The first results of the Labour Costs Statistics 1996 show average hourly labour costs in industry in 1996 ranging from 6.1 ECU in Portugal to 26.5 ECU in Germany. Both the USA (17.4) and Japan (19.7) fell below the EU15 average of 20.2 ECU. Euro-zone costs are even higher at 21.6.

The data are in a report¹ from Eurostat, Statistical Office of the European Communities in Luxembourg.

These averages, expressed in current exchange rates, indicate the costs an employer has to pay to employ people in Member States. They reflect the industrial structure of each country, with southern countries more specialised in labour-intensive low-paying industries.

Labour costs account on average for some two-thirds of production costs of goods and services.

Today’s report says labour costs in Belgium, Austria and Sweden are close to Germany’s at the top end of the range, with Luxembourg and Finland closest to the EU average. Costs in Ireland are more in line with southern countries – above Portugal and Greece but below Italy and Spain.

Highest in finance and energy

The data show that, EU-wide, labour costs in energy activities (28.7 ECU an hour) and financial institutions (27.6) are the highest in all Member States except the Netherlands. Costs are generally lowest in hotels and restaurants (13.3 EU-wide). Denmark, Sweden and Finland have the most even distribution among the various industrial sectors.

In Portugal, costs for all activities are very low – and from 1992-1996 the spread between Portugal and the most expensive Member States even increased.

Direct costs amount to three-quarters of total

Direct costs in industry amount to 73.7% in EU15 and 71.2% in the euro-zone. These are mainly pay, before adding employers’ social security contributions and other marginal costs to form the total costs.

The structure of labour costs varies considerably from country to country, mainly reflecting different tax, pension and social security systems. At one end of the scale are Italy and France, where employers pay between 28% and 36% of total labour costs (depending on the activities) in social security contributions and other indirect costs. At the other extreme is Denmark, where individuals’ social protection is mainly financed through income tax; this leads to indirect labour costs of only 5% to 9%.

As well as Denmark, two other Member States have direct labour costs amount to more than 80% of total costs: Luxembourg and Ireland.

Hourly labour costs in industry (current exchange rates) – 1996

	Hourly labour costs in ECU	…of which direct costs (%)	…of which direct remuneration (%)	…of which indirect costs (%)	…of which social security (%)
EU15	20.2	73.7	n/a	26.3	23.6
Euro-zone	21.6	71.2	63.4	28.8	26.1
Belgium	25.8	67.4	55.5	32.6	30.8
Denmark	23.0	92.0	n/a	8.1	6.1
Germany	26.5	74.4	62.7	25.6	23.6
Greece	9.6	76.0	69.9	24.0	22.9
Spain	14.9	73.6	73.5	26.4	25.0
France	22.5	66.9	57.2	33.1	29.2
Ireland	13.8	83.5	73.2	16.5	13.6
Italy*	17.2	66.0	65.5	34.0	31.0
Luxembourg	19.3	84.0	71.8	16.0	14.8
Netherlands	22.6	74.9	64.7	25.1	22.8
Austria	24.6	70.4	61.3	29.6	25.3
Portugal	6.1	75.3	69.1	24.8	20.8
Finland	19.7	75.1	63.8	24.9	22.7
Sweden*	23.9	67.7	60.7	32.3	29.7
UK	n/a	n/a	n/a	n/a	n/a

* 1997, n/a = not available

METHODOLOGICAL NOTES

The Community statistics on labour costs are the only statistical instruments providing detailed harmonized data on wages and other employer costs related to employment in relation to hours worked. The surveys on labour costs are at present carried out every four years; the latest under Council Regulation (EC) N° 23/97 refers to 1996 and covered the fifteen Member States of the European Union plus Norway. The survey covered local units with ten or more employees in industrial and service activities.

The term "labour costs" means the expenditure borne by employers in order to employ workers. These costs can be subdivided into two main categories: direct costs and indirect costs.

Direct costs are mainly direct remuneration (i.e. gross amounts, before deduction of taxes and social security contributions payable by employees) irregular bonuses and gratuities, payments to employees saving schemes, payments for days not worked and benefits in kind.

Indirect costs include the social security expenses the employer must pay, vocational training expenditure, taxes, etc. If the employer receives any subsidies, these may be deducted from the costs.

Labour costs statistics are available by economic activity (NACE Rev 1, 3 digits), by region (NUTS 1) and by size classe of enterprise. The total cost is broken down into 44 positions (some of which are not available for all countries). These statistics (with explanatory notes) can be consulted in the LACOST domain of the Eurostat Database NewCronos or requested from the Data Shops.

Quarterly indices of labour costs which shows the main trends until Q1/1999 are available and can be consulted on-line on the Eurostat Internet server, under “Euro-indicators” and “News releases”.

¹ Eurostat Statistics in Focus, Population and social conditions, no 10/99 : “Labour Costs 1996: Major disparities between the European Union countries”