Keeping up employee salaries throughout recession has hit company profitability and decreased the level of reinvestment in fixed capital, according to the Federation of European Employers (FedEE).

Despite worries over declining pay levels following the global economic crisis that began in 2007, the federation insisted workers in eurozone countries “have actually fared better relative to their company's fortunes following the downturn rather than during the period leading up to it”, according to a statement.  


This assertion follows release of the latest remuneration figures published by the European Commission’s statistical agency Eurostat. These figures stated that in the first quarter of 2002, total employee remuneration in the eurozone stood at 60.4% of gross value added. When the downswing came in 2008 it fell to 59.2%. However, as the recession took hold and company value-added fell sharply through late 2008 and early 2009, employee remuneration climbed to 62.1% of value-added. Since then, remuneration levels have sustained much of their recessionary gains to stand at 61.1% of value-added in the first quarter of this year.

Gross fixed-capital formation did not enjoy such a level of shielding during the downturn. In the first quarter of 2002, it amounted to 21.5% of gross value-added. By the second quarter of 2009, it had fallen to 19.8%, but then it continued to fall to just 18.8% by the first quarter of 2013.

Commenting on these developments during an online debate, the secretary-­general of the Federation of European Employers, Robin Chater, warned: “If there is to be a sustained recovery during the eurozone, resources are going to have to be diverted away from employees back into long-­term investments. Companies have sustained their positions by substituting labour for capital for far too long and that is exposing the European economy to increasingly capital intensive competitors in North America and the Far East.”

In June 2013, Eurostat had reported that labour costs in the euro area rose by 1.6 % in the year up to the first quarter of 2013, compared with 1.3 % for the fourth quarter of 2012. In the EU, the annual rise was 1.9 % up to the first quarter of 2013, compared with 1.3 % in the previous quarter. The two main components of labour costs are wages and salaries and non-wage costs.

Among the member states for which data is available for the first quarter of 2013, the highest annual increases in hourly labour costs for the whole economy were registered in Romania (+8.6 %) and Estonia (+7.5 %). Decreases were recorded in Slovenia (-3.8 %), Spain (-0.7%), Cyprus (-0.5) and Portugal (-0.3 %).