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Labour costs growing rapidly in Central Europe, Hungary excluded

Prague, Czech Republic – According to data recently released by Eurostat, hourly labour costs in Central European countries remain, as of 2018, less than half as much as the average across the EU.

Countries with the highest and lowest labour costs in the EU

On average, hourly labour costs in EU economies are estimated at 27.4 euros in 2018 (30.6 euros in the Eurozone), an increase of 2.7% compared to 2017 and 25% in a decade.

The highest labour costs were mostly reported in Europe’s Northern and Benelux countries: Denmark (43.5 euros) topped the charts, followed by Luxembourg (40.6 euros), Belgium (39.7 euros), Sweden (38.6 euros), the Netherlands (35.9 euros) and France (35.6 euros).

At the opposite end of the scope, the lowest labour costs were found in Central and Eastern Europe, with Bulgaria (5.4 euros / hour), Romania (6.9 euros) and Lithuania (9 euros) closing the ranking.

Eurostat

Hourly labour costs in Central Europe

Visegrad Group countries also ranked among the countries with the lowest hourly labour costs in the EU.

With an hourly labour cost of 12.6 euros, the Czech Republic ranked as the most expensive economy in Central Europe, but still well below EU average and tenth lowest in the bloc as a whole. Year-on-year, the Czech economy experienced the second fastest increase in labour costs (+11.2% compared to 2017), only topped by Latvia (+12.9%). Slovakia closely follows its Czech neighbour, with hourly labour costs of 11.6 euros (+6.9% compared to 2017).

Hungary (9.2 euros / hour, +6.4% in one year) and Poland (10.1 euros / hour, +6.8% year-on-year) respectively rank as the fourth and sixth cheapest countries when it comes to hourly labour costs.

Labour costs evolution since 2008 in the EU

Although Central European countries lag behind their Western European counterparts, fifteen years after their EU accession, labour costs in those countries are among the fastest-growing in the bloc – Hungary excluded, where hourly labour costs grew at a rate of only 18% over the past decade, well below the EU and regional average.

Since 2008, labour costs grew respectively by 33% and 37% in Poland and the Czech Republic, two of the highest rates throughout the bloc. But the most significant hike came from Slovakia, where labour costs grew by 66% between 2008 and 2018, the second highest rate in the EU after Bulgaria (+108% in ten years).

Romania and the three Baltic countries also reported strong hikes (more than 50%) in their labour costs over the past decade.

While only two countries reported a decreased in labour costs over the past decade (Greece and Cyprus), the lowest hikes came from Spain (+10%), Ireland (+11%), Italy (+12%), France (+15%), followed by Sweden, the U.K. and Portugal (+16% each), Croatia and Hungary (+18% each).

Let’s also note that non-wage costs (employers’ social contributions, included within the total labour costs) were significantly higher in the Czech Republic and Slovakia, where they accounted for respectively 26.9% and 26.7% of total labour costs (fifth and seventh highest in the EU). Non-wage costs remained well below average in Hungary (19.8%) and Poland (18.4%).

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