Hourly labour costs


Data extracted in April 2019.

Planned article update: April 2020.

Highlights
Hourly labour costs ranged from EUR 5.4 in Bulgaria to 43.5 in Denmark in 2018.
Non-wage labour costs highest in France (32.6 % of total labour costs) and Sweden (32.3 %).

Estimated hourly labour costs, 2018


Watch the video on labour cost data

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

In 2018, average hourly labour costs were estimated at EUR 27.4 in the EU-28 and at EUR 30.6 in the euro area (EA-19). However, this average masks sizeable gaps between EU Member States, with hourly labour costs ranging between EUR 5.4 and EUR 43.5.

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.



Full article

Hourly labour costs ranged between EUR 5.4 and 43.5 in 2018

In 2018, average hourly labour costs in the whole economy (excluding agriculture and public administration) were estimated to be EUR 27.4 in the European Union (EU) and EUR 30.6 in the euro area. However, this average masks sizeable differences between EU Member States, with the lowest hourly labour costs recorded in Bulgaria (EUR 5.4), Romania (EUR 6.9), Lithuania (EUR 9.0), Hungary (EUR 9.2) and Latvia (EUR 9.3), and the highest in Denmark (EUR 43.5), Luxembourg (EUR 40.6), Belgium (EUR 39.7), Sweden (EUR 36.6), the Netherlands (EUR 35.9) and France (EUR 35.8). Figure 1 shows the levels across the Member States.

Figure 1: Estimated hourly labour costs, 2018 (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 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 23.7 % in the EU and 25.6 % in the euro area, ranging from 6.1 % in Malta to 32.6 % in France and 32.3 % in Sweden (see Table 1 and Figure 2).

Figure 2: Non-wage costs (% of total), 2018.png
Source: Eurostat (lc_lci_lev)

These estimates for 2018, 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 as a whole, labour costs per hour were highest in the mainly non-business economy (EUR 28.5) and lowest in the construction sector (EUR 25.0). Gaps were larger in the euro area with industry as the best paying sector (EUR 33.2 per hour) and construction as the lowest (EUR 27.6 per hour) (see Table 3).

Table 3: Hourly labour costs in euro, breakdown by economic activity in 2018
Source: Eurostat (lc_lci_lev)


Table 4: Hourly labour costs in national currency for non-euro area countries, breakdown by economic activity in 2018
Source: Eurostat (lc_lci_lev)

Hourly labour costs increased most in Romania, least in Malta

Between 2017 and 2018, hourly labour costs in the whole economy expressed in euro rose by 2.7 % in the EU and by 2.2 % in the euro area (see Figure 3).

Within the euro area, the largest increases were recorded in Latvia (+12.9 %), Lithuania (+10.4 %), Estonia and Slovakia (both +6.8 %) . Hourly labour costs increased least in Malta (+0.4 %), Finland (+1.2 %), Spain (+1.3 %) and Portugal (+1.4 %).

When comparing labour cost estimates over time, levels expressed in national currency should be used to eliminate the influence of exchange rate movements. For Member States outside the euro area in 2018, and expressed in national currency, the largest rises in hourly labour costs in the whole economy were registered in Romania (+13.3 %) and Hungary (+9.8 %). The smallest increases were observed in Denmark (+1.9 %), Sweden (+2.3 %) and the United Kingdom (+3.3 %).

Figure 3: Relative change in hourly labour costs 2018/2017 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 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 2016 was:

Compensation of employees 98.63 %
Vocational training costs 1.02 %
Other expenditure 0.35 %
Taxes 0.54 %
Subsidies 0.55 %

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 98.6 % 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).

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, 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.

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