Spain is among the EU countries where it is cheaper to hire a worker, even though the hourly labor cost has increased by 1 euro during 2020

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In 2020, despite the impact of the coronavirus on companies, employment, and the economy in general, the cost borne by companies for their workers has increased again, both in the European Union and in most of its member countries, including Spain, while the labor cost has decreased compared to the previous year only in Croatia, Malta, Cyprus, and Ireland, in the absence of updated data from Greece.

This can be seen from the statistics on labor costs per hour in the EU countries just published by Eurostat, which reveal that EU companies have seen an average increase of 2.9% in the wage costs and social security contributions they pay for their employees, to an average of 28.5 euros per hour, which rises to 32.3 euros per hour in the 19 countries of the Eurozone.

How much does a worker cost a company depending on the autonomous community?

Spain, on the other hand, is far behind the EU average and the figures of the main European economies, despite the fact that over the past year the labor cost per hour grew by 4.6% to 22.8 euros, which translates into 1 euro more than in 2019. However, those 22.8 euros are not only behind the figures for Germany, Italy, France, the Nordic countries, or Ireland in 2020 but also do not exceed the average cost they boasted in 2008, as the following table shows.

Thus, Spain ranks 12th out of 27 in terms of the average level of labor cost per hour in the European Union, despite the increases it has experienced in recent years, growing by 17.4% between the 19.4 euros per hour that a worker cost in 2008 and the 22.8 euros per hour it cost last year, according to Eurostat.

However, the growth in labor costs in Spain in the last 12 years pales in comparison with the increases in Eastern EU countries, such as Bulgaria, where labor costs have grown by 150% in Bulgaria, from 2.6 euros per hour in 2008 to 6.5 in 2020, 92.9% in Romania, 91.4% in Slovakia, 78% in Latvia, 72.1% in Estonia or 71.2% in Lithuania, while the EU average showed a rise of 3.1%.

Meanwhile, some of the countries whose average labor cost exceeds that of Spain have also experienced higher growth since 2008, such as Austria, up 39% to 36.7 euros per hour, Denmark up 32.4% to 45.8 euros per hour, the highest in the EU, Germany up 31.2% to 36.6 euros per hour, France up 20.2% to 37.5 euros per hour and Italy up 18.2% to 29.8 euros per hour.

Regarding 2020, Eurostat has clarified that “most Member States introduced a series of support schemes to alleviate the impact of the pandemic on companies and workers”, which consisted of temporary job suspensions, subsidies to affected employees, and tax breaks for companies, which it clarifies were “recorded with a negative sign on the non-wage component of labor costs”, i.e. social contributions.

For this reason, the European statistical office considers that “in general, the number of hours actually worked decreased more than wages while taxes minus subsidies decreased, thus limiting the impact on labor costs per hour”.

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