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Italy is the only country in the European Union where the cost of hourly wages is low

Italy is the only country in the European Union where the cost of hourly wages is low

During the first two years of the pandemic, hourly labor costs in the European Union increased everywhere, with the exception of Italy and Spain, where the dynamic between 2020 and 2021 was negative. However, unlike Spain, we are the only EU country that has recorded not only a decrease in labor taxes, but also a decrease in average hourly wages. This is what emerges from Latest Estimates Eurostat.

Overall, in 2021 the average hourly labor cost in the entire economy (that is, how much employers pay on average per hour taking into account wages, contributions and other taxes) was estimated at €29.1 in the European Union and €32,8 in the region Euro, an increase compared to 2020, where the averages were 28.6 and 32.4 euros respectively (in terms of percentages +1.7 and +1.2).

Looking at the order of labor costs, they range from 7 euros an hour in Bulgaria to 46.9 euros in Denmark. Italy is in the middle with 29.3 euros in 2020 compared to 29.7 in 2020, which is lower than the eurozone average (and about 8 euros less than the Germans and the Dutch), and a decrease of 1, 6%. This is the largest drop in the European Union, given that the only other EU country with a negative trend, Spain, recorded a decline of 0.3%.

The largest increases were recorded in Lithuania (+12.5%), Estonia (+6.5%), Cyprus and Slovenia (+6.2% each) and Latvia (+6.1%) for the eurozone. , in Bulgaria (+9.1%), Poland (+8.2%) and Hungary (+7.3%) among countries outside the eurozone. Increases were contained in Germany and France (+1.4% and +1.2%).

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As we have said, the two main components of labor cost are wages and salaries and non-wage costs (eg social contributions paid by the employer). The share of non-wage costs in total labor costs for the entire economy in 2021 was 24.6% in the European Union and 25.1% in the Eurozone. The lowest proportion of non-wage costs were recorded in Lithuania (3.7%), Romania (4.9%) and Ireland (8.7%) and the highest in Sweden (32.0%), France (31.9%) and Italy (28.3%).

Just by looking at the dynamics of these two components, another strange fact appears for Italy: our country is, in fact, the only country in the European Union where the cost of hourly wages decreased between 2020 and 2021 (-1, 3%) from 21.3 to 21 euros. Taxes that must be paid by employers also decreased (-2.3%), but Ireland and Hungary did more in this (-2.7%, respectively), while Spain scored -1.5%.

How do we interpret this data? “In 2021, most member states will extend the validity of the support plans introduced in 2020 to mitigate the impact of the Covid-19 pandemic on businesses and employees – explains Eurostat – these schemes mainly consist of short-term work agreements and temporary layoffs wholly or partly compensated by Government. schemes generally recorded as subsidies (or tax breaks) with a negative mark in the non-wage component of labor costs.”

This is for contributions and taxes paid by the employer. What about wages? The decrease in the hourly cost in this case could also be a positive sign, since for example it could depict an increase in employment, perhaps young people, whose wages are generally lower and thus pushed the average to a lower level. Indeed, Italy experienced a strong recovery in employment between 2020 and 2021. But this also applies to Spain, where the cost of hourly wages has increased, unlike Italy.

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Then there is the historical: between 2008 and 2021, the contribution / tax component to be paid by employers in our country grew by 1.3 euros, more or less in line with the eurozone average (+1,8 euros). The cost of hourly wages has risen to just under €3 an hour. In the rest of the eurozone, the increase was nearly €6, about double.