Iceland tops Europe in hourly labour costs, Eurostat says

Iceland has some of the highest wages in Europe, according to a report by mbl.is based on a Eurostat summary of labour costs in Europe, measured in euros per hour.

Iceland ranked first, ahead of Norway and Luxembourg. Switzerland was not included in the comparison.

Yngvi Harðarson, an economist and managing director of Analytica, said the Icelandic króna’s high real exchange rate was influencing the result.

“I think most people agree that the króna’s real exchange rate is now above its long-term equilibrium value,” Yngvi said. This means the exchange rate is more likely than not to weaken, although he said it was difficult to predict when that might happen or how long an adjustment would take.

Anna Hrefna Ingimundardóttir, deputy director and head of the economic affairs division at the Confederation of Icelandic Enterprise, said high wages were desirable because living standards were generally good in countries where wages were high.

However, she said companies needed a favourable operating environment and competitive export industries to support such labour costs. Iceland may be approaching its limit in terms of labour costs, she said, citing high taxes, burdensome regulations and the króna’s high exchange rate as factors working against businesses.

High wages were not necessarily a bad thing, Anna Hrefna said, as they reflected substantial value creation, but companies clearly needed to be able to bear the costs.