Eurostat: Labour Costs

Eurostat have published their first estimates of hourly labour costs in 2012.  Ireland had the tenth highest hourly labour costs in the EU27 (eighth in the EA17), though is fifth highest for ‘wage and salaries’ (third in the EA17) due to lower than average ‘other costs’, which is primarily employers’ social contributions.

In 2008, Irish labour costs were 112.5% of the EA17 average and in 2012 this had fallen to 104.0%.  Over the same five years, hourly labour costs in Ireland are estimated to have been largely unchanged (+0.8%) compared to rise of nearly 9% in the EA17.  Only Greece in the EA17 recorded a decline (-11%) over the five years and all of that occurred in the last two years.

For Ireland, non-wage costs are estimated to be 14% of hourly labour costs, compared to an EA17 average of 26%.  Only Luxembourg (13%) and Malta (8%) are lower.

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11 thoughts on “Eurostat: Labour Costs”

  1. It might also be worth pointing out that inflation in Ireland has been below that of the euro area, and indeed the EU, for virtually the entirety of this period, so I believe I’m right in saying that while the difference in nominal labour costs looks substantial (0.8% vs 8.6/8.7%) the divergence in real wage growth is likely to be less pronounced.

  2. @ Greg,

    Indeed. And some calculations of real unit labour costs will include exchange rate movements. Ireland has significant amounts of non-eurzone trade (US, UK) and the reliability of some of the trade figures is questionable. This can cloud the calculation of real unit labour costs and lead to the creation of graphs such as this:

    Irish real unit labour costs 2008-2011

    Another factor is the changing in the structure of economy. The loss of 300,000 construction jobs would, on its own, lead to a rise in productivity/fall in unit labour costs.

  3. In relation to construction it is notable that in Ireland construction has an hourly rate higher than Business, whereas is Germany it is much less. Does this reflect the higher value of remaining construction or overpayment in the sector?

  4. The contrast between Irish total costs and those of the other PIIGS is stark, as is the contrast to the UK. Its a great little country! We pay ourselves one of the highest salaries in the world and we still can afford that mortgage.

    Perhaps I am mistaken but any growth solution to our nightmare would need to translate into increased consumption which means higher wages,in a word, unlikely, Bailout 2 here we come!

  5. Mickey!

    I will let MH take the issue of GDP v GNP. It is worth looking at who does not pay as much tax in Ireland as elsewhere. We have no property tax to speak off. Workers below the 8 the decile pay lower taxes than elsewhere. The Troika has spotted this. Then there is the issue of the contribution from thee corporate sector which may or may not be paying as much as any other corporate sector in any other country.

    If there was another bail out, I would expect more on property, a reduction in tax credits and an increase in the standard rate and a 15%”CT rate. Oh and there would be further welfare cuts and public sector pay cuts.

  6. @tull
    No point in taking on the illiterate and the innumerate because they can neither read nor add up. But if the principle is we should tax those who currently pay no or low taxes then logic leads us immediately to those who earn 40,000 or less. These people currently contribute less than 10pct of the total tax take yet comprise 36Pct of taxpayers. But the 9 pct of workers who earn 75k or above, contribute 60 pct of the tax take. There is a lot of untaxed income in the lower half of the distribution. Let’s go for it!

  7. Simpleton ,
    With sentiments like that you may wake up to find a placard waving, megaphone toting delegation from the ULA on your doorstep.

    ULA in the best traditions of Monty Python is neither united, left or allied.

  8. “The mainly non-business economy (except public administration) [..] includes Education; Human health & social work activities; Arts, entertainment & recreation; and Other service activities”

    In EU27 and EA17, the hourly rate for the above non-business economy sector is 99% of the simple average of the business/industry/contruction and service sectors. In Ireland? It is 127%

    Anyone know why this is?

  9. @ Pavement Trauma

    Possibly medics and lawyers.

    @ All

    The Irish tax and social security revenues (PRSI) total as a percentage of GNP in 2011 was at 35%, similar to the average of 29 member countries of the OECD; similar to the UK’s GDP ratio and lower than well-run comparable countries such as Austria, Sweden, Finland and Denmark, which are all in the 40s.

    Davy Stockbrokers said in a report published last year that in 2011 the gap between Irish GDP and GNP expanded enormously. Nominal GDP was 20% higher than GNP in 2011, up sharply from just 14% in 2009.

    In Ireland, the dual health system imposes additional costs on some citizens while in the high tax countries, people can retire on much higher pensions than in Ireland, for the majority of the population.

    Corporate taxes are low and if personal taxes were to rise further, there would be more exceptions made for some workers in foreign-owned enterprises.

    The 25% R&D tax credit which at best has a marginal impact on innovation (nobody who should know knows if over a decade any self-assessed claim was rejected! It is claimed by inserting the value of R&D spend in the annual corp. tax return and is a fertile area for padding) can be used to reduce individuals’ taxes, was adjusted in last December’s Budget at a cost of at least €45m against DoF officials’ advice, had powerful lobbyists pleading for it.

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