Malta's labour costs increased at a lower pace than the average in the euro area, according to statistics published by Eurostat yesterday.

According to the EU's statistical arm, by June, Malta registered an increase of 1.8 per cent in total hourly labour costs when compared to a year earlier. This is the second lowest increase in the euro area, only surpassed by Germany where labour costs rose by just 0.7 per cent.

On the other hand, labour costs exploded in some of the new member states, particularly in Latvia and Romania where labour costs increased by a staggering 24.8 and 23 per cent respectively.

Eurostat's calculations are based on a labour cost index - a short-term indicator - showing the development of hourly labour costs incurred by employers as a result of engaging the labour work force. The quarterly changes in employers' costs are measured for the total labour costs and the main components, wages and salaries, and labour costs other than wages and salaries (non-wage costs).

The non-wage costs include the employers' social contributions plus employment taxes regarded as labour costs less subsidies intended to refund part or all of the employer's cost of direct remuneration.

According to the Eurostat figures, Malta's labour costs by June increased mostly in the construction sector which registered a 6.5 per cent increase on June 2007. Labour in the services sector increased by 1.8 per cent in the same period while industry's costs registered an increase of just one per cent.

Eurostat said that the average total hourly labour costs in the euro area between June 2007 and June 2008 increased by an average 2.7 per cent in nominal terms with salaries and wages rising by 2.8 per cent while non-wage costs increased by 2.2 per cent.