Low wage trap


Time series: Labour_2.3.4_EN.xls

LOW WAGE TRAP
(Per cent)
  2013 2014 2015 2016 2017
Single person with no children, with gross earnings increase from 33% to 67% of the AW 21.6 30.1 21.6 21.6 22.0
One-earner married couple with two children, with gross earnings increase from 33% to 67% of the AW 21.6 30.1 21.6 21.6 22.0

Explanatory notes:
Low wage trap % = 100 * ( 1 - (NI67%-NI33%)/(GE67%-GE33%))
(NI67%-NI33%) - change of net income when gross earnings change from 33% to 67% of AW.
(GE67%-GE33%) - change of gross earnings from 33% to 67% of AW.
Gross earnings (GE) - gross annual earnings for the corresponding family case.
Net income (NI) - net annual income for the corresponding family case, calculated by deducting form the gross earnings of the employee's social security contributions and income taxes, and adding family allowances (if applicable) plus housing benefits (if applicable), plus social assistance, plus in-work benefits (if applicable).
AW - average worker, working at full-time and receiving the average gross earnings in industries and services - sections B to N of NACE Rev. 2.
24.06.2019
Net earnings and tax rates - net earnings, average tax rate, tax wedge on labour costs, unemployment trap, low wage trap - national level
Contact
Contact organisation

National Statistical Institute

Contact organisation unit

"Labour Statistics" Department

Contact name

Emilia Milosheva

Contact person function

State expert

Contact mail address

2, P. Volov Str.

Contact email address

[email protected]

Contact phone number

+35929857610

Contact fax number
Metadata update
Metadata last certified30 June 2014
Metadata last posted30 June 2014
Metadata last update30 June 2014
Statistical presentation
Data description

"Net earnings and Tax rates" is a group of indicators and variables based on illustrative models developed by OECD. Information is provided on:

a) net earnings - information is provided for the variables: total labour costs, gross earnings, social security contributions, income taxes, family allowances, net earnings;

b) tax rates;

c) tax wedge on labour costs;

d) unemployment trap;

e) low wage trap.

All indicators and variables are based on gross earnings, social security contributions, personal income tax, family allowances and other benefits.

Data refer to an average worker in different illustrative cases, defined on the bases of marital status (single vs. married), number of workers (in case of couples), number of dependent children and level of gross earnings, expressed as percentage of the average earnings of an average worker.

Classification system

· National Classification of Economic Activities (NCEA-2003, for international use NACE.BG 2003) - up to 2007;

· Classification of Economic Activities (CEA-2008, for international use NACE.BG 2008) - since 2008.

Sector coverage

Economic activities within sections C to K of NACE.BG-2003 from 2000 to 2007, and since 2008 in sections B to N of NACE.BG-2008.

Statistical concepts and definitions

All indicators and variables are based on gross earnings, social security contributions, personal income tax, family allowances and other benefits.

Data refer to an average worker in different illustrative cases, defined on the bases of marital status (single vs. married), number of workers (in case of couples), number of dependent children and level of gross earnings, expressed as percentage of the average earnings of an average worker. According to the model developed by OECD, the average worker (AW) is a full-time employee who receives the average earnings in industries and services - sections C to K of NACE.BG-2003 from 2000 to 2007, and since 2008 in sections B to N of NACE.BG-2008.

Gross earnings cover remuneration in cash, paid during the reference year by the employer, before tax deductions and social security contributions payable by employees and retained by the employer. All regular and irregular bonuses are included. Severance payments and payments in kind are excluded.

Net earnings are the annual net incomes for the corresponding family case, calculated from the gross earnings by deducting employees' social security contributions and personal income taxes, and adding family allowances (if applicable). The following situations are considered:

- single person with no children and earnings level of 50%, 67%, 80%, 100%, 125% and 167% of the AW respectively;

- single person with two children and earnings level of 67% of the AW;

- married couple with two children and the following levels of earnings of the AW: husband 100%/wife 0%; husband 100%/wife 33%; husband 100%/wife 67%; husband 100%/wife 100%;

- married couple with no children and earnings levels as percentage of the AW: husband 100%/wife 33%; husband 100%/wife 100%.

The average tax rate is defined as the income tax on gross earnings plus the employee's social security contributions less family allowances, expressed as a percentage of gross wage earnings.

The tax wedge on labour costs is defined as income tax on gross wage earnings plus employee's and employer's social security contributions, expressed as a percentage of the total labour costs. The total labour costs are defined as the total from the gross earnings plus employer?s social security contributions plus payroll taxes, paid by the employer (not applicable in Bulgaria).

The unemployment trap measures the percentage of gross earnings which is taxed away by the combined effect of the levied taxes and social contributions and the withdrawal of unemployment, and other benefits, when an unemployed person returns to employment.

The low wage trap (LWT) measures the percentage of gross earnings which is taxed away by the combined effect of the levied taxes and social contributions and the withdrawal of social benefits, when employee's gross earnings increase from 33% to 67% of the AW. LWT provides information on the financial consequences for an employed person when increasing his/her work efforts (either as an increased number of hours worked or due to changes in skills) and thus of his/her wages. The indicator is calculated for:

- single person with no children;

- one-earner married couple with two children.

Methods of calculations of indicators are described in the document "Net earnings and tax rates - definitions and models": http://www.nsi.bg/sites/default/files/files/metadata/Labour_Methodology_2.3_EN.pdf

Statistical unit

The statistical unit is the family. All situations are illustrative and may not be representative in Bulgaria.

Statistical population

All families in Bulgaria.

Reference area

Area of Republic of Bulgaria.

Time coverage

2000 - 2012

Base period

Not applicable.

Unit of measure

BGN, percent (%).

Reference period

Calendar year

Institutional mandate
Legal acts and other agreements

The data are collected on the basis of gentlemen's agreements.

Data sharing

Not applicable.

Confidentiality
Confidentiality - policy

· Law on Statistics (Statistics Act);

· Regulation (EC) No 223/2009 on European statistics (recital 24 and Article 20(4)) of 11 March 2009 (OJ L 87, p. 164), stipulates the need to establish common principles and guidelines ensuring the confidentiality of data used for the production of European statistics and the access to those confidential data with due account for technical developments and the requirements of users in a democratic society.

Confidentiality - data treatment

Not applicable.

Release policy
Release calendar

Not part from the release calendar.

Release calendar access

Not applicable.

User access

Data are published on the website of NSI under heading "Labour market"  in accordance with Law on Statistics (Chapter 5) and the European Statistics Code of Practice respecting professional independence and in an objective, professional and transparent manner in which all users are treated equitably.

Frequency of dissemination

Annual

Accessibility and clarity
News release

None.

Publications

None.

On-line database

Indicators are accessible to all users on the NSI's website under heading Labour market - Annual statistics on employment and labour cost - Structural indicators:

· Net earnings and average tax rate: http://www.nsi.bg/en/node/6445

· Tax wedge on labour costs: http://www.nsi.bg/en/node/6448

· Unemployment trap: http://www.nsi.bg/en/node/6451

· Low wage trap: http://www.nsi.bg/en/node/6454

Micro-data access

Not applicable.

Other

Not applicable.

Documentation on methodology

Methodology used is published in the annual editions of OECD:

· "Taxing wages" - http://www.oecd.org/media/oecdorg/directorates/centrefortaxpolicyandadministration/Methodology_2011.pdf

· "Benefits and Wages".

Methods of calculations are described in the document "Net earnings and tax rates - definitions and models: http://www.nsi.bg/sites/default/files/files/metadata/Labour_Methodology_2.3_EN.pdf

Quality documentation

None.

Quality management
Quality assurance

According to Article 2, Para 3 of the Bulgarian Law on Statistics statistical information shall be produced in compliance with the following criteria for quality: adequacy, accuracy, timeliness, punctuality, accessibility and clarity, comparability and logical consistency.

Quality assessment

Not done.

Relevance
User needs

Main users are Eurostat and OECD. (Until 2007 NSI did calculations by the established methodology and delivered figures to Eurostat. Since 2008 calculations are done by OECD based on a questionnaire answered annually by NSI concerning characteristics of social and tax legislation in Bulgaria).

User satisfaction

Survey on users' satisfaction is not carried out.

Completeness

All indicators from the group are calculated.

Accuracy and reliability
Overall accuracy

Source of data on gross annual earnings in industries and services is the annual survey on "Employed persons, wages and salaries and other labour costs" which is an exhaustive statistical survey.

Sampling error

Not applicable.

Non-sampling error

Not applicable.

Timeliness and punctuality
Timeliness

Deadline for publication: 12 months after the reference year.

Punctuality

Punctuality depends on the availability of data on gross annual earnings.

Coherence and comparability
Comparability - geographical

Definitions and methodology of OECD are applied.

Comparability - over time

Comparability over time is influenced by the change of the classification of economic activities used for definition of average gross annual earnings in industries and services - economic activities within sections C to K of NACE.BG 2003 from 2000 to 2007, and since 2008 in sections B to N of NACE.BG 2008.

Coherence - cross domain

Indicators within the data set are internally coherent.

Coherence - internal

All utilized models are illustrative, representing hypothetical situations and may not be representative at national level or compliant with other sources of similar information.

Cost and burden

Survey on respondents' burden is not carried out.

Data revision
Data revision - policy

It is applied only if there is revision of gross annual earnings which is base for calculation of the indicators.

Data revision - practice

It is applied only if there is revision of gross annual earnings which is base for calculation of the indicators.

Statistical processing
Source data

Source of data on gross annual earnings in industries and services is the annual survey "Employed persons, wages and salaries and other labour costs" which is an exhaustive statistical survey:

http://www.nsi.bg/en/node/6437

Frequency of data collection

Not applicable.

Data collection

Not applicable.

Data validation

Arithmetic checks are applied on the calculations.

Data compilation

Calculated are aggregated average annual earnings for sections B to N of NACE.BG-2008.

Adjustment

Not applicable.

Comment
Metadata Structure Definition: ESMS_MSD+BNSI+2.0+SDMX.2.0.xml

Pages

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