This chapter presents and analyses the main indicators of labour taxation across OECD countries in 2025. Most emphasis is given to the tax wedge, which measures the difference between labour costs to the employer and the corresponding net take-home pay of the employee. The chapter also examines the net personal average tax rate, which expresses personal income tax and employee social security contributions net of cash benefits as a percentage of gross wage earnings. The analysis focuses on three household types: a single worker with no children at average earnings; a one-earner married couple with two children, also at average earnings; and a two-earner couple with two children, where one spouse earns the average wage and the other 67% thereof. The chapter also includes analysis of changes in the average wage in OECD countries in 2025.
Taxing Wages 2026
Abstract
This Report provides unique information for the 38 OECD countries on the income taxes paid by workers, their social security contributions, the transfers they receive in the form of cash benefits, as well as the social security contributions (SSCs) and payroll taxes paid by their employers. The taxpayer-specific detail in this Report complements the information provided annually in Revenue Statistics, which provides internationally comparable data on the level and structure of tax revenues in OECD countries.
Part I of the Report presents detailed information about the effective tax rates on labour income as well as the implied total labour costs for employers in OECD countries in 2025 for eight illustrative household types earning comparable levels of income (expressed as a percentage of the national average wage). It also provides detailed analysis of changes in effective tax rates between 2024 and 2025 as well as changes since 2000. Part II provides detailed information on labour taxation systems in individual OECD countries. The methodology followed in this Report is explained in the Annex.
This chapter begins with an introduction to the Taxing Wages methodology, which is followed by a review of the effective tax rate indicators across OECD countries in 2025. The review analyses the tax wedge and the personal average tax rates for a single worker without children who earns the average wage. It also examines the corresponding indicators for a one-earner couple earning the average wage with two children and a two-earner married couple, also with two children, where one spouse earns the average wage and the other 67% thereof. The chapter concludes by analysing changes in nominal and real average wages as well as changes in post-tax income by country in 2025 and by setting out the industry classification on which the wage data is based.
The Taxing Wages methodology focuses on full-time employees. It is assumed that their annual income from employment is equal to a given percentage of the average full-time adult gross wage earnings for each OECD economy, referred to as the average wage. This covers both manual and non-manual workers for either industry sectors C-K inclusive with reference to the International Standard Industrial Classification of All Economic Activities, Revision 3 (ISIC Rev.3) or industry sectors B-N inclusive with reference to the International Standard Industrial Classification of All Economic Activities, Revision 4 (ISIC Rev.4).1 Further details are provided in Table 1.8 as well as in the Annex of this Report. Additional assumptions are made about the personal circumstances of these wage earners to determine their tax and benefit position.
In Taxing Wages, the term ‘tax’ includes personal income tax, SSCs and payroll taxes (which are aggregated with employer SSCs in the calculation of tax rates) payable on gross wage earnings. Consequently, any income tax that might be due on non-wage income and other kinds of taxes – such as corporate income tax, net wealth tax and consumption taxes – are not taken into account. The transfers included are those paid by general government as cash benefits, usually in respect of dependent children.
For most OECD countries, the tax year is equivalent to the calendar year, the exceptions being Australia, New Zealand and the United Kingdom. In the case of New Zealand and the United Kingdom, where the tax year starts in April, the calculations apply a ‘forward-looking’ approach. This implies that, for example, the tax rates reported for 2025 are those for the tax year 2025-2026. However, in Australia, where the tax year starts in July, a ‘backward-looking’ approach is adopted to present more reliable results; the year 2025 in respect of Australia is the 2024-2025 tax year. Taxing Wages also adopts a backward-looking approach for Italy due to how the relevant information is collected by national authorities; the information included in this publication for 2025 therefore refers to the policies in place during the 2024 fiscal year.
Taxing Wages presents several measures of taxation on labour. Most emphasis is given to the tax wedge, a measure of the difference between labour costs to the employer and the corresponding net take-home pay of the employee. This indicator is calculated by expressing the sum of personal income tax, employee plus employer SSCs together with any payroll tax, minus benefits as a percentage of labour costs. Employer SSCs and (in some countries) payroll taxes are added to the gross wage earnings of employees in order to determine a measure of total labour costs.
The average tax wedge measures that part of total labour costs which is taken in tax and SSCs net of cash benefits, while the marginal tax wedge measures that part of an increase in total labour costs that is paid in taxes and SSCs less cash benefits. The tax wedge only includes payments that are classified as taxes according to the OECD Interpretative Guide. Employees and employers may also make non-tax compulsory payments (NTCPs)2 that may affect the indicators presented in this Report, such as the tax wedge. An accompanying paper to Taxing Wages presents “compulsory payment indicators” that combine taxes and NTCPs. It is available at: https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-policy/non-tax-compulsory-payments.pdf.
This Report also includes analysis of the personal average tax rate and the net personal average tax rate. The personal average tax rate is the term used when the personal income tax and employee SSCs are expressed as a percentage of gross wage earnings. The net personal average tax rate corresponds to the above measure net of cash benefits. The net personal marginal tax rate shows that part of an increase in gross wage earnings that is paid in personal income tax and employee SSCs net of cash benefits.
The tax wedge
Table 1.1 shows that the tax wedge between the labour costs to the employer and the corresponding net take-home pay for single workers without children, at average wage earnings levels, varied widely across OECD countries in 2025 (see column 1). While the tax wedge for this type of household exceeded 45% of labour costs in Austria, Belgium, France, Germany, Italy and Slovenia, it was below 20% in Chile and Colombia. The largest tax wedge was observed in Belgium (52.5%) and the lowest in Colombia (0.0%). In Colombia, a single worker earning the average wage did not pay personal income taxes in 2025, while their contributions to pension, health and employment risk insurance are considered to be NTCPs3 and therefore not counted as taxes in Taxing Wages. Table 1.1 shows that the average tax wedge as a percentage of labour costs in OECD countries was 35.1% in 2025.
Changes in the tax wedge as a percentage of labour costs between 2024 and 2025 for a single worker earning the average wage without children are shown in column 2 of Table 1.1. The OECD average tax wedge for this household type increased by 0.15 percentage points (p.p.) in 2025, having increased by 0.11 p.p. in 2024 and by 0.16 p.p. in 2023. Between 2024 and 2025, the tax wedge increased in twenty-four OECD countries, fell in eleven, and remained the same in three. Box 1.1 provides a longer-term perspective on the changes in the tax wedge for this household type and the other two household types considered in this Chapter since 2000.
The tax wedge for the eight household types examined in this Report may differ in terms of their level but they have followed a similar trajectory since 2000. The small overall decline in the tax wedge between 2000 and 2025 for each household type masks significant fluctuations over the intervening period that are primarily linked to two economic shocks: the Global Financial Crisis and the COVID-19 pandemic.
Figure 1.1 shows the average tax wedge for OECD countries in each year between 2000 and 2025 for the three household types analysed in this Chapter: the single worker earning the average wage; the one-earner married couple earning the average wage with two children; and the two-earner married couple with two children where the principal earns the average wage and the spouse earns 67% of the average wage.
Tax burdens for the three household types have followed a similar trend over this period, with the lowest average tax wedge for each observed in 2009 during the Global Financial Crisis and in 2020-21 during the COVID-19 pandemic, when many countries introduced temporary measures to support households. In every year between 2022 and 2025 (inclusive), the tax wedge increased for all three household types.
In 2025, the average tax wedge for the single worker was at its highest level since 2016, while that of the one-earner married couple reached its highest level since 2015, and that of the two-earner married couple attained its highest level since 2018.
As % of labour costs
Notes: The single worker as well as the principal earner in the one-earner married couple earn the average wage. For the two-earner married couple, the principal earner is assumed to earn the average wage while the spouse is assumed to earn 67% of the average wage. Payroll taxes are included in the calculations for the employer social security contributions, where applicable.
In 2025, all OECD countries introduced changes to the thresholds, rates and amounts for personal income tax, SSCs or cash transfers. As a result, changes in the tax wedge reflected both these policy adjustments (whether reforms or parametric changes) and changes in the average wage, making it difficult to ascribe with certainty movements in the tax wedge in a specific country to either factor, especially since some policy rates might be automatically indexed to wage growth (OECD, 2023[1]).
Increases in the tax wedge for a single worker earning the average wage ranged from 0.02 p.p. in Switzerland to 2.45 p.p. in the United Kingdom. The increase in the tax wedge was larger than 1.0 p.p. in four countries: Israel, Germany, Estonia and the United Kingdom. In the United Kingdom, the increase was mainly driven by higher personal income taxes due to fiscal drag (gross earnings increased while tax allowances and the thresholds for the tax schedule remained unchanged) and the increase in employer SSCs (which resulted from an increase in the National Insurance contribution rate and a lowering of the minimum earnings threshold for contributions). In Estonia, the 1.95 p.p. increase was mainly due to an increase in the personal income tax rate4 between 2024 and 2025 from 20% to 22%, as well as fiscal drag. In Germany, the 1.34 p.p. increase was primarily attributable to an increase in SSC rates for sickness and long-term care insurance for employees and employers between 2024 and 2025, to the discontinuation of the inflation compensation premium, and to gross earnings increasing by more than the adjustments to PIT thresholds. Finally, a 1.09 p.p. increase in the tax wedge in Israel was mostly caused by fiscal drag, as tax credits and the thresholds for tax brackets did not change, combined with an increase in the SSC rates for employees and employers.
In thirteen out of the 24 countries where the tax wedge increased, the rise was driven by higher personal income tax as a percentage of labour costs (see column 3 of Table 1.1). In the countries where the rules concerning the tax schedule did not change, such as Korea and Poland, this was due to increases in the nominal average wage between 2024 and 2025. Higher average wages increase personal income tax rates through the progressivity of income tax systems if income tax thresholds rise by less than average earnings (OECD, 2023[1]). Similarly to the case of Israel, the higher personal income taxes in Korea and Poland were primarily the result of a higher proportion of earnings becoming subject to tax while the value of tax allowances and tax credits fell relative to earnings.
In Belgium, Canada, Chile, Finland, Germany, Israel, Luxembourg, Slovenia, Türkiye and the United Kingdom, the increase in the tax wedge was mostly due to higher employee or employer SSCs. In Belgium, the SSC rate on employers edged up slightly in 2025. In Canada, both the employee and employer contribution rates increased year-on-year. In Chile, a new employer SSC payment was introduced. Similarly, in Finland and in Luxembourg, employers now bear a larger share of contributions to the social security system. In Slovenia, a 1.0 p.p. increase in the contribution rate for both employers and employees took effect in mid-2025. In Türkiye, the employer SSC rate increased between 2024 and 2025. The increases in Israel, Germany and the United Kingdom are discussed above.
In nine of the eleven OECD countries where the tax wedge fell as a percentage of labour costs, the decline was mostly derived from lower personal income tax (Australia, Denmark, Iceland, Ireland, Italy, Latvia, Portugal, Sweden and the United States). The decreases in the tax wedge observed in 2025 exceeded 1 p.p. in Australia (-1.67 p.p.), Latvia (-1.44 p.p.) and Italy (-1.21 p.p.). In Australia, the decrease in the tax wedge was mostly due to a decrease in the tax rates and a parallel increase in the earnings thresholds of the tax schedule. In Latvia, the decrease was mainly due to the introduction of a flat basic allowance of EUR 510 per month, which replaced a means-tested allowance and further lowered the taxable income of the single worker earning the average wage. In Italy, the main driver of the decrease was the replacement of the temporary reduced rate for employee SSCs by two new tax credits.
Table 1.2 and Figure 1.2 show the components of the tax wedge across OECD countries in 2025: personal income tax, employee SSCs and employer SSCs (including payroll taxes where applicable), as a percentage of labour costs for a worker without children earning the average wage. Labour costs in Table 1.2 are expressed in US dollars with equivalent purchasing power.
The percentage of labour costs paid in personal income tax varied considerably across OECD countries in 2025, from zero in Colombia and Costa Rica and 0.1% in Chile (with Czechia, Japan, Korea, Poland and the Slovak Republic also below 10%) to 35.1% in Denmark (with Australia, Belgium, Iceland and New Zealand also above 20%). The percentage of labour costs paid in employee SSCs also varied widely, ranging from 0.0% in Australia, Colombia, Denmark and New Zealand to 19.2% in Lithuania and 20.6% in Slovenia. Employers in France paid 26.7% of labour costs in SSCs, the highest amongst OECD countries. Employer SSCs accounted for more than 20% of labour costs in eight other countries: Austria, Belgium, Czechia, Estonia, Italy, the Slovak Republic, Spain and Sweden. Combined employee and employer SSCs exceeded 20% of labour costs in 23 countries and represented at least one-third of labour costs in Austria, Czechia, France, Germany, the Slovak Republic and Slovenia.
As % of labour costs
Note: Table shows results for a single individual without children earning the average wage.
1. Countries ranked by decreasing total tax wedge.
2. Due to rounding, changes in the tax wedge in column (2) may differ by one-hundredth of a percentage point from the sum of columns (3)-(5). Although not included in columns (3)-(5), the discontinuation of the “climate bonus” cash transfer contributed to increasing the tax wedge in Austria between 2024 and 2025 by 0.30 p.p.
3. Includes payroll taxes where applicable.
Source: Country submissions, (OECD[2]) Economic Outlook Volume 2025 Issue 2.
As % of labour costs
Note: Table shows results for a single individual without children earning the average wage.
1. Countries ranked by decreasing labour costs.
2. Due to rounding, the total in column (1) may differ by one tenth of a percentage point from the sum of columns (2)-(4).
3. Includes payroll taxes where applicable.
4. US dollars with equal purchasing power.
Source: Country submissions, (OECD[2]) Economic Outlook Volume 2025 Issue 2.
Salary equal to the average wage, as % of labour costs
Notes: Figure shows results for a single individual without children at the income level of the average worker.
Includes payroll taxes where applicable.
Personal average tax rates
The personal average tax rate is defined as personal income tax plus employee SSCs as a percentage of gross wage earnings. Unlike the tax wedge, this indicator focuses on the total burden on gross earnings faced by the employee alone, excluding the contributions paid by employers. This indicator sheds light on the incentive to work faced by individual workers.
Table 1.3 shows the personal average tax rate in 2025 for a single worker without children at the average wage level, with the average worker’s gross wage earnings expressed in US dollars with equivalent purchasing power. Figure 1.3 provides a graphical representation of the personal average tax rate decomposed between personal income tax and employee SSCs.
Table 1.3 and Figure 1.3 show that, on average, the personal average tax rate for a single worker at average earnings in OECD countries was 25.1% in 2025. Belgium had the highest rate, at 39.5% of gross wage earnings; Denmark, Germany, Lithuania and Slovenia were the other countries with rates above 35%. The lowest personal average tax rates were in Mexico (13.2%), Costa Rica (9.8%), Chile (7.1%) and Colombia (0.0%). The personal average tax rate was zero for Colombia as the single worker did not pay personal income tax at the average wage level in 2025, as discussed above.5
In 2025, the share of income tax in the personal average tax rate was higher than the share of employee SSCs for 23 of the 38 OECD Member countries. No employee SSCs were levied in Australia, Colombia, Denmark and New Zealand and their level was below 5% of gross earnings in Estonia, Iceland, Ireland and Mexico. In contrast, a single worker at the average wage level paid substantially more in employee SSCs than in personal income tax (i.e. a difference larger than 5 p.p.) in five countries: Chile, Costa Rica, Japan, Poland and Slovenia. In seven countries – Czechia, Greece, Korea, Lithuania, Portugal, the Slovak Republic and Türkiye – the respective shares of personal income tax and employee SSCs as a percentage of gross earnings were very close (i.e. differences smaller than 3 p.p.).
As % of gross wage earnings
Note: Table shows results for a single individual earning the average wage.
1. Countries ranked by decreasing gross wage earnings.
2. Due to rounding, total may differ by one tenth of a percentage point from aggregate of columns for income tax and social security contributions.
3. US dollars with equal purchasing power.
Source: Country submissions, (OECD[2]) Economic Outlook Volume 2025 Issue 2.
Salary equal to the average wage, as % of gross earnings
Notes: Countries ranked by decreasing tax burden.
Figure shows results for a single worker without children earning the average wage.
Many OECD countries provide a fiscal benefit to households with children through advantageous tax treatment or cash benefits.6 Table 1.4 compares the tax wedge as a percentage of labour costs for a one-earner married couple with two children with that of a single individual without children, at average wage levels. The tax wedge for the couple with children is generally smaller than that observed for the individual without children: the OECD average tax wedge as a percentage of labour costs for the one-earner married couple with two children was 26.2% in 2025, compared with 35.1% for the single worker. However, this gap narrowed by 0.31 p.p. between 2024 and 2025 because the average tax wedge for the one-earner married couple with two children increased slightly more than the tax wedge for the single worker without children between 2024 and 2025.7
The tax savings realised by a one-earner married couple with two children compared with a single worker without children amounted to more than 20% of labour costs in Poland and exceeded 15% of labour costs in Belgium, Lithuania, Luxembourg and the Slovak Republic. The tax wedge for a one-earner married couple with two children was the same as for a single worker on the average wage in Costa Rica, Mexico and Türkiye.
The tax wedge of a one-earner married couple with two children increased by 0.46 p.p. on average and rose in 22 countries between 2024 and 2025 (column 4). In 26 countries, the change did not exceed plus or minus one percentage point, while there were increases of more than 1.0 p.p. in nine countries: Chile, Estonia, Germany, Israel, Japan, Poland, the Slovak Republic, Slovenia and the United Kingdom.
In the Slovak Republic, the tax wedge of an average one-earner married couple with two children increased by 5.37 p.p. primarily due to a reform of the child tax credit system, which reduced the amount of the fixed monthly benefit per child and introduced an income-based phase-out. In the United Kingdom, the 2.68 p.p. increase was mostly due to higher PIT caused by fiscal drag as well as increased employer contributions. In Chile, the increase (2.55 p.p.) was primarily caused by the discontinuation of the Electronic Family Wallet programme, which resulted in a decrease in cash transfers. In Japan, the increase (2.43 p.p.) was mainly driven by increases in central and local personal income tax liabilities.
In Poland, the increase (2.30 p.p.) was due to the combined effect of fiscal drag and the value of the child cash transfer remaining unchanged between 2024 and 2025. In Estonia, the 2.29 p.p. increase was principally attributable to an increase in the personal income tax rate between 2024 and 2025 and the tax allowances and child-related cash transfers remaining unchanged. In Germany, the 1.61 p.p. increase was primarily caused by the discontinuation of the inflation compensation premium, the increase in employee and employer SSC rates and fiscal drag. In Israel, the increase (1.19 p.p.) was mostly driven by fiscal drag and an increase in employee and employer SSC rates. Finally, in Slovenia, the increase (1.03 p.p.) can mostly be attributed to the 1 p.p. increase in employee and employer SSC rates as of July 2025.
Decreases of at least one percentage point in the tax wedge of a one-earner married couple with two children receiving the average wage occurred in three countries: Australia, Latvia and Lithuania. In Latvia, the decrease (2.09 p.p.) was mainly caused by a reform of the PIT system, which replaced a means-tested allowance with a flat basic allowance of EUR 510 per month. In Lithuania, the 1.86 p.p. fall in the tax wedge was mainly due to higher child-related transfers. Finally, in Australia, the 1.63 p.p. decrease was mostly due to a decrease in personal income tax following changes to the tax schedule in the 2023/24 and 2024/25 fiscal years.
A comparison of changes in the tax wedge between 2024 and 2025 for one-earner married couples with two children and single persons without children, at the average wage level, is shown in column 6 of Table 1.4. The fiscal preference for families decreased in 24 of the 38 OECD countries and increased in eleven countries: Colombia, Denmark, Finland, France, Hungary, Iceland, Latvia, Lithuania, Norway, Switzerland and the United States.
As % of labour costs
1. Countries ranked by decreasing tax wedge of the family.
2. One-earner married couple with two children and earning the average wage.
3. Single individual without children earning the average wage.
Source: Country submissions, (OECD, 2025[2]) Economic Outlook Volume 2025 Issue 2.
As % of gross wage earnings
Notes: Countries ranked by decreasing rates for single taxpayer without children.
The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’ corresponds to a combined wage level of 100%-0% of average wage
Figure 1.4 compares the net personal average tax rate for a single worker earning the average wage with that of a one-earner married couple with two children at the same income level. Due to tax reliefs and cash benefits for families with children, the one-earner married couple’s disposable income exceeded that of the single worker by more than 20% of earnings in the Slovak Republic (24.7%), Poland (24.2%) and Luxembourg (22.1%); and by more than 15% in Belgium (19.9%), Austria (17.6%), Germany (17.4%), Lithuania (16.4%), Italy and Ireland (both 15.1%).
Meanwhile, the disposable income of the one-earner married couple exceeded that of the single worker by less than 10% of earnings in 15 countries: New Zealand (9.4%), Denmark (9.2%), the Netherlands (8.4%), Estonia (7.5%), Australia (7.1%), Spain (6.0%), Norway and Sweden (both 5.7%), Japan (5.5%), Israel (5.0%), Colombia (4.8%), Finland (4.5%), the United Kingdom (4.0%), Chile (2.5%) and Greece (2.3%). The disposable income was the same for both household types in Costa Rica, Mexico and Türkiye, as in each country their net personal average tax rates were identical.
The preceding sections focused on two households with comparable levels of income: the single worker at 100% of the average wage and the married couple with one earner at 100% of the average wage, with two children. This section extends the analysis to examine the tax wedge and personal average tax rate for a third household type: the two-earner married couple, earning 100% and 67% of the average wage respectively, with two children.
The tax wedge
For the two-earner married couple where the principal earns the average wage and the spouse earns 67% of the average wage, with two children, the OECD average tax wedge was 29.8% of labour costs in 2025 (Figure 1.5 and Table 1.5). Belgium’s tax wedge of 44.8% was the highest among OECD countries for this household type. The other countries with a tax wedge exceeding 40% were Germany and France (42.6% and 41.0%, respectively). The lowest tax wedge was observed in Colombia (-5.8%), where the tax wedge was negative because this household type did not pay income taxes at that level of earnings (although it paid contributions that are not considered taxes) and received cash benefits that were paid on top of their wages. The other countries where the tax wedge for this household type was below 20% were Korea (18.6%), New Zealand (18.5%), Israel (17.7%), Switzerland (17.1%) and Chile (5.5%).
Figure 1.5 shows the average tax wedge and its components as a percentage of labour costs for the two-earner married couple in 2025. On average across OECD countries, income tax represented 10.6% of labour costs and the sum of employee and employer SSCs represented 21.6%. The OECD tax wedge is net of cash benefits, which represented 2.4% of labour costs in 2025. The cash benefits that are included in the Taxing Wages models are those universally paid to workers in respect of dependent children between the ages of six to eleven inclusive. In-work benefits that are paid to workers regardless of their family situation are also included in the calculations.
The OECD average tax wedge of the two-earner married couple increased by 0.34 p.p. in 2025 from the previous year, as indicated in Table 1.5 (column 2). For this household type, the tax wedge increased in 19 countries and decreased in 18. The increase exceeded one percentage point in nine countries: the Slovak Republic (3.22 p.p.), the United Kingdom (2.55 p.p.), Estonia (2.14 p.p.), Slovenia (1.76 p.p.), Germany (1.60 p.p.), Poland (1.38 p.p.), Chile (1.27 p.p.), Japan (1.26 p.p.) and Israel (1.18 p.p.). In the Slovak Republic, the increase was primarily driven by a reduction in the monthly tax credit per child and the introduction of an income-based phase-out. In the United Kingdom the increase was due to a rise in the employer SSC rate coupled with a decrease in the minimum contribution threshold. In Estonia, the increase was mostly a result of an increase in the flat income tax rate. In Slovenia, the increase in the tax wedge was mainly driven by a fall in the value of cash transfers relative to earnings. In Germany, higher SSCs were the main driver of the increase while in Poland and Chile it was mostly due to a decline in cash benefits as a proportion of total labour costs. In Japan, the central and local income tax liability increased. Finally, in Israel, the increase can be attributed to fiscal drag as well as increased employer and employee SSC rates.
Among the countries where the tax wedge rose for two-earner married couples with children in 2025, an increase in personal income tax as a percentage of labour costs accounted for most of the increase in eight: Czechia, Estonia, Japan, Korea, Mexico, the Netherlands, the Slovak Republic and Spain. Meanwhile, an increase in SSCs was the main factor behind the higher tax wedge for this household type in seven countries: Belgium, Finland, Germany, Israel, Luxembourg, Türkiye and the United Kingdom. In Austria, Chile and Slovenia, the increase was driven by a decrease in the cash transfers received by this household type, while the value of cash transfers in Poland fell in real terms due to not being indexed to inflation.
Decreases of more than one percentage point were observed in only two countries: Latvia (-1.67 p.p.) and Australia (-1.56 p.p.). As mentioned above, the decrease in the tax wedge in Latvia resulted from the introduction of a flat basic allowance, which replaced a means-tested allowance, while in Australia the decrease was mostly caused by a decrease in personal income tax payments following changes to the tax schedule between fiscal years 2023/24 and 2024/25.
As % of labour costs
Note: Two earner married couple, one at 100% and the other at 67% of the average wage, with two children.
Includes payroll taxes where applicable.
As % of labour costs
Note: Table shows results for a two-earner married couple, one earning 100% and the other earning 67% of the average wage, with two children.
1. Countries ranked by decreasing total tax wedge.
2. Due to rounding, the changes in tax wedge in column (2) may differ by one hundredth of a percentage point from the sum of columns (3)-(6).
3. Includes payroll taxes where applicable.
Source: Country submissions, (OECD[2]) Economic Outlook Volume 2025 Issue 2.
For two-earner couples with two children, as % of gross wage earnings
Notes: Table shows results for a two-earner married couple, one at 100% and the other at 67% of the average wage, with two children.
1. Countries ranked by decreasing gross wage earnings.
2. Due to rounding, total may differ by one tenth of a percentage point from aggregate of columns for income tax, social security contributions and cash benefits.
3. US dollars with equivalent purchasing power.
Source: Country submissions, (OECD[2]) Economic Outlook Volume 2025 Issue 2.
Personal average tax rates
The net personal average tax rate was 18.8% of gross wage earnings on average for a two-earner married couple with two children where one spouse earns the average wage and the other earns 67% thereof in 2025. Table 1.6 shows the net personal average tax rate for each OECD country and its components as a percentage of gross wage earnings. Household gross wage earnings in column 5 are expressed in US dollar terms with equivalent purchasing power. Unlike the results shown in Table 1.3, cash benefits are taken into account in Table 1.6 and offset personal income taxes and employee SSCs (column 2 plus column 3, minus column 4).
The net personal average tax rate of the two-earner married couple varied greatly among OECD countries in 2025, ranging from -5.8% in Colombia to 30.8% in Denmark. In Colombia, the net personal average tax rate was negative because this household type did not pay income taxes at that level of earnings, paid contributions that are not considered to be taxes8 and received cash benefits that were paid on top of their wages. The disposable income of the household after tax represented 105.8% of the couple’s gross wage earnings in Colombia while it represented 69.2% in Denmark. The net personal average tax rate was below 10% in Costa Rica (9.8%), Korea (9.6%) and Chile (5.1%).
The Taxing Wages indicators focus on labour taxation. To assess the overall impact of the government sector on people’s welfare, other factors including indirect taxes (such as value added tax) should also be taken into account, as should taxation of other forms of income, such as capital income (Hourani et al., 2023[3]). NTCPs are not included in the calculations presented in this Report but further analysis of those payments is presented in the accompanying online paper: https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-policy/non-tax-compulsory-payments.pdf.
The average wage increased in all OECD countries between 2024 and 2025 in nominal terms, and it increased in 35 of the 38 countries in real terms. The real post-tax income for a single worker earning the average wage increased in 28 countries in real terms over the same period, having increased in 29 countries in 2024.
Table 1.7 shows gross wage earnings in national currency of the average worker across OECD countries in 2024 and 2025. The figures for 2025 are estimated by the OECD Secretariat by applying the change in the compensation per employee in the total economy as presented in the OECD Economic Outlook Volume 2025 Issue 2 database (OECD, 2025[2]) to the final average wage values provided for previous years by each OECD country. More information on the value of the average wage and the estimation methodology is included in the Annex of this Report.
The annual change in gross nominal wages in 2025 – shown in column 3 – ranged from 0.7% in Switzerland to 39.8% in Türkiye. To a large extent, changes in nominal wage levels in OECD countries exceeded consumer price inflation (see column 4 of Table 1.7. The annual change in real wage levels (before personal income tax and employee SSCs) decreased the most in Israel (-1.3%), whereas in two other countries the decline was smaller than 1 p.p. By contrast, 21 countries recorded real wage growth of up to 2 p.p. in 2025, while another fourteen countries experienced increases exceeding 2 p.p. (see column 5 of Table 1.7).
By combining changes in the average wage in 2025 with the changes in the net personal average tax rate discussed earlier in this chapter, it is possible to calculate changes in workers’ post-tax real income between 2024 and 2025. However, it should be noted that this indicator provides only a partial view of changes in workers’ overall disposable income because it does not take into account government policies that do not meet the criteria for inclusion in the Taxing Wages models. These policies may nonetheless have a significant impact on workers’ disposable income, thereby offsetting declines in real wages. Such ‘non-standard’ measures are typically linked to consumer spending and may include policies to reduce the cost of staple goods or to lower the cost of health and education. Further information on the benefits included in the Taxing Wages models is provided in Annex A, while country-specific information can be found in the country chapters located in Part II of the Report.
In ten OECD countries, the real post-tax income of a single worker without children earning the average wage was lower in 2025 than in 2024, either because the personal average tax rate (column 6) increased or remained unchanged while the real wage before tax decreased (column 5), or because the personal average tax rate increased by more than the real wage before tax.
In contrast, the real post-tax income of this household type rose in 28 countries in 2025: Australia, Belgium, Chile, Colombia, Costa Rica, Czechia, Denmark, Finland, France, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Sweden, Switzerland, Türkiye and the United States.
The personal average tax rate decreased or remained unchanged while the real wage before tax increased in Australia, Belgium, Colombia, Costa Rica, Denmark, Hungary, Iceland, Ireland, Italy, Latvia, Luxembourg, the Netherlands, Norway, Portugal, Sweden and the United States.
The personal average tax rate increased by less than the real wage before tax in Chile, Czechia, Finland, France, Greece, Lithuania, New Zealand, Poland, the Slovak Republic, Slovenia, Switzerland and Türkiye.
When comparing wage levels, it is important to note that the definition of average wage earnings may vary between countries due to data limitations. For instance, some countries do not include the wages earned by supervisory and managerial workers or do not exclude part-time workers (see Table A.4 in the Annex).
Table 1.8 provides more information on whether average wages for the years 2000 to 2025 are based on industry sectors C-K inclusive with reference to the International Standard Industrial Classification of All Economic Activities, Revision 3 (ISIC Rev.3), industry sectors B-N inclusive with reference to the International Standard Industrial Classification of All Economic Activities, Revision 4 (ISIC Rev.4), or on alternative classification systems where countries were not able to provide data in line with the two previously mentioned approaches.9
Note: Table shows results for a single worker without children earning the average wage.
1. Estimated percentage change in the consumer price index.
2. Percentage change in the personal average tax rate of the average worker (single without children) between 2024 and 2025.
Source: Country submissions, (OECD[2]) Economic Outlook Volume 2025 Issue 2.
1. For Australia, data is based on ANZSIC06 such that the categories substantially overlap with ISIC 4, sectors B-N.
2. For Austria, 2000-2003 average wage values are not based on the NACE (ISIC) classification.
3. For Chile, the values for 2000 to 2008 are estimates deriving from the annual changes in the average wages based on “CIIU Rev.3” (2009=100) between 2000 and 2008 and the average wage for 2009 based on CIIU Rev.4 (2016=100). From 2009, the values are based on ISIC4.CL2012 sectors B to R, excluding O (8422) “Defense Activities” and O (8423) “Public order and safety activities”.
4. For Colombia, average wage values are based on ISIC rev. 3. The “Agriculture, hunting and forestry”, “Other community, social and personal service activities” and “Activities not adequately defined” sectors are excluded.
5. For Costa Rica, the average wage from 2000 onwards refers to the earnings of workers within the formal sector. The average worker’s wage was calculated based on microdata from national household surveys.
6. For Denmark, average wage values are based on sectors B-N and R-S (NACE rev 2).
7. For Greece, average annual earnings refer to full time employees for the sectors B to N of NACE Rev 2, including Division 95 and excluding Divisions 37, 39 and 75 from 2008 onwards.
8. For Iceland, this uses a national classification system that corresponds with the NACE rev. 2 classification system.
9. For Ireland, values from 2019 onwards are based on CSO table NAQ08. This includes compensation of employees across all sectors of the economy based on official quarterly national accounts estimates for Ireland compiled in accordance with the European System of National and Regional Accounts (ESA 2010) framework. Values from 2008 to 2018 are based on CSO table EHA05 for NACE rev.2 B-N. Values for prior years are Secretariat estimates based on the growth rates of the average wages for sectors C to E in reference to NACE.
10. Information on data for Israel is available at: http://oe.cd/israel-disclaimer.
11. For Korea, average wage values are based on 6th Korean Standard Industrial Classification (KSIC) C-K for 2000-2001, 8th KISC C-M for 2002 to 2007. Average wage data from 2008 to 2010 is based on the 9th KISC B-N (samples of firms with five or more permanent employees). Average wage data of 2011 to 2019 is based on the 9th KISC B-N (samples of firms with one or more permanent employees). Average wage data of 2020 and 2021 are based on the 10th KISC B-N (samples of firms with one or more permanent employees).
12. For Latvia, values are based on NACE rev.2 and cover the private sector that includes commercial companies with central or local government capital participation up to 50%, commercial companies of all types without central or local government capital participation, individual merchants, and peasant and fishermen farms with 50 or more employees.
13. For Mexico: Average wage values from 2000-2023 are based on the Mexican Classification of Economic Activities (Clasificación Mexicana de Actividades Económicas [CMAE]), which is based on one of the first versions of ISIC.
14. For the Netherlands, average wages from 2012 onwards include all economic activities (sectors A to U from SBI2008). Values for the private sector only (sectors B to N) are not available.
15. For New Zealand: see the note for Australia, which applies from 2004.
16. For the Slovak Republic, average wage values are based on SK NACE Rev. 2 classification (B to N) without the earnings of the self-employed. However, employment data used for the calculation of the weighted mean still include the self-employed.
17. For Türkiye, the average wage is based on the average production worker wage ISIC rev. 3.1 sector D for years 2000 to 2006.
References
[3] Hourani, D. et al. (2023), “The taxation of labour vs. capital income: A focus on high earners”, OECD Taxation Working Papers, No. 65, OECD Publishing, Paris, https://doi.org/10.1787/04f8d936-en.
[2] OECD (2025), OECD Economic Outlook, Volume 2025 Issue 2, OECD Publishing, Paris, https://doi.org/10.1787/9f653ca1-en.
[5] OECD (2025), Taxing Wages 2025: Decomposition of Personal Income Taxes and the Role of Tax Reliefs, OECD Publishing, Paris, https://doi.org/10.1787/b3a95829-en.
[4] OECD (2024), Taxing Wages 2024: Tax and Gender through the Lens of the Second Earner, OECD Publishing, Paris, https://doi.org/10.1787/dbcbac85-en.
[1] OECD (2023), Taxing Wages 2023: Indexation of Labour Taxation and Benefits in OECD Countries, OECD Publishing, Paris, https://doi.org/10.1787/8c99fa4d-en.
← 1. Not all national statistical agencies use ISIC Rev.3 or Rev.4 to classify industries. However, the Statistical Classification of Economic Activities in the European Community (NACE Rev.1 or Rev.2), the North American Industry Classification System (US NAICS 2012). The Australian and New Zealand Standard Industrial Classification (ANZSIC 2006) and the Korean Standard Industrial Classification (6th to 9th KISC) include a classification which broadly conforms either with industries C-K in ISIC Rev. 3 or industries B-N in ISIC Rev.4.
← 2. Non-tax compulsory payments are requited and unrequited compulsory payments to privately-managed funds, welfare agencies or social insurance schemes outside general governments and to public enterprises (https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-policy/non-tax-compulsory-payments.pdf).
← 3. In Colombia, the general social security system for healthcare is financed by public and private funds. The pension system is a hybrid of two different systems: a defined contribution, fully-funded pension system; and a pay-as-you-go system. Each of those contributions are mandatory and more than 50% of total contributions are made to privately managed funds. Therefore, they are considered to be non-tax compulsory payments (NTCPs) (further information is available in the country details in Part II of the report). In addition, in Colombia, all payments for employment risk are made to privately managed funds and are considered to be NTCPs. Other OECD countries also have NTCPs (please see https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-policy/non-tax-compulsory-payments.pdf).
← 4. In Estonia, there is a unique personal income tax rate of 22%, regardless of the taxable income.
← 5. See note 3.
← 6. The impact of tax reliefs and cash transfers on the tax wedge for different household types and the statutory progressivity of labour taxation systems in OECD countries is discussed in the Special Feature of this Report as well as the Special Feature of the 2025 edition of Taxing Wages (OECD, 2025[5]).
← 7. The fiscal advantage for a couple with children may disincentivise the non-working spouse from taking-up employment. The tax wedge for a second earner in a married couple may be significantly higher than for a single worker at the same income level and with the same number of children, which may reduce women’s labour participation and thus contribute to persistent gender inequality across many OECD countries in terms of labour outcomes. This topic is discussed in detail in Chapter 2 of the Taxing Wages 2024 report (OECD, 2024[4]).
← 8. See note 3.
← 9. Most OECD countries have calculated average wage earnings on the basis of sectors B-N in the ISIC Rev. 4 Industry Classification since 2008 or earlier. Some countries have revised the average wage values for prior years as well. Average wage values based on the ISIC Rev. 4 Classification or any variant are available for years back to 2000 for Australia, Czechia, Estonia, Finland, Greece, Hungary, Iceland, Italy, Japan, Latvia, Lithuania, Portugal, the Slovak Republic, Slovenia, Spain and Switzerland.
Australia (for all years) and New Zealand (from 2004 onwards) have provided values based on the 2006 ANZSIC industry classification, divisions B to N, which substantially overlaps with the ISIC Rev.4, sectors B to N. For New Zealand, the years prior to 2004 are based on sectors C-K in ANZSIC. Türkiye has provided values based on the NACE Rev.2 classification sectors B-N from 2007 onwards. Values for the years prior to 2007 are based on the average production worker wage (ISIC rev.3.1, sector D). The average wage values are not based on the sectors B-N in the ISIC Rev. 4 Industry Classification for Costa Rica (all years), the Netherlands (from 2012 onwards) or Mexico (all years).