European Union Labour Cost Index

Labour Cost Index y/y reflects changes in the hourly labour costs paid by employers, for the given quarter compared to the same quarter of the previous year. The index is calculated in nominal terms and is not adjusted for inflation. It is calculated as the ratio of a single employee labour cost to labour productivity (defined as GDP per one employed person).

The index calculation includes regular wages and other expenses for employees. Wage expenses include the following: direct wages, bonuses and allowances (both in monetary and physical terms), unused vacation days, costs in kind (meals, tea, fuel, company car). Other expenses include employers' social contributions, employment tax, disability payments, pension payments, etc.

Labour costs do not include vocational training costs, expenditure on work clothes and tools, as well as recruitment costs.

The index calculation is based on aggregate administrative data and information from surveys of employers in the eurozone. Procedures for statistical evaluation are additionally used. The weight of an individual Member State in the index calculation is determined in accordance with its share of labour costs relative to the rest of the eurozone Member States.

The indicator allows evaluating inflation and forecasting the growth in consumer spending. Labour costs are an important potential indicator of inflation. The indicator is closely monitored by economists, since it is used in the preparation of the monetary policy of the eurozone. It is also important in economic analysis. Labour cost growth can be seen as positive for euro quotes.