Brussels, 27/04/2012 (Agence Europe) - There are huge differences in labour costs among the EU member states. According to the latest figures from the EU's statistical office, Eurostat, they range from between €3.50 an hour to €39.30 an hour (ICM index), but do they reflect differences in worker competitiveness and differences in the competitiveness of industry in Europe?
In 2011, hourly labour costs (including employer social security contributions) were highest in Belgium at €39.30, Sweden at €39.10 and Denmark at €38.20. At the other end of the scale are Lithuania at €5.50, Romania at €4.20 and Bulgaria at €3.50. The EU can roughly be divided into two sections, east and west, in terms of labour costs. The average for the EU as a whole is €23.10, slightly less than for the eurozone (€27.60).
These figures do not reflect productivity, a key aspect in worker competitiveness, and competitiveness is one of the key aims of reforms to improve economic governance in Europe and growth stimulus in the member states. Speaking at Copenhagen University on Monday 23 April 2012, the president of the European Commission, José Manuel Barroso, said the immediate challenges facing Europe are due to problems with the health of public finance, financial instability and lack of global competitiveness.
Productivity tables directly reflect labour costs. Belgium is the most expensive country to employ workers in, and Belgian workers are still the most productive in Europe, according to a league table drawn up by PricewaterhouseCoopers (PwC) and published last month. PwC compared full-time equivalent (FTE) labour costs and found that, with a median of €239,000 of turnover per FTE, Belgium is top of the table of the most productive workers, followed by Switzerland (€230,000) and Ireland (€224,000), explained Peter De Bley of HR Consulting in Belgium. The lowest productivity is found in the countries with the cheapest labour, with a median of €133,000 per FTE in central and eastern European countries.
In order to measure the competitiveness of workers, costs like infrastructure and fuel need to be factored in, which shows that the high productivity of west European workers covers some of the extra labour costs. In Belgium, for example, profit per FTE puts the country eighth in the league table, with Bulgaria at the top.
Is the competitiveness of an industry related solely to the return on investment for a worker? Michel Leis, author of “Crises Economiques et Régulations Collectives” (published by Cygne), says that a company's competitivenss cannot be reduced to the cost of productiion and productivity alone, but also depends on the characteristics of the market, a product's positioning and profit expectations, as he explained in an article in “La Libre Belgique” on Sunday 15 April 2012. He argues that tax harmonisation and upwards alignment of East European countries is the only way to ensure European industry can survive. He says that austerity and cuts in worker pay packages will not be effective, particularly because pay cuts feed through to lower demand, as the recent employment package unveiled by the European Commission demonstates (see EUROPE10597).
The comparisons are upset by the emergence of the service sector, where there is lower initial investment and lower labour costs. Labour costs in Europe only account for between 10% and 25% of total production costs, with technological value-added being increasingly crucial for keeping up with global competition. This is the challenge for the European Union today, which aims in the EUROPE 2020 Strategy to build on innovation, highlighting one of the key ingredients for member state competitiveness, namely increased investment in R&D, rather than cutting wages. (JK/transl.fl)