Hourly labour costs
Data extracted in March 2021
Planned article update: 31 March 2022
In 2020, average hourly labour costs were estimated at EUR 28.5 in the EU and at EUR 32.3 in the euro area (EA-19). However, this average masks sizeable gaps between EU Member States, with hourly labour costs ranging between EUR 6.5 and EUR 45.8.
When comparing labour cost estimates in euro over time, it should be noted that data for the Member States outside the euro area are influenced by exchange rate movements.
Hourly labour costs ranged between €6.5 and €45.8 in 2020
In 2020, average hourly labour costs in the whole economy (excluding agriculture and public administration) were estimated to be EUR 28.5 in the European Union (EU) and EUR 32.3 in the euro area. However, this average masks sizeable differences between EU Member States, with the lowest hourly labour costs recorded in Bulgaria (EUR 6.5), Romania (EUR 8.1) and Hungary (EUR 9.9), and the highest in Denmark (EUR 45.8), Luxembourg (EUR 42.1), Belgium (EUR 41.1). Figure 1 shows the levels across the Member States.
Non-wage costs highest in France and Sweden
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 24.5 % in the EU and 25.0 % in the euro area (see Table 1 and Figure 2).
Labour costs per hour lowest in the construction sector
In the EU as a whole, labour costs per hour were highest in the mainly non-business economy (EUR 29.7) and lowest in the construction sector (EUR 25.6). Gaps were larger in the euro area, with industry as the highest paying sector (EUR 34.8 per hour) and construction as the lowest (EUR 29.0 per hour) (see Table 3).
Hourly labour costs increased most in Portugal
Between 2019 and 2020, hourly labour costs in the whole economy expressed in euro rose by 3.1 % in the EU and by 2.9 % in the euro area (see Figure 3).
Within the euro area, hourly labour costs increased in all Member States except Malta (-4.7 %), Cyprus and Ireland (-2.7 % each). The largest increases were recorded in Portugal (+8.6 %), Lithuania (+7.5 %) and Slovakia (+7.0 %), the smallest in Luxembourg (+0.5 %), Finland (+0.7 %) and the Netherlands (+0.8 %).
For Member States outside the euro area, the hourly labour costs expressed in national currency increased in 2020 except in Croatia (-1.0 %) with the largest increases recorded in Hungary (+7.9 %), Bulgaria (+7.8 %), Czechia (+7.4 %) and Romania (+7.2 %). They increased least in Sweden (+1.1 %) and Denmark (+2.0 %).
In 2020, most Member States introduced a number of support schemes 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 government. Those schemes were generally recorded as subsidies (or tax allowances) recorded with a negative sign in the non-wage component of labour costs. In general, the number of hours actually worked decreased more than wages while taxes less subsidies fell, thus limiting the impact on the hourly labour costs.
Source data for tables and graphs
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 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 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 %|
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 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).
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, Norway and Sweden where only calendar-adjusted data are available.
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.
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 2020.
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. 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.
- Previous releases:
- Labour costs (lc)
- Labour cost index (lci)
- Labour costs annual data (lcan)
- Labour cost levels (lc_lci_lev)
- Labour cost index (ESMS metadata file — lci_esms)
- 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 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