Hourly labour costs
- Data extracted in April 2017. Most recent data: Further Eurostat information, Main tables and Database. Next update of the article: April 2018
In 2016, average hourly labour costs were estimated at EUR 25.4 in the EU-28 and at EUR 29.8 in the euro area (EA-19). However, this average masks significant gaps between EU Member States, with hourly labour costs ranging between EUR 4.4 and EUR 42.0.
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.
- 1 Main statistical findings
- 2 Data sources and availability
- 3 Context
- 4 See also
- 5 Further Eurostat information
- 6 External links
Main statistical findings
Hourly labour costs ranged between EUR 4.4 and EUR 42.0 in the EU-28 Member States in 2016
In 2016, average hourly labour costs in the whole economy (excluding agriculture and public administration) were estimated to be € 25.4 in the European Union (EU) and € 29.8 in the euro area. However, this average masks significant gaps between EU Member States, with the lowest hourly labour costs recorded in Bulgaria (€ 4.4), Romania (€ 5.5), Lithuania (€ 7.3), Latvia (€ 7.5), Hungary (€ 8.3) and Poland (€ 8.6), and the highest in Denmark (€ 42.0), Belgium (€ 39.2), Sweden (€ 38.0), Luxembourg (€ 36.6) and France (€ 35.6). 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 26.6 in the EU-28 and EUR 32.6 in the euro area), followed by services (EUR 25.8 and EUR 28.7 respectively) and construction (EUR 23.3 and EUR 26.1). In the mainly non-business economy (excluding public administration), labour costs per hour were EUR 26.6 in the EU-28 and EUR 29.7 in the euro area in 2016.
Labour costs are made up of wages & salaries and non-wage costs such as employers' social contributions. The share of non-wage costs in the whole economy was 23.9 % in the EU and 26.0 % in the euro area, ranging from 6.6 % in Malta to 33.2 % in France.
Decreases in hourly labour costs in Italy
Between 2015 and 2016, hourly labour costs in the whole economy expressed in € rose by 1.6% in the EU and by 1.4% in the euro area. When comparing labour cost estimates over time, levels expressed in national currency should be used to eliminate the influence of exchange rate movements. Within the euro area, the largest increases were recorded in the Baltic Member States: Lithuania (+7.5%), Latvia (+6.4%) and Estonia (+5.6%). The only decrease was observed in Italy (-0.8%), while hourly labour costs remained nearly stable in Malta (+0.0%), the Netherlands (+0.1%) and Belgium (+0.2%). For Member States outside the euro area in 2016, and expressed in national currency, the largest rises in hourly labour costs in the whole economy were registered in Romania (+12.7%) and Bulgaria (+7.8%), and the smallest increases in the United Kingdom (+1.5%) and Denmark (+1.9%). Figure 2 analyses the annual growth between 2015 and 2016.
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 and the most recent LCS refers to the year 2012. 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-28 the weight of each variable in the labour cost per hour in 2012 was:
|Compensation of employees||97.9 %|
|Vocational training costs||0.98 %|
|Other expenditure||0.4 %|
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 2012 and is available 70 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-28 the LCI labour cost concept covers approximately 98.1 % 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 97.0 % of the LCS labour cost concept.
Estimates for the years after 2012 are obtained by extrapolating the 2012 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 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 under-estimation 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 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-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 on higher labour costs, in particular if not reflected in higher productivity, 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.
- Earnings statistics
- Labour cost index - recent trends
- Labour cost structural statistics - levels
- Labour markets at regional level - Earnings at a regional level
- Wages and labour costs
Further Eurostat information
- Previous releases
- Hourly labour costs news release 1 April 2016
- Hourly labour costs news release 30 March 2015
- Hourly labour costs news release 27 March 2014
- Labour costs (lc)
- Labour cost index (lci)
- Labour costs annual data (lcan)
- Labour cost levels (lc_lci_lev)
Methodology / Metadata
- Labour cost index (ESMS metadata file — lci_esms)
- Regulation (EC) No 450/2003 of 27 February 2003 concerning the labour cost index
- Regulation (EC) No 1216/2003 of 7 July 2003 implementing Regulation 450/2003 concerning the labour cost 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 economic activities covered by the labour cost index
Source data for tables and figures on this page (MS Excel)
- Employment Cost Index (U.S. Bureau of Labour) - An alternative measure of changes in labour costs