Statistics Explained

Hourly labour costs


Data extracted in March 2022

Planned article update: March 2023

Highlights

Hourly labour costs ranged from €7.0 in Bulgaria to €46.9 in Denmark in 2021.
Non-wage labour costs highest in Sweden (32.0 % of total labour costs) and France (31.9 %).
Non-wage costs (% of total), 2021
Source: Eurostat (lc_lci_lev)

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

In 2021, average hourly labour costs were estimated at €29.1 in the EU and at €32.8 in the euro area (EA-19). However, this average masks sizeable gaps between EU Member States, with hourly labour costs ranging between €7.0 and €46.9.

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



Full article

Hourly labour costs ranged between €7.0 and €46.9 in 2021

In 2021, average hourly labour costs in the whole economy (see paragraph 'Data sources') were estimated to be €29.1 in the European Union (EU) and €32.8 in the euro area. However, this average masks sizeable differences between EU Member States, with the lowest hourly labour costs recorded in Bulgaria (€7.0) and Romania (€8.5), and the highest in Denmark (€46.9), Luxembourg (€43.0) and Belgium (€41.6). Figure 1 shows the levels across the Member States.

Figure 1: Estimated hourly labour costs, 2021 (EUR)
Source: Eurostat (lc_lci_lev)


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


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

Non-wage costs highest in Sweden and France

The two main components of the labour costs are wages & salaries and non-wage costs such as employers' social contributions. The share of non-wage costs in the whole economy was 24.6 % in the EU and 25.1 % in the euro area (see Table 1 and Figure 2).

Figure 2: Non-wage costs (% of total), 2021.png
Source: Eurostat (lc_lci_lev)

These estimates for 2021, published by Eurostat, cover enterprises with 10 or more employees and are based on the 2016 Labour cost survey, which are extrapolated through the Labour cost index.

Labour costs per hour lowest in the construction sector

In the EU, labour costs per hour were the highest in the mainly non-business economy excluding public administration (€30.3) and the lowest in the construction sector (€26.0). Gaps were larger in the euro area, with industry beeing the highest paying sector (€35.1 per hour) and construction the lowest (€29.3 per hour) (see Table 3).

Table 3: Hourly labour costs in euro, breakdown by economic activity in 2021
Source: Eurostat (lc_lci_lev)


Table 4: Hourly labour costs in national currency for non-euro area countries, breakdown by economic activity in 2021
Source: Eurostat (lc_lci_lev)

Hourly labour costs increased most in Lithuania

Between 2020 and 2021, hourly labour costs in the whole economy (in euro) rose by 1.7 % in the EU and by 1.2 % in the euro area (see Figure 3).

Within the euro area, hourly labour costs increased in all Member States except Italy (-1.6 %) and Spain (-0.3 %). The largest increases were recorded in Lithuania (+12.5 %), Estonia (+6.5 %), Cyprus and Slovenia (+6.2 % each) as well as Latvia (+6.1 %).

For Member States outside the euro area, the hourly labour costs expressed in national currency increased in 2021 in all countries, with the largest increase recorded in Bulgaria (+9.1 %), Poland (+8.2 %) and Hungary (+7.3 %). They increased least in Sweden and Croatia (+3.0 % each).

In 2021, most Member States extended the validity of the support schemes introduced in 2020 to alleviate the impact of the COVID-19 pandemics on enterprises and employees. They mainly consisted of short-term work arrangements and temporary lay-offs, fully or partly compensated by governments. Those schemes were generally recorded as subsidies (or tax allowances) recorded as a negative amount in the non-wage component of labour costs.

Figure 3: Relative change in hourly labour costs 2021/2020 for the whole economy (%)
Source: Eurostat (lc_lci_lev)


Source data for tables and graphs

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 2016. The LCS covers observation units with 10 or more employees and all economic activities except NACE Rev. 2 sections : ‘A - Agriculture, forestry and fishing’, ‘O - Public administration and defence; compulsory social security’, ‘ T - Activities of households as employers; undifferentiated goods - and services - producing activities of households for own use’ and ‘U - Activities of extraterritorial organisations and bodies’.

The labour cost per hour from the LCS is calculated as:

Compensation of employees + Vocational training costs + Other expenditure + Taxes – Subsidies.

For the EU the weight of each variable in the labour cost per hour in 2016 was:

Compensation of employees 98.85 %
Vocational training costs 0.69 %
Other expenditure 0.44 %
Taxes 0.70 %
Subsidies 0.68 %

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 by dividing the labour costs by the number of hours worked. Total labour costs consist 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 expenditure (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 2016 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 the LCI labour cost concept covers approximately 98.9 % of the LCS labour concept. This percentage varies from country to country. The lowest percentage is observed in Hungary and the Netherlands, where the LCI concept represents 97.0 % of the LCS labour cost concept. See (lc_nstruc_r2).

In this publication, the whole economy includes NACE Rev. 2 sections B to N and P to S, and can be subdivided into the following economic activities: The mainly non-business economy (excluding public administration), which includes NACE Rev. 2 sections P to S (Education; Human health & social work activities; Arts, entertainment & recreation and Other service activities); for the EU this accounts for about 25 % of the labour costs of the whole economy.

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). Industry accounts for around 23 % of the whole economy in the EU. Construction; NACE Rev. 2 section F, which accounts for 5% of the whole economy in the EU. 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). They account for around 47 % of the whole economy in the EU.

Excluded are NACE Rev. 2 sections : ‘A - Agriculture, forestry and fishing’, ‘O - Public administration and defence; compulsory social security’, ‘ T - Activities of households as employers; undifferentiated goods - and services - producing activities of households for own use’ and ‘U - Activities of extraterritorial organisations and bodies’.


Estimation method

Estimates for the years after 2016 are obtained by extrapolating the 2016 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, Sweden, Norway and Iceland where only calendar-adjusted data are available.


Caveats

Using the LCI to extrapolate the LCS values means assuming the following hypothesis:

  • the labour cost per hour of all business units behaves in 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.

Conversion to euro

LCI data used to extrapolate labour cost levels are calculated in national currencies. To compile European aggregates, the results for non euro area countries are first converted into euros using the average exchange rates recorded for year 2021.

Context

The collection of labour costs is an essential part of the range of statistics that are relevant for an understanding of the inflationary or deflationary 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. Equally, low or negative growth in hourly labour costs may signal deflation risks. A timely publication of labour cost levels is therefore of the utmost importance for the European Central Bank (ECB) in order for it to be able to monitor inflation in the euro area.

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Labour costs (lc)
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