Hourly labour costs in Q2 down 2.4% YoY as work time increases

Portugal’s Labour Cost Index (ICT), which measures the cost per hour actually worked, was in the second quarter of this year down 2.4% from a year earlier, Statistics Portugal (INE) said today.

According to the INE, the drop in the index – which follows a year-on-year increase of 7.1% in the previous quarter – was “essentially explained by the increase in the number of hours effectively worked per worker” as compared to total labour costs.

“The sharp increase, this quarter, in the number of hours effectively worked was mainly explained by the full or partial reopening of companies that were closed by legislative determination or due to the reduction of normal working hours due to the decrease in turnover,” it explains, in a reference to measures taken because of the Covid-19 pandemic and its effects.

In the second quarter, wage costs were down 4.7% on the year (having in the previous quarter been up 7.8% on the year) while other labour costs were up 7.2% (after having in the previous quarter been up 4.4%).

“Contributing to the increase in other costs in the second quarter of 2021 was the increase in employers’ contributions resulting from the significant decrease in companies covered by the simplified layoff regime in the private sector of the economy,” INE notes, in a reference to the state-funded furlough scheme.

“This evolution also resulted from the combination of the 7.3% increase in the average cost per worker and the 10.8% increase in the number of hours actually worked per worker,” the INE explained. “The increase in the latter component was observed in most activities, with the exception of construction, where a reduction was observed, and was particularly high in public sector activities (13.3%).”

It also noted that the increase in the average cost per worker “was transversal to all economic activities, with the smallest variation being observed in the public sector (2.5%).”