The labour cost index measures, on a quarterly basis, the development of labour costs per hour worked. Labour costs are subdivided into their main components which are the costs of gross wages and salaries and non-wage labour costs. The term “hours worked“ covers only hours actually worked, which means that, for instance, days of sick leave, holidays and vacation days are not included, whereas overtime is included. Comparable results for all the economic sections of industry and the service sector are available back to the 1st quarter of 1996 in accordance with the Nomenclature des Activités économiques dans les Communautés Européennes (NACE) Rev. 2. All the time series are available in a non-adjusted version, a calendar adjusted version and in a calendar and seasonally adjusted version according to the Berlin Procedure BV4.1 and Census X12-Arima. The main purpose of the labour cost index is to identify inflation risks and to contribute to location and competition analyses in a European comparison. The main user is the European Central Bank.
How is the labour cost index calculated?
For the labour cost index, existing data sources are combined in a complex calculation system, without new surveys being conducted. Basic data on labour costs and hours worked are taken from the four-yearly labour cost survey. That Europe-wide survey was conducted for the year 2000 among enterprises with at least ten employees in the entire industry and in selected service branches. What was covered in the service sector in Germany is enterprises in the branches of trade, hotel and restaurant industry, and financial intermediation. For reference year 2004, the survey was extended to cover the entire service sector. The special importance the labour cost survey has for the labour cost index is due to the fact that it shows labour costs in a detailed breakdown by types of expenditure. That subdivision of labour costs into more than 20 sub-items enables a separate weighting of the individual cost components for every branch of economic activity. By means of infra-annual updating indicators, the cost components are updated quarterly until the results of the next labour cost survey are available. The most important cost component is gross wages and salaries. The main data sources used to update that aggregate are the gross wages and salaries recorded by the quarterly survey of earnings. Also, the statutory and voluntary social contributions of employers are highly important. When it comes to updating social contributions, the gross wages and salaries recorded by the quarterly survey of earnings also are a central data source. In addition, the various rates of contribution to social insurance are used. National accounts figures are drawn upon to update data of employee pension schemes. As a third component, data on hours worked are required to update the primary data from the labour cost survey. The quarterly earnings survey collects information on hours paid at quarterly intervals. On the basis of hours paid, hours worked are computed with the help of the results from the calculation of hours worked and labour volume by the Institute for Employment Research (IAB) of the Federal Employment Agency (www.iab.de/en/iab-aktuell.aspx), from which various working time components are available by quarter (for instance development of working time accounts). The time series of the individual economic sectors are combined to form an index for the overall economy. For that purpose, weights are used that are derived from the preceding year’s data on the labour cost share of any individual economic sector in the labour costs of the aggregate level. The current base year is 2008 = 100. The labour cost index thus is calculated as an annually chain-linked Laspeyres index. The definitions and the calculation formula of the labour cost index are governed by two EU regulations adopted in 2003; they have been co-ordinated with the European System of National and Regional Accounts (ESA) 1995.
When are the results of the labour cost index released?
The Federal Statistical Office publishes the indices of total labour costs, of gross wages and salaries and of non-wage labour costs 70 days after the end of the reference quarter in a press release. The release calendar and the press releases are available on the web site of the Federal Statistical Office. The Statistical Office of the European Communities (Eurostat) receives comparable data for all EU member states and uses them to calculate the labour cost index for the EU and for the euro area.
How accurate is the labour cost index?
Revisions: At any publication date there may be revisions as data sources which become available are used. The quality report on the labour cost index informs about the extent of the revisions. Accuracy: In the data provided for the 3rd quarter of 2007 (reference quarter), the results of the labour cost surveys of 2000 and 2004 were accounted for when the labour cost index was calculated. These cornerstones were used to readjust the rates of change of the labour cost index. The resulting corrections differed considerably depending on the economic section concerned. In manufacturing, which is the economic branch with the largest number of employees, the average annual rate of change remained nearly unchanged between 2000 and 2004 (-0.0%). However, the rates of change were modified considerably in energy and water supply (+1.8%), mining (-1.7%) and in the hotel and restaurant industry (+1.7%).
