Wage Growth YoY

Wage Growth YoY is the annual growth rate of Eurostat's Labour Cost Index (LCI) for the European Union. It tracks the calendar-adjusted change in nominal hourly labour costs against the same quarter of the previous year.

The figures are calendar-adjusted for working-day differences and cover enterprises and local units of any size in NACE Rev. 2 sections B to S. Farming, forestry and fishing, households and extraterritorial organisations sit outside the scope. As a publication of Eurostat, the statistical office of the European Union, it is one of the Principal European Economic Indicators (PEEI).

Each quarter covers three calendar months, and national data reach Eurostat 70 days after the quarter ends. Final EU and euro-area figures appear about 75 days after the quarter ends, on a pre-announced date, at 11:00 Central European Time. Flash estimates for the EU and euro-area totals only appear after about 50 days.

Each release adds a news release with EU and euro-area rates, the wages and non-wage split, activity and country detail, and method notes. New quarters carry a provisional flag, older quarters face revision, missing countries may be estimated, and national flashes stay confidential. The European Central Bank receives the data under embargo on the prior evening. The European Central Bank watches the index for price stability, since firms can pass higher costs to shoppers.

Growth reflects wages, non-wage costs and the weight of each sector.

• Wages and salaries: direct pay in cash or in kind, with bonuses, allowances, paid leave and savings plans.
• Non-wage costs: employer social contributions plus employment taxes minus subsidies.
• Industry, with a 23% weight: measures hourly costs in mining, manufacturing, energy and water.
• Construction, with a 5% weight: measures hourly costs in building work.
• Services, with a 47% weight: measures hourly costs in trade, transport, hospitality, communications, finance, property and professional services.
• Mainly non-business economy, with a weight between 25 and 30%: covers public administration, education, health and social work, arts and recreation, and other services.

The December 19, 2022 release for the third quarter of 2022 showed EU costs up 3.4% and euro-area costs up 2.9% on calendar-adjusted data. Wages rose only 2.1% in the euro area and 2.8% in the EU, while the non-wage component jumped 5.3% in both. Non-business costs rose 3.6% in the euro area, against 2.5% for the business economy.

Hungary at 16.6% and Bulgaria at 16.3% posted the largest wage-cost rises in the EU. The release linked the non-wage jump to fading COVID-19 subsidies recorded with a negative sign. It also revised second-quarter growth from 4.0% to 3.8% for the euro area and from 4.4% to 4.2% for the EU.

1. Hourly cost: For each activity section, hourly cost equals labour costs in national currency divided by hours worked. It covers employee compensation plus employment taxes minus subsidies, about 99.0% of the Labour Cost Survey concept.
2. Laspeyres index: Section moves combine under fixed activity shares. Weights stay fixed for one year and renew each year through annual chain-linking.
3. EU aggregation: EU totals are weighted averages of national data in national currency, so exchange rates do not move the index. Country weights use the euro and update each year, usually with the mid-June release.
4. Index and rates: The index equals 100 in 2020. The annual rate compares each quarter with the same quarter of the prior year on calendar-adjusted data. The quarterly change uses seasonally adjusted data.
5. Illustration: An index move from 101.40 to 102.91 gives (102.91 / 101.40 - 1) x 100, or about 1.5%.