.68 %

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

The index equals 100 in 2016 and is available 70 days after the reference quarter. The labour cost per hourfrom the LCI is calculated as:

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Compensation of employees + Taxes – Subsidies

From the table above it can be concluded that for the EU-27 the LCI labour cost concept covers approximately98.9 % of the LCS labour concept. This percentage varies from country to country. The lowest percentage isobserved in Hungary and the Netherlands, where the LCI concept represents 97.0 % of the LCS labour costconcept. See (lc_nstruc_r2) .

Estimation method

Estimates for the years after 2016 are obtained by extrapolating the 2016 LCS hourly labour cost data ex-pressed in national currencies using the LCI transmitted by the Member States. Generally, the LCI that is notadjusted for calendar effects is used except in the case of Denmark, France and Sweden where only calendar-adjusted data are available. Some Member States voluntary transmit annual labour costs figures, but thecoverage 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 businessunits 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 under-estimation of the annual labourcost per hour.

Adjustments to the LCI index

The LCI of countries is unaffected by exchange rate movements, which are only taken into account whencalculating 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 an exchange-rate-adjusted LCI index is used in these calculations instead of the official LCI available at Eurostat’s database.

The unadjusted LCI is used, except for those countries for which it is not available, where the calendar-adjustedLCI is used.

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

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

Other articles• Earnings statistics

• Labour cost index - recent trends

Hourly labour costs 6

• Labour cost structural statistics - levels

• Labour markets at regional level - Earnings at a regional level

• Wages and labour costs

PublicationsNews release

• Hourly labour costs news release 31 March 2020

Previous releases:

• Hourly labour costs news release 11 April 2019

• Hourly labour costs news release 9 April 2018

• Hourly labour costs news release 6 April 2017

• Hourly labour costs news release 1 April 2016

• Hourly labour costs news release 30 March 2015

• Hourly labour costs news release 27 March 2014

Database• Labour market (including Labour Force Survey) , see:

Labour costs (lc)

Labour cost index (lci)

Labour costs annual data (lcan)

Labour cost levels (lc_lci_lev)

Dedicated section• Labour market (including Labour Force Survey)

Methodology• Labour cost index (ESMS metadata file — lci_esms)

Legislation• Regulation (EC) No 450/2003 of 27 February 2003 concerning the labour cost index

• Summaries of EU Legislation: Comparable EU-wide labour cost statistics

• Regulation (EC) No 1216/2003 of 7 July 2003 implementing Regulation 450/2003 concerning the labourcost index

• Corrigendum to Regulation (EC) No 1216/2003 of 7 July 2003

• Regulation (EC) No 224/2007 of 1 March 2007 amending Regulation 1216/2003 as regards the economicactivities covered by the labour cost index

External links• Employment Cost Index (U.S. Bureau of Labour) - An alternative measure of changes in labour costs

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