Economics

Study Notes

Labour Costs in the European Union

Level:
A Level
Board:
AQA, Edexcel, OCR, IB

The chart below on the left ranks European Union countries according to their average labour costs per hour. In 2014, data shows that labour costs per hour (measured in Euros) were over ten times higher in Denmark than they are in Bulgaria.This illustrates the huge gulf in wage levels between economies of former Eastern Europe and the high-income nations in Scandinavia.

Infographic: Europe's Huge Gulf In Labour Costs | Statista

You will find more statistics at Statista

It is important to put this data in context. The data shows labour costs per hour but does not take into account productivity.

If we include productivity ywe can then calculate labour costs per unit of output.

Output per person employed in Bulgaria and Romania is lower than for the European Union as a whole, but not by a factor of ten. So the gap in unit labour costs is lilely to be significantly smaller.

Relatively low unit labour costs and attractive corporation tax rates and lower land prices have been three factors encouraging an inflow of foreign direct investment into many of the European Union’s newer member states.

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