Eurostat, the statistical office of the European Union

F3: Labour market and lifelong learning

BECH 

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Labour cost statistics constitute a hierarchical system of multi-annual, yearly and quarterly statistics, designed to provide a comprehensive and detailed picture of the level, structure and short-term development of labour costs in the different sectors of economic activity in the European Union and certain other countries. All statistics are based on a harmonised definition of labour costs.

The quarterly Labour Cost Index (LCI) is one of the Principal European economic indicators. It 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”.

The data covered by the LCI collection relate to the total average hourly labour costs and its components "wages and salaries" and "employers' social security contributions plus taxes paid minus subsidies received by the employer" (known as the non-wage component of the LCI). The data on vocational training costs and other expenditures such as recruitment costs and working clothes expenditure is not included in the calculation of the labour cost index.

The data is broken down by economic activity (NACE Rev 1.1 Sections C to O (1996Q1-2008Q4) and NACE Rev. 2 Sections B to S (2009Q1 onwards). The data is available for the EU aggregates and EU Member States, EFTA countries (Iceland and Norway) as well as candidate and potential candidate countries (Serbia and Turkey). The data is available as 'unadjusted data (neither seasonally adjusted nor calendar adjusted data)', 'calendar-adjusted data' as well as 'seasonally and calendar adjusted' data.

The data on the Labour Cost Index is given in the form of index numbers (current base year: 2016) and as annual and quarterly growth rates (comparison with the previous quarter, or the same quarter of the previous year).

The National Statistical Institutes compile the indicators based on the available structural and short-term information collected directly from the sampled enterprises or taken from the administrative data sources. All enterprises, irrespective of the size (measured by the number of employees) are covered in the LCI.

In addition, Eurostat estimates of the annual labour cost per hour in euros are provided for the EU Member States as well as the whole EU; they were obtained by combining the four-yearly Labour cost survey (LCS) with the quarterly labour cost index. Methodological information related to the annual estimates of hourly labour costs is available in separate metadata accessible here.

Index levels and growth rates are available for each individual section of the Statistical classification of economic activities in the European Community (NACE), which is in line with the United Nations’ International Standard Industrial Classification of All Economic Activities (ISIC), as follows:

- NACE Rev. 1.1 Sections C to O (until 2008Q4)

- NACE Rev 2. Sections B to S from 2009Q1 onward.

Countries are presented with their standard ISO two-letter codes.

In addition to the individual NACE Rev. 2 Sections B to S, the data is also available for the following NACE aggregates:

• The business economy, which includes NACE Rev. 2 sections B to N; for the EU this accounts for about 75% of the total labour costs of the whole economy. It can be further broken down into:

- Industry, which includes NACE Rev. 2 sections B to E (Mining and quarrying; Manufacturing; Electricity, gas, steam & air conditioning supply; and Water supply, sewerage, waste management & remediation activities).
- Services, which include NACE Rev. 2 sections G to N (Wholesale and retail trade, repair of motor vehicles & motorcycles; Transportation & storage; Accommodation & food service activities; Information & communication; Financial & insurance activities; Real estate activities; Professional, scientific & technical activities; Administrative & support service activities). 

• The mainly non-business economy, which includes NACE Rev. 2 sections O to S (Public administration and defense; compulsory social security; Education; Human health & social work activities; Arts, entertainment & recreation and Other service activities).

In the context of the Labour Cost Index, labour costs are defined as core expenditures borne by employers for the purpose of employing staff. They include employee compensation, with wages and salaries in cash and in kind, employers' social security contributions and employment taxes regarded as labour costs minus any subsidies received. Unlike labour cost survey data, they exclude vocational training costs and other expenditures such as recruitment costs and spending on working clothes. These labour cost components and their elements are defined in Commission Regulation (EC) No 1737/2005 of 21 October 2005 amending Regulation (EC) No 1726/1999 as regards the definition and transmission of information on labour costs.

The quarterly Labour Cost Index measures short-term trends in "average hourly labour costs", defined as (total) labour costs divided by the corresponding number of hours worked in the reference quarter (see Regulation (EC) No 450/2003 of the European Parliament and of the Council of 27 February 2003 concerning the labour cost index). Quarterly changes in hourly labour costs are calculated first for each economic sector (NACE Rev. 2. Sections) and then aggregated to the whole economy keeping a fixed structure (i.e. fixed weights) by industry (Laspeyres index). Therefore, the LCI does not discount the compositional effect derived from a change in the composition of employment within an economic sector. This means that, for instance, the LCI may increase due to the redundancies of low paid workers within one sector. Annual LCI figures are calculated as the arithmetic mean of the quarterly values.

All labour cost indices are annual chain-linked Laspeyres indices. Trends in average hourly labour costs for an individual economic activity/country are weighted by the total labour costs associated with that activity/country, which are fixed for one year in order to obtain national or European aggregates.

LCI data are presented in the form of index numbers (current base year: 2016) and annual and quarterly growth rates (comparison with the previous quarter).

Apart from the overall Labour Cost Index, indices are also available for the labour cost components "wages and salaries" and "employers' social security contributions plus taxes paid minus subsidies received by the employer (labour costs other than wages and salaries; known also as the non-wage component of the LCI)". For some Member States, an index excluding "bonuses" - defined as bonuses and allowances not paid in every remuneration period is also available.

For the NACE aggregates in the LCI, item and country weights are applied. These are available as shares of 1000, i.e. for item weights, every single weight sums up to 1000 for the total labour costs in a given country for the aggregate B to S. For the country weights, they are given in relation to the total labour costs for the country aggregate.

Since 2020, Member States have been invited to fill in a template documenting the procedures and models used for the seasonal adjustment (SA) of their LCI series. Tables in annexe (18.6) give an overview of the kind of adjustment applied, the maximum adjustment in percent, the standard deviation of the irregular component and the autocorrelation of order 1 of the seasonally adjusted series, for each country and each NACE section.

The statistical unit can be the enterprise or the local unit, regardless of size (measured by the number of employees) and operating in the individual NACE sections in the scope of the data collection.

According to the regulation, the LCI covers enterprises with at least 1 employee. This may differ across countries due to different reasons (e.g. unavailability of the data in the administrative data sources used; legal constraints related to collecting statistical data from small enterprises). For country specifics as regards the coverage of the statistical units by size please consult the table below:

The statistical population consists of the enterprises or local units, regardless of size (measured by the number of employees) and operating in the individual NACE sections in the scope of the data collection (C to O of NACE Rev.1.1 - until Q4 2008; B to S of NACE Rev. 2 - from Q1 2009 onwards).

The data is available for the EU and Euro area (EA) aggregates, all EU Member States, EFTA countries (Norway, Iceland) as well as candidate and potential candidate countries (Serbia and Turkey).

Data are available since the 1^st quarter of 1996.

The labour cost indices are chain-linked Laspeyres price indices with currently used 2016 as the reference year.

The historical NACE rev. 1.1 series are published with the year 2000 as the reference year.

Countries have the flexibility in selecting the most appropriate data source for the compilation of the LCI. To ensure the cross-country data comparability it is extremely important to select the data sources that least diverge from the concepts and definitions according to the dedicated EU regulations (Regulation (EC) No 450/2003; Commission Regulation (EC) No 1216/2003 and the Commission Regulation (EC) No 224/2007). In case of methodological or conceptual differences, countries should explain them in their national quality reports.

In general, among participating countries the following 3 types of the data sources have been recognized:

-       dedicated statistical surveys

-       administrative data sources

-       statistical estimation methods based on the information available from other statistical surveys and/ or administrative data collections.

Some of the estimation methods applied, include the application of growth rates of the average hourly labour costs to the results of the latest structural survey, reference to separate growth rates for labour costs and hours worked, or the application of growth rates of some labour cost components to all or other labour cost components.

Indices are collected quarterly and the annual weights at least once a year.

Eurostat collects data from participating countries.

The National Statistical Institutes compile the indicators based on the available structural and short-term information collected directly from the sampled enterprises or taken from the administrative data sources.

Data reported by individual countries is systematically checked for internal consistency.

 The validation process of the LCI data is run by Eurostat upon data reception, as follows:

 A Unix script that compares the current data delivery to the previous one is used. It focuses on the revisions for every quarter (full-time series are always delivered) and any differences in the aggregate indices for B-N (business economy) and B-S for NSA, WDA (working-day adjusted), and SA (seasonally adjusted) data are shown.

 The script checks the following areas:

 1. Revisions (NSA, WDA, SA)

2. WDA coefficients are checked, also the consistency between the components and the total

3. B-N and B-S aggregates are compared, both value and annual rate for NSA, WDA, SA

4. The annual rates for figures used for the news release are checked for consistency, i.e. rate of total index should be in-between the rates of the components.

The validation fits with levels 2 (consistency with other data sets within the same domain and within the same data source) and 3 (consistency within the same domain between different data sources) of the validation process (according to the ESS VIP on validation).

Labour costs are measured in current prices in national currencies.

EU aggregates are obtained as weighted averages of the national data. To create comparable weights, data from non-Euro countries are converted into euros.

Since 2020, Member States have been invited to fill in an excel template aimed at documenting the procedures and models used for the seasonal adjustment (SA) of their LCI series. The tables in the annex give an overview of the kind of adjustment, a maximum adjustment in percent, the standard deviation of the irregular components, and autocorrelation of order 1 of the seasonally adjusted series performed by each country for each NACE section.

Eurostat normalizes the weight information before publication. In practice, this is done in a three-step process: First, the weights transmitted by each Member State are converted into euro (using the same sources as for the country weights), then weights for years with missing data are imputed from the latest available year and finally, the share of a sub-index relative to the total B-S is estimated.

Upon arrival, Eurostat checks the LCI data for completeness and consistency. The data is after this initial check validated and in case of spotted inconsistencies affected countries are contacted bilaterally with a view to correct the spotted issue before publishing the data.

With each data transmission countries also transmit mandatory Metadata in which they explain the changes in the labour market that may be reflected in the LCI data for the latest quarter; indicate the changes in the LCI methodology applied (in particular, in data sources, in estimation methods as well as other relevant methodological changes) and explain the cause of significant revisions to past data.

The quality management procedures implemented in Eurostat are applied between the date of the receipt of the data and the dissemination date. They include three main validations steps:

1. Checking the delivered metadata

Eurostat analyses the developments observed in the transmitted LCI data against the changes in the total labour cost and the number of hours worked reported by countries in the quarterly metadata.

2. Validation of annual weights

Eurostat checks the transmitted annual weights, in particular:

• the consistency between the total and components

• the revisions of the weights transmitted for previous years

• the consistency of the weights over consecutive years

Quality issues spotted during the validation step are reported to the concerned country for feedback and correction. This may include:

• breaks, level shifts, outliers, etc.

• large revisions (above 10%) between the two successive transmissions

• identical weights for several years in a row

• the differences between the weights for total (B-S) and the sum of the individual NACE sections

3. Validation of the LCI data (indices)

The quality of LCI data is analyzed through six main steps:

• the completeness of the data
• detection of breaks, level shifts, outliers
• size of revisions,
• the coherence between the total LCI and the components (wage and non-wage) for each individual NACE section
• plausibility of the calendar adjustment coefficients

the volatility checks

LCI responds to the needs of the European Central Bank and Commission services for monitoring price stability. However, it should be noted that the LCI is not a genuine 'labour price index' as it does not discount the "compositional effect" within an economic sector (i.e. changes in the hourly labour costs due to a change in the employment composition such as the share of low paid/high paid jobs). Indeed, it is based on average hourly labour costs by NACE section and not on a fixed basket of job profiles. This means that, for instance, the LCI may increase due to the redundancy of low paid workers within one sector as the average of the remaining workers are higher paid than the ones made redundant.

In addition, private companies may use the LCI for indexing wage agreements and for competitiveness analysis.

Moreover, Eurostat uses the LCI to extrapolate annual labour cost levels from the benchmark data collected every 4 years through the Labour Cost Survey.

Finally, LCI provide information on the evolution of the hourly labour costs in the context of the COVID-19 pandemic. More detailed information can be found in item 15.2.

Eurostat is regularly in contact with the main users (ECB and Commission services). Generally, user satisfaction is high, but for some MS, users would appreciate lower revisions and/or better timeliness.

In cooperation with the National Statistical Institutes, Eurostat is currently testing, a flash estimate to be available at t+50 days for the euro area, the EU, and their largest Member States (Belgium, Germany, Spain, France, Italy, the Netherlands, Poland, Portugal and Romania).

With minor exceptions, countries respect their reporting obligations in terms of the coverage and the breakdowns required.

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The LCI is subject to frequent revisions, in particular for the latest quarters, when new data become available The European aggregates are rarely revised by more than 0.2 percentage points in either direction. The revisions in the EU and EA aggregates are regularly updated in the excel file available in the labour costs dedicated section of the ESTAT website (a revision file available showing the frozen series).

Information on the main revisions recorded in the last years is provided below.

2020Q4:

Romania: The social security contribution and the social health insurance contribution paid by the employer until 2017 and which was transferred on the employee side starting with the 1st quarter 2018 are now included in the direct costs (wages and salaries) – LCI_WAG component.

Lithuania: In 4Q 2020 seasonal adjustment model and parameters were revised and fixed for 1–3Q of 2021. The SA and WDA data for 2017–2020 were revised.

2021Q1:

France: Due to the revision in data source used for compilation of LCI and the use of the new data source for hours worked the whole series starting from Q1 2020 onwards have been revised.

2021Q2: No update on revisions.

2021Q3:

France: Revisions on 2021Q1 data for both LCI–wage and salaries and LCI –Total labour costs are mainly due to revisions in input data and seasonal adjustment.

Germany: In the unadjusted time series revisions are starting with the 1st quarter of 2016. These revisions can also be found in the adjusted time series. The time series have been revised due to benchmarking of the LCI according to the results of the Labour Cost Survey 2016.

Netherlands: Revisions of 2020Q1-Q4 data due to updated quarters and an improved estimation of the COVID-19 wage compensation scheme.

Not applicable

Not applicable

not applicable

Some MS estimate results for the parts of the economy, e.g. business with less than 3 or 5 employees. Precise details for each country can be found in the national quality reports.

The LCI being an index and not an absolute number, the under coverage of micro firms has a minor impact on the results for the total economy.

None

Not available

Not available

Not available

Not available

Not available

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Not available

Collected data is available in unadjusted (NSA), calendar adjusted (WDA) and seasonally adjusted (SA) form. Three countries (Malta, Poland and Slovakia) have derogations from delivering NSA data for some NACE sections.

Countries are free to adjust directly or indirectly according to what gives the best results in their case. However, to reduce the inconsistencies Eurostat recommends countries to apply indirect method of seasonal adjustment.

As the data may be based to some extent on estimates, or incomplete data, the most recently available data are particularly subject to revision.

For this reason, LCI data for the latest quarters are generally flagged ‘p’ (‘provisional’).

The general public is informed about possible revisions in the news releases. Revisions occur each quarter, due to corrected or updated the underlying raw data used for the compilation of the LCI.

The revisions in the EU and EA aggregates are regularly updated in the excel file available in the labour costs dedicated section of the ESTAT website (a revision file available showing the frozen series).

In the last six quarters, the revisions for EU aggregates have never exceeded 0.2 percentage points for the headline rate.

Normally not more than 0.2 points on the aggregate rate.

According to the legal obligation, data are sent to Eurostat 70 days after the end of the reference period.

The data is published approximately 5 working days afterwards – the precise publication dates for each quarterly release is predefined and available in Release calendar, available on Eurostat's website.

see 7.1

no applicable

With very few exceptions punctuality is respected (70 days after the end of the reference period).

With very few exceptions countries respect the punctuality of the data transmissions. (70 days after the end of the reference period).

The publication of the data is done with the respect to the predefined Release calendar, available on Eurostat's website.

Data are comparable between countries. Note that the LCI does not give information on the level of labour cost in a specific Member State, but only about its developments.

Not applicable.

The data is generally comparable over time. When this is not the case, this is indicated by a flag ‘b’ (‘break’). For the last four quarters (2020Q4 – 2021Q4) no brakes in series were indicated.

Note on the impact of COVID-19 to the LCI data:

With the outbreak of the COVID-19 pandemic, by the beginning of 2020, EU governments introduced various schemes/measures to support the most affected branches of the economy and to protect employees from losing their jobs. To ensure a harmonized recording of those measures in labour cost statistics, in particular the quarterly Labour Cost Index (LCI), Eurostat posted a ‘Guidance Note on the recording of government schemes related to the COVID-19 crisis in Labour Cost Statistics’.

It is important to note that labour cost statistics only record the governmental support schemes that are channeled through employers and transit through the accounts of the enterprise. Direct compensations from the government to the employees are outside the scope of labour cost statistics.

The support measures introduced by EU governments varied in scope, intensity and time span, depending on how the COVID-19 pandemic affected each national economy. To help users analyse developments in the labour cost index during the pandemics, Eurostat collected information on the main schemes with an impact on labour cost statistics. This was done in full cooperation with the National Statistical Institutes.

In the annex, we provide an overview of the main support schemes/measures introduced by EU member states (except Czechia), EFTA countries (Iceland and Norway) as well as the candidate and potential candidate countries that transmit LCI data to Eurostat (Serbia and Turkey).

For the B to N sections, data are currently comparable back to 2000.

Structural Business Statistics (SBS, annual data) and the Labour Force Survey (quarterly data) are surveys that partly measure similar or identical variables, such as "number of employees" or "wages and salaries". Whilst the National Accounts (NA) and the Labour Cost Survey (LCS) are closely related, certain coherence problems should be taken into account when comparing data relating to the same variables from the four different sources (LCS, SBS, Structure of Earnings Survey (SES), NA). Some of these problems are described in paragraph 19 of the ESMS file on Labour Cost Surveys "lcs_r2_esms".

Fully coherent (NSA) - annual data are averages of the four quarters.

Depends on the country. NA coherence checks are one of the validation methods used by Eurostat.

All the figures are checked for internal consistency.

In case of inconsistencies between the LCI totals and the wage / non-wage components, Eurostat informs the country concerned and recalculates the totals from the components.

News releases are accessible online

Statistics Explained

The LCI data published in Eurostat’s on-line database is available on the following links:

Labour cost index by NACE Rev.2 activity, quarterly data [lc_lci_r2_q]

Labour cost index by NACE Rev. 2 activity - nominal value, annual data [lc_lci_r2_a]

Labour cost index by NACE Rev.2 activity, country weights [lc_lci_r2_cow]

Labour cost index by NACE Rev.2 activity, item weights [lc_lci_r2_itw]

Historical LCI data [with the 2000 as a base year are also available in Eurostat’s on-line database:

Labour cost index by NACE Rev. 1.1 activity - nominal value, quarterly data [lc_lci_r1_q]

Labour cost index by NACE Rev. 1.1 activity - nominal value, annual data [lc_lci_r1_a]

Labour cost index by NACE Rev. 1.1 activity - country weights [lc_lci_r1_cow]

Labour cost index by NACE Rev. 1.1 activity - item weights [lc_lci_r1_itw]

not applicable

Not applicable

none

Every 2 years ESTAT prepares the Report to the European Parliament and the Council on the implementation of Regulation (EC) No 450/2003 concerning the labour cost index (LCI).

The latest report (for the period from the second quarter of 2018 (2018Q2) to the first quarter of 2020 (2020Q1) can be accessed here

For country specifics please consult national quality reports linked to this metadata.

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There are several metadata files available, users may consult them at will.

The response burden is highly heterogeneous as the amount of information gathered from respondents respectively the data based on administrative sources differs a lot between MS.

Regulation (EC) No 223/2009 on European statistics (recital 24 and Article 20(4)) of 11 March 2009 (OJ L 87, p. 164), stipulates the need to establish common principles and guidelines ensuring the confidentiality of data used for the production of European statistics and the access to those confidential data with due account for technical developments and the requirements of users in a democratic society.

When transmitting the data to Eurostat countries can flag the data considered as confidential. Eurostat takes those flags into account when publishing the data - confidential data is not disclosed in any of the publication channels.

When transmitting the data to Eurostat countries can flag the data considered as confidential. Eurostat takes those flags into account when publishing the data - confidential data is not disclosed in any of the publication channels.

Labour costs survey 2008, 2012 and 2016 - NACE Rev. 2 activity https://ec.europa.eu/eurostat/cache/metadata/EN/lcs_r2_esms.htm

Labour cost levels by NACE Rev. 2 activity   https://ec.europa.eu/eurostat/cache/metadata/EN/lc_lci_lev_esms.htm