A breakdown by economic activity shows that in the euro area hourly labour costs rose at an annual rate of 2.2% in industry, 2.6% in construction and 2.5% in services in the fourth quarter of 2006. In the EU25, labour costs grew by 2.5% in industry, and by 2.8% in both construction and services.
Member States
Among the Member States for which data are available for the fourth quarter of 2006 the smallest annual increases in hourly labour costs were observed in Germany (1.2%), Malta (1.7%) and Sweden (2.0%). The highest annual rises were registered in Latvia (26.9%), Lithuania (19.7%), Estonia (17.6%) and Hungary (10.8%).
Annual growth in the wages and salaries component ranged from 1.0% in Germany to 27.2% in Latvia. The range for non-wage costs was from -1.4% in Malta to 26.2% in Latvia.
Labour Cost Index
The Labour Cost Index is a short-term indicator showing the development of hourly labour costs incurred by employers as a result of engaging the labour work force. The quarterly changes in employers’ costs are measured for the total labour costs and its main components wages and salaries, and labour costs other than wages and salaries (non-wage costs).
Total Labour Cost (TOT) covers wage and non-wage costs less subsidies. It does not include vocational training costs or other expenditures such as recruitment costs, spending on working clothes, etc.
Wage and salary costs (WAG) includes direct remunerations, bonuses, and allowances paid by an employer in cash or in kind to an employee in return for work done, payments to employees saving schemes, payments for days not worked and remunerations in kind such as food, drink, fuel, company cars, etc.
Labour costs other than wages and salaries (OTH - non-wage cost)includes the employers’ social contributions plus employment taxes regarded as labour costs less subsidies intended to refund part or all of the employer’s cost of direct remuneration.
The labour cost index covers the following economic activities:
- Industry (NACE sectors C to E); C Mining and quarrying, D Manufacturing, E Electricity, gas, water supply.
- Construction (NACE sector F).
- Services (NACE sectors G to K); G Wholesale and retail trade, repair of motor vehicles, personal and household goods, H Hotels and restaurants, I Transport, storage, communication, J Financial intermediation, K Real estate, renting, business activities.
