Nominal hourly labor costs in Romania increased by 5.3 percent in the first quarter of 2014, compared to the same quarter last year. This is the third largest growth in the EU after Latvia (7 percent) and Estonia (6.8 percent), according to Eurostat data.

The increase in labor costs was supported by the business economy, which saw labor costs increase by 6.2 percent in Q1 2014. This comes mainly from the services sector, where labor costs were up 7.1 percent, and from the industrial sector, with an increase of 6.8 percent. In construction, labor costs were down 1.7 percent compared to the first quarter of 2013.

In the non-business economy, labor costs increased by 2.4 percent, which is way less than last year, when the state increased salaries in the public sector.

The rise in labor cost, which basically means higher salaries, represents good news for Romania’s domestic consumption, which is starting to pick up after years of stagnation.

Romania still has the second lowest nominal labor costs in the EU, after Bulgaria, with an average of EUR 4.6 per hour, five times lower than the EU average of EUR 23.7 per hour, according to Eurostat data for 2014.

From 2008 to 2013, nominal labor costs in Romania increased by 10.6 percent, in euro terms, which is close to the average increase in the EU.

Andrei Chirileasa, andrei@romania-insider.com