Spending by employers to compensate workers continues to grow for the ninth consecutive quarter, but it does so at a slower pace. According to the Harmonized Labor Cost Index (ICLA) released this Monday by the National Institute of Statistics (INE), between July and September the cost of hours worked increased specifically by 5.4% compared to the third quarter of 2022, a rate interannual more than one point lower than that registered between April and June. The data represents the first moderation in two years of increases, which could point to a change in trend, despite the fact that inflation continues to be the focus of businessmen and workers.
The annual rebound recorded in the ICLA between the months of July and September adds up to a new quarter of increase in labor costs. This is the ninth consecutive increase, since it embarked on its particular upward path in the second half of 2021.. This upward path peaked in the second quarter of 2023, when the labor cost per hour worked grew by 6.5%, that is, its largest year-on-year increase since the second quarter of 2020, in the midst of the pandemic. The moderation of the increase to 5.4% in the third quarter of 2023 opens the door to a change in trend in the evolution of labor costs. However, it is still the second sharpest year-on-year increase in just over three years, surpassed only by that of the previous quarter.
The increase in labor costs in the third quarter has not been homogeneous in all sectors. The largest increases were recorded in real estate activities, information and communication, and arthritic and entertainment activities, areas in which the expenditure disbursed by employers for each hour worked grew respectively by 13%, 8.2% and 7.8%.. On the other hand, extractive industries, energy supply and financial and insurance activities were the sectors where labor costs increased the least, with year-on-year increases of below 3%.
The ICLA reflects the behavior of the expenses borne by companies when employing their staff, so it includes not only the salaries of workers, but also social contributions, vocational training costs and taxes related to employment, discounting subsidies perceived by companies. According to provisional data published this Monday, the rebound in labor costs rises to 5.7% when extraordinary payments and arrears are excluded from the calculation.
In the absence of the INE releasing the average amount of said labor costs next week, for the moment the available data indicates that the salary cost increased by 4.6% in the third quarter compared to the same period in 2023. , while the rest of the costs rose by 7.8%. This means that an important part of the increase in labor costs does not correspond to the increase in salaries received directly by workers at the end of the month.
According to the collective bargaining statistics of the Ministry of Labor, the salaries agreed in the agreement rose on average by 3.41% until September, a proportion slightly below inflation, which in the ninth month of 2023 rose to 3.5%.. The increases agreed in the agreement have increased slightly in recent months until reaching 3.49% in November. Compared to the ground covered to date, the Randstad Research think tank expects salaries to rise between 2% and 3.5% in 2024, according to a salary trends report published this Monday.
Regarding the second quarter of 2023, in the last three months for which data is available, the labor cost per effective hour of work has increased by 3.1% between July and September due mainly to the decrease in the number of hours worked coinciding with Summer holidays. By components, the salary cost grew by 1.3% quarterly, while the remaining costs increased by 8.6%.
In fact, the quarterly increase in labor costs per hour worked is common in the summer months, due to the seasonal decrease in the volume of hours worked.. This increase in costs by reducing working hours is one of the arguments put forward by detractors of the reduction in the working day to 37.5 hours per week agreed by PSOE and Sumar in their government agreement, although there are also those who defend that working fewer hours would improve work-life balance and enhance productivity.