Among the 27 European countries covered in the OECD’s Taxing Wages 2025 report, seven recorded a decline in real post-tax income in 2024 compared to 2023 for the average single worker without children.
This measure reflects the amount of money left to spend or save after taxes are deducted and inflation is taken into account. The countries affected were Italy, Estonia, Czechia, France, Greece, Belgium, and Spain.
Why did people take home less money in these countries?
In Italy, the average wage increased by 3.9% in 2024. With inflation at 1.2%, this translated to a real wage growth of 2.7% before taxes. However, the personal average tax rate—which includes both personal income tax and employee social security contributions—rose sharply by 7.5%. This created a significant gap between real wage growth and the increase in personal taxation, ultimately eroding much of the benefit from higher wages.
Cristina Enache, global tax economist at the Tax Foundation, emphasised the impact of increased social security contributions.
While this highlights a growing gap between wages and taxation, it doesn’t directly reveal how much real post-tax income changed.
Personal average tax rates also increased by more than 4.5% in Estonia and Czechia, leading to lower real post-tax incomes in 2024, as real wage growth did not keep pace.
Enache of the Tax Foundation noted that in Estonia, the tax burden rise was driven by the removal of certain tax allowances. In Czechia, the increase was primarily due to higher social security contributions from either employees or employers.
In France, real wages grew by 0.7%, but the personal average tax rate increased by 1.7%, resulting in lower real post-tax incomes compared to 2023.
Portugal, UK and Turkey record highest increases
During this period, Portugal, the UK, and Turkey recorded the highest increases in real post-tax incomes. In Portugal, the personal average tax rate fell by 8%, while real wages grew by 4.7%.
“Portugal reduced its income tax rates for the first six tax brackets, reducing the overall tax wedge for the average income earner,” Cristina Enache told Euronews.
In the UK, the average tax rate dropped by 8.7%, although real wage growth was modest at 1.6%.
In Turkey, despite a 3.9% increase in the personal average tax rate, a substantial 15.5% rise in real wages led to significantly higher real post-tax incomes in 2024 compared to 2023. However, some critics have accused the national statistical office of manipulating inflation figures.
What does a lower or higher “real post-tax income” indicate?
Cristina Enache explained that “real post-tax income” refers to the income a person takes home after taxes, adjusted for inflation.
“A lower real post-tax income means that after taxes and inflation, the individual has less money to spend. Therefore, a decrease in the real post-tax income between 2023 and 2024 means that the worker earning the average wage is losing purchasing power,” she said.
Policy recommendation for ‘bracket creep’
‘Bracket creep’ occurs when income growth causes individuals to pay higher average income tax rates over time. This typically happens when inflation pushes taxpayers into higher tax brackets or erodes the value of tax credits, deductions, and exemptions. According to the Tax Foundation, ‘bracket creep’ leads to higher income taxes without any real increase in income.
“Indexing the income tax (and, depending on the design, the social security contributions) to inflation would avoid bracket creep and could mitigate the decrease in real post-tax income for workers,” Enache pointed out.
The Euronews article titled “Where did real wages rise and fall the most in Europe in 2024?” takes a closer look at how wages changed compared to 2023—examining nominal increases, inflation, real wage growth, and average salaries.