Among the many 27 European international locations lined within the OECD’s Taxing Wages 2025 report, seven recorded a decline in actual post-tax earnings in 2024 in comparison with 2023 for the typical single employee with out youngsters.
This measure displays the amount of cash left to spend or save after taxes are deducted and inflation is taken into consideration. The international locations affected had been Italy, Estonia, Czechia, France, Greece, Belgium, and Spain.
Why did individuals take house much less cash in these international locations?
In Italy, the typical wage elevated by 3.9% in 2024. With inflation at 1.2%, this translated to an actual wage progress of two.7% earlier than taxes. Nevertheless, the non-public common tax charge—which incorporates each private earnings tax and worker social safety contributions—rose sharply by 7.5%. This created a major hole between actual wage progress and the rise in private taxation, finally eroding a lot of the profit from increased wages.
Cristina Enache, world tax economist on the Tax Basis, emphasised the affect of elevated social safety contributions.
Whereas this highlights a rising hole between wages and taxation, it doesn’t immediately reveal how a lot actual post-tax earnings modified.
Private common tax charges additionally elevated by greater than 4.5% in Estonia and Czechia, resulting in decrease actual post-tax incomes in 2024, as actual wage progress didn’t preserve tempo.
Enache of the Tax Basis famous that in Estonia, the tax burden rise was pushed by the elimination of sure tax allowances. In Czechia, the rise was primarily as a result of increased social safety contributions from both workers or employers.
In France, actual wages grew by 0.7%, however the private common tax charge elevated by 1.7%, leading to decrease actual post-tax incomes in comparison with 2023.
Portugal, UK and Turkey report highest will increase
Throughout this era, Portugal, the UK, and Turkey recorded the very best will increase in actual post-tax incomes. In Portugal, the non-public common tax charge fell by 8%, whereas actual wages grew by 4.7%.
“Portugal lowered its earnings tax charges for the primary six tax brackets, decreasing the general tax wedge for the typical earnings earner,” Cristina Enache advised Euronews.
Within the UK, the typical tax charge dropped by 8.7%, though actual wage progress was modest at 1.6%.
In Turkey, regardless of a 3.9% improve within the private common tax charge, a considerable 15.5% rise in actual wages led to considerably increased actual post-tax incomes in 2024 in comparison with 2023. Nevertheless, some critics have accused the nationwide statistical workplace of manipulating inflation figures.
What does a decrease or increased “actual post-tax earnings” point out?
Cristina Enache defined that “actual post-tax earnings” refers back to the earnings an individual takes house after taxes, adjusted for inflation.
“A decrease actual post-tax earnings implies that after taxes and inflation, the person has much less cash to spend. Due to this fact, a lower in the true post-tax earnings between 2023 and 2024 implies that the employee incomes the typical wage is shedding buying energy,” she stated.
Coverage suggestion for ‘bracket creep’
‘Bracket creep’ happens when earnings progress causes people to pay increased common earnings tax charges over time. This usually occurs when inflation pushes taxpayers into increased tax brackets or erodes the worth of tax credit, deductions, and exemptions. In keeping with the Tax Basis, ‘bracket creep’ results in increased earnings taxes with none actual improve in earnings.
“Indexing the earnings tax (and, relying on the design, the social safety contributions) to inflation would keep away from bracket creep and will mitigate the lower in actual post-tax earnings for staff,” Enache identified.
The Euronews article titled “The place did actual wages rise and fall probably the most in Europe in 2024?” takes a more in-depth take a look at how wages modified in comparison with 2023—analyzing nominal will increase, inflation, actual wage progress, and common salaries.