Global| Mar 18 2004Euro-Zone Labor Costs Slower than in US
Summary
Eurostat today published hourly labor cost data for the Euro-Zone for Q4 2003. Total labor costs are seen to have moderated last year after a pick-up in 2001 and 2002. This pattern was exhibited in both wage costs and "other" costs, [...]
Eurostat today published hourly labor cost data for the Euro-Zone for Q4 2003. Total labor costs are seen to have moderated last year after a pick-up in 2001 and 2002. This pattern was exhibited in both wage costs and "other" costs, i.e. benefits. All of the major economies in Europe - Germany, France, Italy and Spain - participated in the slowing trend during 2003, although changes for individual quarters do vary.
It is comforting that ongoing labor cost pressures in Europe look so temperate. A particular aspect of this trend seems somewhat unexpected: these labor costs in Europe are running more slowly than those in the US. Eurostat includes a calculation of comparable hourly labor cost and wage data for the US, and as shown in the Table below, they rose considerably more last year, 4%, than the 2.5% in Europe. While the rates of advance were similar in 2002, the US also saw larger increases in the prior two years. This spread is sometimes due to wage cost differentials, but much more consistently, it is benefits where the US outstrips Europe. These data very much resemble the US's ECI information. Over the past four years the ECI benefits measure has far outrun the "other" component in the European data, and unpublished BLS data on health insurance suggest that item may well be the culprit. As that cost has accelerated into a double-digit pace in the last several years, it looks that the US practice of financing health care through employment arrangements is weighing on the competitive structure of private US labor costs.
| % Changes | Seasonally Adjusted||||||
|---|---|---|---|---|---|---|
| Q4-2003 | Q3-2003 | 2003 | 2002 | 2001 | 2000 | |
| Euro-Zone: Total Labor Costs | 2.2 | 2.6 | 2.5 | 3.4 | 3.4 | 2.6 |
| Wages & Salaries | 2.6 | 2.2 | 2.5 | 3.3 | 3.5 | 2.8 |
| Other Labor Costs | 2.6 | 2.6 | 2.8 | 3.8 | 3.2 | 1.6 |
| US: Total Labor Costs | 3.2 | 4.4 | 4.0 | 3.2 | 4.1 | 4.4 |
| Wages & Salaries | 2.6 | 3.2 | 3.1 | 2.8 | 3.8 | 3.9 |
| Memo: ECI Benefits | 4.9 | 5.6 | 6.4 | 4.7 | 5.1 | 5.6 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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