This chapter presents the main results of the analysis of the taxation of labour income across OECD countries in 2021. 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 – which is calculated by expressing the sum of personal income tax, employee plus employer social security contributions together with any payroll tax, minus benefits as a percentage of labour costs. The calculations also focus on the net personal average tax rate. This is the term used when the personal income tax and employee social security contributions net of cash benefits are expressed as a percentage of gross wage earnings. The analysis focuses on the single worker, with no children, at average earnings and makes a comparison with the one-earner married couple with two children, at the same income level. A complementary analysis focuses on the two-earner couple with two children, where one spouse earns the average wage and the other 67% of it.

In 2021, the COVID-19 pandemic continued to cause disruption around the world. However, the economic impact was not as damaging as in 2020: across the OECD, GDP grew by an estimated 5.3% in 2021 after contracting by 4.7% the previous year as countries were able to better manage the virus, aided by growing vaccination coverage over the course of the year. Unemployment fell across the OECD, although employment levels, hours worked and labour force participation generally remained below pre-crisis levels, and wage growth in many countries did not keep pace with sharp rises in consumer prices. As economies recovered, governments were able to scale back many of the measures such as job retention schemes and cash benefits introduced to protect livelihoods and incomes in 2020. Nonetheless, the recovery in 2021 was uneven between and within countries. Low-income jobs were disproportionately affected by the pandemic and many of those who lost their jobs have struggled to find new employment. Meanwhile, acute labour shortages emerged in certain sectors (OECD, 2021[1]).

The 2021 tax burden results based on the eight model household types are presented in Tables 3.1 to 3.13 and Figures 3.1 to 3.7. The model household types vary by marital status, number of children and economic status: single taxpayers, without children, earning 67%, 100% and 167% of the average wage (AW); a single parent, with two children, earning 67% of the AW; a one-earner couple at the AW level with two children; two-earner couples at 167% and 200% of the AW with two children; and a two-earner couple, without children, at 167% of the AW.The chapter presents different measures for the average tax burdens (tax wedge, personal tax rate, net personal tax rate, personal income tax rate and employee social security contribution rate) and marginal rates (tax wedge and net personal tax rate). The results for two measures of tax progressivity are also considered: tax elasticity on gross earnings and labour costs.

The chapter presents a graphical exposition of the tax burdens on labour income in 2021 for gross wage earnings ranging from 50% to 250% of the average wage. These are illustrated in separate graphs for each of four household types and for each OECD member country. The household types are single taxpayers without children; single parents with two children; one-earner married couples without children and one-earner married couples with two children.The graphs are divided into two sets showing the components of the average and marginal tax wedge as percentage of total labour costs (central and local income taxes; employee and employer social security contributions and cash benefits). The graphs also show the net personal average and marginal tax rates.

The chapter presents the results of tax burden measures on labour income for the eight model household types for 2020. The chapter includes Tables 5.1 to 5.13 that show a number of measures of the average tax burdens (tax wedge, personal tax rate, net personal tax rate, personal income tax rate and employee social security contribution rate) and the marginal rates (tax wedge and net personal tax rate). The results for two measures of tax progressivity are also considered: tax elasticity on gross earnings and labour costs.The table formats are identical to Tables 3.1 to 3.13 which are discussed in Chapter 3 on tax burden results on labour income for 2021. This chapter compares the two sets of tables and analyses changes in the tax burdens between 2020 and 2021.

The chapter presents the evolution of the tax burdens on labour income between 2000 and 2021. The chapter contains Tables 6.1 to 6.24, which are grouped by tax measures for the eight household types. Tables 6.1 to 6.8 contain the (average) tax wedge comprising income taxes plus employee and employer social security contributions (including any applicable payroll taxes) less cash benefits; Tables 6.9 to 6.16 provide the (average) burden of personal income taxes; and Tables 6.17 to 6.24 depict the (average) burden of income taxes plus employee social security contributions less cash benefits (net personal average tax rates).