Hourly Labour costs in Malta during the first quarter of this year were 2.4 per cent more than in March 2010 according to new data released by the EU's statistics arm.

While less than the average in the euro area, which saw hourly labour costs increase by 2.6 per cent during this year's first quarter compared to twelve months earlier, Malta's cost of labour still increased significantly as in 2010 the increase was just of 0.4 per cent over the previous year.

The increase of the cost of work in Malta, which includes salaries, wages and taxes, comes amid recommendations by Brussels that Malta should revise its wage indexation mechanism, known as COLA, in order to link wage increases to productivity.

This measure is opposed by the Government and the unions but supported by the Central Bank and the private sector who argue that the current mechanism does not increase the island's competitiveness.

Manufacturing industry experienced the steepest increase in labour costs according to Eurostat, swelling by 4.1 per cent over a 12-month period. On the other hand, the costs of labour in construction increased by 2.8 per cent while the services industry experienced the slightest increase in labour costs, 1.6 per cent.

Eurostat said that hourly labour costs in the euro area rose by 2.6 per cent in the year up to the first quarter of 2011 and 2.7 per cent in the EU 27.

The two main components of labour costs are wages and salaries and non-wage costs.

In the euro area, wages and salaries per hour worked grew by 2.3 per cent in the year up to the first quarter of 2011, and the non-wage component by 3.6 per cent.

The breakdown by economic activity shows that in the euro area hourly labour costs rose by 2.8 per cent in industry and by 2.5 per cent in both construction and services in the year up to the first quarter of 2011.