This chapter presents and analyses the main indicators of labour taxation across OECD countries in 2023. 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 a single worker with no children at average earnings; a one-earner married couple with two children, at the same income level; 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 2023.

This Special Feature uses Taxing Wages models and indicators to examine the tax treatment of second earners within married couples in OECD countries. Although the Taxing Wages methodology does not distinguish between male and female workers, women account for at least three-quarters of second earners (the lesser-earning spouse in Taxing Wages household types that include two adults) in most OECD countries (OECD, 2023[1]). By estimating the tax rates on second earners, the chapter provides insights into the incentives that the tax system provides for them to take up employment or increase the amount they work. As such, it aims to inform policies to address persistent gender gaps in labour market outcomes across OECD countries, in particular those related to labour force participation.

The effective tax rates on labour income in 2023 calculated for the eight model household types are presented in Tables 3.1 to 3.13 and Figures 3.1 to 3.7. The household types vary by marital status, number of children and economic status. For each household type, the chapter presents different indicators for the average rates (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 graphical expositions of effective tax rates on labour income in 2023 for gross wage earnings ranging from 50% to 250% of the average wage. These are illustrated in separate graphs for 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 a percentage of total labour costs. The graphs also show the net personal average and marginal tax rates.

The chapter presents the effective tax rates on labour income for the eight model household types for 2022. Tables 5.1 to 5.13 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 in Chapter 3, which show the effective tax rates on labour income in 2023.

This chapter presents the evolution of effective tax rates on labour income between 2000 and 2023 for the eight household types. Tables 6.1 to 6.8 show 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).