Romania, Largest Increase in Labour Cost Last Year
In 2024, compared with 2023, hourly labour costs at whole economy level expressed in euro rose by 5.0% in the EU and by 4.5% in the euro area. Within the euro area, hourly labour costs increased in all countries. The largest increases were recorded in Croatia (+14.2%), Latvia (+12.1%) and Lithuania (+10.8%) and the lowest in Czechia (+1.3%), followed by Finland (+1.8%) and Luxembourg (+2.1%).
For EU countries outside the euro area, the hourly labour costs expressed in national currency increased in 2024 in all countries, with the largest increases recorded in Romania (+14.2%), Bulgaria (+13.9%), Hungary (+13.6%) and Poland (+12.8%). They increased the least in Sweden (+3.6%).
As you can see, if the exchange rate effect is taken into consideration, Romania goes into fourth place, after Poland, Croatia and Bulgaria. Contrary to the zloty appreciation relative to euro, Romanian leu, Hungarian forint and Czech koruna recorded lower exchange rates, although the leu was the most stable currency in the region (Croatia is already in the Eurozone and Bulgaria has a fixed rate of exchange).
Regarding the average hourly labour costs we remain with the second lowest level, in a context still showing significant gaps between EU countries. The lowest hourly labour costs were recorded in Bulgaria (€10.6), Romania (€12.5) and Hungary (€14.1), while the highest in Luxembourg (€55.2), Denmark (€50.1) and Belgium (€48.2).
Average hourly labour costs in industry were €33.9 in the EU and €39.8 in the euro area. In the construction sector, they were €30.0 and €33.4, respectively. In services, hourly labour costs varied between €33.3 in the EU and €36.4 in the euro area. In the mainly non-business economy (excluding public administration), they were €34.2 and €37.5, respectively.
The two main components of labour costs are wages and salaries and non-wage costs (e.g. employers’ social contributions). The share of non-wage costs in total labour costs for the whole economy was 24.7% in the EU and 25.5% in the euro area. The lowest shares of non-wage costs in the EU were recorded in Romania (4.8%), Lithuania (5.4%) and Malta (5.8%) and the highest in France (32.2%) and Sweden (31.6%).
Taking into consideration the time series, we can see that labour cost almost tripled in Romania between 2008 and 2024, from 4.2 euro to 12.5 euro. If the first four euros were added till 2020, the last approximately four euros were included in the last four years and the gap relative to central European countries is visibly closing.
The difference of labour cost shrunk in 2024 compared to 2008, from approximately 120% to 45% in regard to Czechia, from 80% to 40% in regard to Poland, and from 85% to only slightly above 10% in regard to Hungary. That means this relative advantage when it comes to foreign investment is diminishing rapidly and we must find other incentives for doing business in Romania.
Photo source: PxHere.com.
