Labour costs across Europe flaunt wide regional disparities. For instance, Northern and Western European countries consistently show the highest figures for hourly compensation. Relatedly, as of 2024 the average hourly EU labor cost is €33.5 (or about $37). This number masks huge disparities in country-level costs. Next round goes to Norway, Iceland and Denmark, which boast jaw-dropping hourly labour rates of more than €50. In sharp contrast, Bulgaria’s hourly rate is the lowest of all at just €10.6.
Labour costs fluctuate considerably between EU Member States. In reality, the maximum-to-minimum ratio is greater than five times when converted into euros. After accounting for purchasing power standards (PPS), the gap more than halves to just over two times. This is an important conclusion, because even as nominal costs vary widely, purchasing power can go a long way toward closing these divides.
High Labour Costs in Northern and Western Europe
Countries in Northern and Western Europe fill out the top of the rankings for highest labour costs. Norway and Iceland are both currently above €50 in the labour cost per hour, making them the true stars of the labour market. Denmark is not far behind, too comfortably clearing this high bar.
In Belgium the hourly labour cost is registered at €48.2, the Netherlands €45.2. These numbers show a worldwide trend of higher living standards leading to higher labour costs. The degree to which high labour costs are concentrated to these areas and what that means for how firms weigh rising costs to economic competition is unclear.
“Several additional factors play a significant role,” – Giulia De Lazzari
Moderate Costs in Southern Europe
The labour costs of Southern European countries look moderate when compared to their Northern counterparts. This area has consistently lower hourly rates but a healthy labor pool just the same. On a slightly different note, countries such as Italy, Spain and Austria, among others, exhibit a significant proportion of non-wage costs within their total labour costs.
In Austria, Italy, and Spain, non-wage costs account for well over a quarter of employer costs. This signals that employers are still probably struggling with financial costs that extend beyond wages alone. This trend weighs on total compensation to workers and can have a serious chilling effect on businesses’ decisions to hire and grow their workforce.
The EU Average and Future Projections
As we estimated for 2024, the EU’s average labour cost will be at 25% of the total economic production. This average factors in the wages that nonprofits can pass through to employees. It includes the embedded costs of benefits and employer contributions.
An important portion of these benefits are directly funded through employer contributions. To that end, enterprises needed to play a sophisticated balancing act to ensure they were most efficiently controlling these costs.
Dr. Sotiria Theodoropoulou provides insight into the cost disparities: “If costs are expressed in Purchasing Power Standards (PPS), the disparities in labour costs are more limited.” This strong statement highlights the need for a wider economic context, prevent misleading comparisons between labour costs across Europe from taking place.
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