



Labour cost components As far as employees are concerned, the compensation received for their work, more commonly called wages or earnings, generally represents their main source of income and therefore has a major impact on their ability to spend and/or save. Whereas gross wages/earnings include the social contributions payable by the employee, net earnings are calculated after deduction of these contributions and any amounts which are due to government, such as income taxes. As the amount of taxes generally depends on the situation of the household in terms of income and composition, net earnings are calculated for several typical household situations. The Diagram 1 summarises the relation between net earnings, gross earnings/wages and labour costs. Diagram 1: Labour cost components

Labour costs The average hourly labour cost in 2019 was estimated at EUR 27.7 in the EU-27 and at EUR 31.4 in the euro area (EA-19). However, this average masks significant differences between EU Member States, with hourly labour costs ranging between EUR 6.0 in Bulgaria and EUR 44.7 in Denmark (see Figure 1); the average was higher still (EUR 50.2) in Norway.

(EUR)

Source: Eurostat Figure 1: Estimated hourly labour costs, 2019(EUR)Eurostat (lc_lci_lev)

Labour costs consist of costs for wages and salaries plus non-wage costs such as employers’ social contributions. In 2019, the share of non-wage costs in total labour costs, for the whole economy, was 25.1 % in the EU-27, while it was 25.6 % in the euro area. The share of non-wage costs also varied substantially across EU Member States: the highest shares of non-wage costs were recorded in France (32.9 %), Sweden (32.2 %) and Italy (28.8 %), while the lowest shares were recorded for Luxembourg (11.0 %), Malta (5.9 %) and Lithuania (5.3 %).

Gross wages/earnings Median earnings Gross earnings are the largest part of labour costs. In 2014, the highest median gross hourly earnings in euro were recorded in Denmark (EUR 25.52), Ireland (EUR 20.16) and Sweden (EUR 18.46), By contrast, the lowest median gross hourly earnings in euro were registered in Lithuania (EUR 3.11), Romania (EUR 2.03) and Bulgaria (EUR 1.67). In other words, across EU-27 Member States, the highest national median gross hourly earnings were 15 times as high as the lowest when expressed in euros; when adjusted for price levels (by converting to purchasing power standards (PPS)) the highest average was five times as high as the lowest average, with Denmark and Bulgaria again representing the extremes at either end of the range.

(excluding apprentices), 2014

Source: Eurostat Figure 2: Median gross hourly earnings, all employees(excluding apprentices), 2014Eurostat (earn_ses_pub2s)

Low-wage earners Low-wage earners are defined as employees who earn two thirds or less of national median gross hourly earnings. In 2014, 17.2 % of employees were low-wage earners in the EU-28 (includes the United Kingdom; EU-27 data is missing), whereas the proportion was 15.9 % in the euro area. The proportion of low wage earners varied significantly between EU-27 Member States in 2014: the highest shares were observed in Latvia (25.5 %), Romania (24.4 %) and Lithuania (24.0 %). By contrast, less than 10 % of employees were low wage earners in Italy (9.4 %), France (8.8 %), Denmark (8.6 %), Finland (5.3 %), Belgium (3.8 %) and Sweden (2.6 %).

(excluding apprentices) earning two thirds or less of the median gross hourly earnings, 2014

(% of employees)

Source: Eurostat Figure 3: Low-wage earners — employees(excluding apprentices) earning two thirds or less of the median gross hourly earnings, 2014(% of employees)Eurostat (earn_ses_pub1s)

Gender pay gap The unadjusted gender pay gap is an important indicator to measure differences between the average earnings of men and women in the EU. In 2018, in the EU-27 as a whole, women were paid, on average, 14.8 % less than men, while the difference was 15.9 % for the euro area. The biggest gender pay gaps were identified in Estonia (22.7 %), Germany (20.9 %) and Czechia (20.1 %). The smallest differences in average pay between the sexes were found in Italy (5.0 %, 2017 data), Luxembourg (4.6 %) and Romania (3.0 %) — see Figure 4.

(difference between average gross hourly earnings of male and female employees, as % of male gross earnings)

Source: Eurostat Figure 4: Unadjusted gender pay gap, 2018(difference between average gross hourly earnings of male and female employees, as % of male gross earnings)Eurostat (earn_gr_gpgr2)

Various issues contribute to these gender pay gaps, such as: differences in labour force participation rates, differences in the occupations and activities that tend to be male- or female-dominated, differences in the extent to which men and women work on a part-time basis, as well as the attitudes of personnel departments within private and public bodies towards career development and unpaid and/or maternity/parental leave. Some underlying factors that may, at least in part, explain gender pay gaps include sectoral and occupational segregation, education and training, awareness and transparency, as well as direct discrimination. Gender pay gaps also reflect other inequalities, in particular, women’s often disproportionate share of family responsibilities and associated difficulties of reconciling work with private life. Many women work part-time or under atypical contracts: although this permits them to remain in the labour market while managing family responsibilities, it can have a negative impact on their pay, career development, promotion prospects and pensions.

Net earnings and tax burden All the data are based on a widely acknowledged model developed by the OECD, where figures are obtained from national sources (for further details on the model consult the information on the OECD - Benefits and wages website). Net earnings Information on net earnings complements gross earnings data with respect to disposable earnings, in other words after the deduction of income taxes and employee social security contributions from the gross amounts and the addition of family allowances (cash transfers paid in respect of dependent children), in the case of households with children. In 2019, the net earnings of a single person earning 100 % of the average earnings of a worker in the business economy, without children, ranged from EUR 42 584 in Luxembourg to EUR 6 030 in Bulgaria . The same two EU Member States recorded the highest (EUR 57 175) and the lowest (EUR 6 603) average net earnings, respectively, for a married couple with a single earner and two children (see Figure 5).

(EUR)

Source: Eurostat Figure 5: Annual net earnings, 2019(EUR)Eurostat (earn_nt_net)

In the case when both parties of a married couple work (both earning an average worker’s earnings), Luxembourg recorded the highest annual net earnings, EUR 94 638 both when the couple had two children and EUR 87 024 when the couple had no children. Bulgaria recorded the lowest net earnings EUR 12 102 when the couple had two children and slightly less with EUR 12 061 when the couple had no children. Tax burden Tax rate indicators (tax wedge on labour costs, unemployment trap and low wage trap) aim to monitor work attractiveness. Figure 6 presents them for such a low wage earner who earns two thirds (67 %, to be exact) of the average earnings of a worker in the business economy (NACE Rev. 2, Sections B to N) and who is a single person without children. The first indicator, tax wedge on labour costs, measures the burden of tax and social security contributions relative to labour cost. It is defined as income tax on gross wage earnings plus employee and employer social security contributions, expressed as a percentage of total labour costs. This tax wedge for the EU-27 was 39.5 % (40.1 % for the euro area) in 2019. The highest tax wedges on labour costs of low-wage earners in 2019 were recorded in Belgium (45.4 %), Germany (45.2 %) and Hungary (44.6 %) and the lowest ones in Malta (27.4 %), Ireland (24.6 %) and Cyprus (18.1 %).

(%)

Source: Eurostat Figure 6: Tax rate indicators on low wage earners — single person without children, 2019(%)Eurostat (earn_nt_taxwedge) (earn_nt_unemtrp) and (earn_nt_lowwtrp)

The second indicator, unemployment trap, measures the proportion (as a percentage) in the increase of gross earnings that is ‘taxed away’ by higher tax and employee social security contributions and the withdrawal of unemployment and other benefits when an unemployed person moves into employment. In 2019, the unemployment trap stood at 74.4 % in the EU-27 (74.5 % for the euro area). The highest rates were recorded in Belgium (93.1 %), Luxembourg (90.9 %) and Denmark (88.9 %) and the lowest ones in Slovakia (46.4 %), Greece (34.6 %) and Estonia (32.2 %). The third indicator, low wage trap, measures the proportion (as a percentage) in the increase of gross earnings that is ‘taxed away’ through the combined effects of income taxes, employee social security contributions, and any withdrawal of benefits when gross earnings increase from 33 % to 67 % of the average earnings of a worker. The low wage trap was recorded at 39.3 % in the EU-27 in 2019 (41.1 % for the euro area), with the highest rates observed again in Belgium (60.4 %), Luxembourg (50.6 %) and Denmark (50.2 %) and the lowest ones in Bulgaria (22.4 %), Estonia (21.0 %) and Cyprus (8.3 %).

Source data for tables and graphs Wages and labour costs: tables and figures

Data sources Labour costs Labour costs encompass employee compensation (including wages, salaries in cash and in kind, employers’ social security contributions), vocational training costs, and other expenditure (such as recruitment costs, expenditure on work clothes, and employment taxes regarded as labour costs minus any subsidies received). These labour cost components and their elements are defined in Regulation 1737/2005 of 21 October 2005. Labour cost statistics constitute a hierarchical system of multi-annual, yearly and quarterly statistics, designed to provide a comprehensive and detailed picture of the level, structure and short-term development of labour costs in the different sectors of economic activity in the EU Member States and some non-member countries. All statistics are based on a harmonised definition of labour costs. The labour cost levels are based on the latest labour cost survey (currently 2016) and an extrapolation based on the quarterly labour cost index. The labour cost survey is a four-yearly survey that collects levels of labour costs at a very detailed level. For the purpose of extrapolating with the labour cost index, data are only used at an aggregated level. The quarterly labour cost index (a Euroindicator) measures the cost pressure arising from the labour production factor. The data covered in the labour cost index collection relate to total average hourly labour costs and to two labour cost categories: wages and salaries; employers’ social security contributions plus taxes paid minus subsidies received by the employer. Data are available for European aggregates (EU and euro area) and EU Member States for an aggregate covering industry, construction and services (except public administration, defence, compulsory social security) as covered by NACE Rev. 2 Sections B to N and P to S (the information is also disaggregated by economic activity), in working day and seasonally adjusted form. Gross wages/earnings The main definitions for earnings are provided in Regulation 1738/2005 of 21 October 2005. Data come from the four-yearly structure of earnings survey (SES) whose latest vintage dates from October 2014. Gross earnings cover monetary remuneration paid directly by the employer, before tax deductions and social security contributions payable by wage earners and retained by the employer. All bonuses, regardless of whether or not they are regularly paid (such as 13th or 14th month pay, holiday bonuses, profit-sharing, allowances for leave not taken, occasional commissions, and so on) are included. Data on median earnings are based on gross hourly earnings of all employees (full-time and part-time, but excluding apprentices) working in enterprises with 10 or more employees and in all sectors of the economy except agriculture, fishing, public administration, private households and extra-territorial organisations. Median earnings are calculated such that half of the population earns less than the median and the other half earns more. Gender pay gap The gender pay gap, in its unadjusted form, is defined as the difference between average gross hourly earnings of male paid employees and female paid employees, expressed as a percentage of average gross hourly earnings of male paid employees. The methodology for the compilation of this indicator is benchmarked on data collected from the structure of earnings survey (SES), which is revised every four years when fresh data from the structure of earnings survey become available. According to the methodology used, the indicator concerning the unadjusted gender pay gap covers all employees (there are no restrictions for age and hours worked) of enterprises (with at least 10 employees) within industry, construction and services (as covered by NACE Rev. 2 Sections B to S excluding O). Some countries also provide information for NACE Rev. 2 Section O (public administration and defence; compulsory social security) although this is not obligatory. Information is also available with an analysis between the public and private sectors, by working time (full-time or part-time) and based on the age of employees. Net earnings and tax burden Net earnings are derived from gross earnings and represent the part of remuneration that employees can actually keep to spend or save. Compared with gross earnings, net earnings do not include social security contributions and taxes, but do include family allowances. The unemployment trap is defined as the difference between the increase of gross earnings and the increase of net income when moving from unemployment to employment, expressed as a percentage of gross earnings.