Hourly labour costs

Data extracted in March 2016. Most recent data: Further Eurostat information, Main tables and Database.

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

In 2015, average hourly labour costs were estimated at EUR 25.0 in the EU-28 and at EUR 29.5 in the euro area (EA-19). However, this average masks significant gaps between EU Member States, with hourly labour costs ranging between EUR 4.1 and EUR 41.3.

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: Hourly labour costs for the whole economy, 2015 (EUR)
Enterprises with ten or more employees
Source: Eurostat (lc_lci_lev)

Main statistical findings

Figure 2: Relative change in hourly labour costs 2014/2015 for the whole economy (%)
Source: Eurostat (lc_lci_lev)
Table 1: Labour costs per hour, 2004-2015, whole economy excluding agriculture and public administration (EUR)
Source: Eurostat (lc_lci_lev)
Table 2: Labour costs per hour in national currency for non-euro area Member States, whole economy excluding agriculture and public administration, 2004-2015
Source: Eurostat (lc_lci_lev)
Table 3: Labour costs per hour, breakdown by economic activity, 2015 (EUR)
Source: Eurostat (lc_lci_lev)
Table 4: Labour costs per hour in national currency for non-euro area Member States, breakdown by economic activity, 2015
Source: Eurostat (lc_lci_lev)

Hourly labour costs ranged between EUR 4.1 and EUR 41.3 in the EU-28 Member States in 2015

In 2015, average hourly labour costs in the whole economy (excluding agriculture and public administration) were estimated to be EUR 25.0 in the EU-28 and EUR 29.5 in the euro area (EA-19). However, this average masks significant differences between EU Member States, with the lowest hourly labour costs recorded in Bulgaria (EUR 4.1), Romania (EUR 5.0), Lithuania (EUR 6.8), Latvia (EUR 7.1) and Hungary (EUR 7.5), and the highest in Denmark (EUR 41.3), Belgium (EUR 39.1), Sweden (EUR 37.4), Luxembourg (EUR 36.2) and France (EUR 35.1) . 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 25.9 in the EU-28 and EUR 32.3 in the euro area), followed by services (EUR 24.9 and EUR 28.6 respectively) and construction (EUR 22.4 and EUR 25.8). In the mainly non-business economy (excluding public administration), labour costs per hour were EUR 25.1 in the EU-28 and EUR 29.4 in the euro area in 2015.

Non-wage costs

Labour costs are made up of wages and salaries plus non-wage costs such as employers' social contributions. The share of non-wage costs in the whole economy was 24.0 % in the EU-28 and 26.0 % in the euro area, with the lowest in Malta (6.6 %) to highest in France (33.2 %).

These estimates for 2015, published by Eurostat, cover enterprises with 10 or more employees and are based on the 2012 Labour cost survey, which are extrapolated through the Labour cost index .

Decreases in hourly labour costs in Cyprus and Italy

Between 2014 and 2015, hourly labour costs in the whole economy expressed in euro have risen by 2.0 % in the EU-28 and by 1.5 % in the euro area. Within the euro area, the largest increases were recorded in Latvia (+7.3 %), Lithuania (+5.6 %) and Estonia (+5.3 %). Decreases were observed in Cyprus (-1.0 %) and Italy (-0.5 %). For Member States outside the euro area in 2015, and expressed in national currency, the largest increases in hourly labour costs in the whole economy between 2014 and 2015 were registered in Romania (+8.30 %), and Bulgaria (+7.0 %), and the smallest in Denmark and Croatia (both +1.7 %). 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 2 analyses the annual growth between 2014 and 2015.


Data sources and availability

Data sources

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%
Taxes 0.58%
Subsidies 0.34%

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.

Estimation method

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).

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 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.

Context

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.

See also

Further Eurostat information

Publications

Previous releases

Database

Labour costs (lc)
Labour cost index (lci)
Labour costs annual data (lcan)
Labour cost levels (lc_lci_lev)

Dedicated section

Methodology / Metadata

Other information

Source data for tables and figures on this page (MS Excel)

External links