Statistics Explained

Annual national accounts - evolution of the income components of GDP


Data extracted in March 2022.

Planned article update: March 2023.

Highlights


Compensation of employees was the largest income component of EU GDP in 2021, accounting for 47.8%.
Figure 1: Shares of income components to GDP Source: Eurostat (nama_10_gdp)


This article explains the income components of Gross Domestic Product (GDP) and presents the changes in their composition over the last 20 years as a proportion of GDP. The first part of the article presents the income components as a proportion of GDP in the latest values in 2021 and how these have changed over the last 20 years. The last section presents changes in main income components since 2001, which reflect the impact of the economic and financial crisis and of the COVID-19 pandemic.

Full article

Shares of income components to GDP in 2021

In 2021, the COVID-19 pandemic had still a significant impact on the shares of different income components. Compensation of employees was the largest income component in the European Union (EU), accounting for 47.8 % and 48.4 % of GDP in the EU and the euro area, respectively. It decreased by -0.9 percentage points (pp) in comparison with 2020 in both areas, while taxes on production and imports (less subsidies) increased by +0.5pp and +0.4pp respectively compared to 2020 and accounted for 10.8 % in the EU and 10.3 % in the euro area in 2021. Finally, gross operating surplus and mixed income accounted for 41.4 % of GDP for the EU and 41.3 % for the euro area, increasing by +0.4pp in the EU and by +0.6pp in the euro area in comparison with 2020.

Table 1: Income components of GDP, per cent, in 2021, 2020 and 2001
Source: Eurostat (nama_10_gdp)


Table 1 shows the income components as a proportion of GDP in the EU and the euro area as well as for the Member States in 2020 and 2021. The share of the income components varied significantly across the EU (see Figure 1). Compensation of employees is made up of two components : ‘wages and salaries’ and ‘employers' social contributions’.


Compensation of employees

Eleven Member States recorded a higher share of GDP than the EU average for compensation of employees. In Germany (53.7 %), Denmark (52.2 %), Slovenia (51.7 %), France (51.4 %) and Austria (50.3 %), this component accounted for over half the value of GDP. Sixteen Member States recorded a share of GDP that was equal or below the EU average for compensation of employees, with the lowest proportions in Ireland (26.0 %), Greece (36.6 %), Romania (38.1 %) and Poland (38.6 %).

Wages and salaries

Fifteen Member States recorded a higher share of GDP than the EU average for wages and salaries with Denmark (47.9 %) and Lithuania (47.3 %), accounting for 45 % and over of GDP. The lowest proportions were recorded in Ireland (21.8 %), Greece (28.5 %) and Italy (29.6 %).

Employers' social contributions

Nine Member States recorded a higher share of GDP than the EU average for this component with the highest proportions being observed in France (12.9 %), Belgium (12.2 %) and Estonia (12.1 %). Six countries reported an employers' social contribution of less than 5 % of GDP: Lithuania (1.6 %), Romania (1.7 %), Malta (3.6 %), Ireland (4.1 %), Denmark (4.3 %) and Hungary (4.9 %).

Taxes on production and imports (less subsidies)

Thirteen Member States recorded a higher share of GDP than the EU average for this component, with the largest values observed in Sweden (19.5 %), Croatia (15.7 %) and Hungary (15.5 %) . Ireland (5.1 %), Malta (6.2 %) and Czechia (7.9 %) all recorded shares of less than 8 % of GDP.

Gross operating surplus and mixed income

Sixteen Member States recorded a higher share of GDP than the EU average for gross operating surplus and mixed income. In Ireland (68.2 %), Romania (52.7 %) and Greece (52.5 %) , this component accounted for over half the value of GDP, while the lowest proportions were observed in Sweden (32.7 %), Denmark (34.3 %) and France (35.6 %).

Changes over the last 20 years

Table 1 presents also the changes to each of the income components by Member State and the EU between 2001 and 2021. The evolution of the shares of compensation of employees and corporate profits and mixed income over the last 20 years shows the clear impacts of the economic and financial crisis and of the COVID-19 pandemic in 2020. Between 2000 and 2007, a trend is observed of decreasing compensation of employees and increasing profit shares in relation to rather high increases of GDP. Then, the share of compensation of employees remained relatively resilient during the crisis, when GDP (chain linked volumes) decreased by 4.3 % in 2009 as profits took the biggest hits. After the crisis, trends remained relatively stable until 2019. With the COVID-19 pandemic in 2020, shares had moved to the benefit of gross operating surplus and mixed income and compensation of employees and at expense of taxes on production and imports (less subsidies). See Figure 2.

Figure 2: Evolution of the main income components (% of GDP, 2001-2021)
Source: Eurostat (nama_10_gdp)


Compensation of employees

The share of compensation of employees had a decreasing trend between 2000 and 2007 then increased significantly in 2008-2009 during the economic crisis and decreased back to its early 2000 levels. In 2020, this share increased during the COVID-19 pandemic but decreased again in 2021. Nevertheless, this share is still slightly higher than in 2019. As a result, over the last 20 years, this share slightly increased in the EU (+0.5pp) and in the euro area (+0.8pp). Significant changes were noted across the Member States. The largest increases in the shares of GDP for compensation of employees over the last 20 years were observed in Lithuania (from 37.8 % in 2001 to 48.9 % in 2021 or +11.1 percentage points (pp)) and Bulgaria (+9.9pp), while Ireland recorded the largest decrease (from 38.4 % in 2001 to 26.0 % in 2021, or -12.4pp). See Figure 3.


Figure 3: Changes to compensation of employees as a percentage of GDP between 2001 and 2021
Source: Eurostat (nama_10_gdp)

Wages and salaries

The share of wages and salaries has slightly risen in the EU over the last 20 years, (from 37.1 % in 2001 to 37.8 % in 2021, or +0.7pp) with the same trends as compensation of employees. In 2021, this share is still slightly higher than in 2019. For 21 Member States the share of this income component to GDP has increased, with the most notable increases observed in Lithuania (from 29.8 % in 2001 to 47.3 % in 2021, +17.5pp), Bulgaria (+11.3pp) and Latvia (+8.2pp). Significant decreases in the share of this component were recorded in Ireland (from 32.6 % in 2001 to 21.8 % in 2021, or -10.8pp), Poland (-2.6pp) and Belgium (-2.2pp). See Figure 4.

Figure 4: Changes to wages and salaries as a percentage of GDP between 2001 and 2021
Source: Eurostat (nama_10_gdp)

Employers' social contributions

The share of employers' social contributions has slightly decreased in the EU over the last 20 years (-0.4pp). This share has the same trends as compensation of employees except for the period between 2009-2019 when a constant decrease is observed. In 2021, this share recovered level of pre-pandemic period. In 14 Member States the share of this income component to GDP has increased. The most notable increases were observed in Cyprus (from 6.2 % in 2001 to 9.0 % in 2021, or +2.8pp), Czechia and Greece (both +1.7pp). Significant decreases in the share of this component were recorded in Lithuania (from 8.0 % in 2001 to 1.6 % in 2021, or -6.4pp), Hungary (-5.8pp) and Romania (-5.7pp). See Figure 5.

Figure 5: Changes to employers' social contributions as a percentage of GDP between 2001 and 2021
Source: Eurostat (nama_10_gdp)

Taxes on production and imports (less subsidies)

Over the past 20 years, the share of taxes on production and imports (less subsidies) first decreased in 2008-2009 with the economic crisis, increased to reach its previous levels and decreased again in 2020 with the COVID-19 pandemic. In 2021, it still remained below its pre-pandemic level. As a result, over the last 20 years, this share slightly decreased (-0.6pp) in the EU. 15 countries recorded a decrease in this ratio with the most significant decreases observed for Malta (-5.0pp), Ireland (-4.6pp) and Austria (-3.3pp). In ten Member States, the share of this income component to GDP has slightly increased over the same period with the most notable increases observed in Hungary (+1.8pp) and Spain (+1.1pp) . See Figure 6.

Figure 6: Changes to taxes on production and imports as a percentage of GDP between 2001 and 2021
Source: Eurostat (nama_10_gdp)


Gross operation surplus and mixed income

The share of gross operating surplus and mixed income increased steadily between 2000 and 2007 and took the biggest hits of the financial crisis in 2008-2009. Since 2016, this share slightly decreased until 2019 but increased surprisingly in 2020 and 2021. As a result, over the last 20 years, this share slightly increased in the EU (0.1pp) and slightly decreased in the euro area (-0.2pp). The largest increases in the share of GDP to gross operating surplus and mixed income were observed in Ireland (from 51.1 % in 2001 to 68.2 % in 2021, or +17.1pp), Malta (+5.4pp) and Belgium (+5.2pp) while the largest decreases in this ratio were recorded in Latvia (from 48.6 % in 2001 to 38.4 % in 2021, or -10.2pp), Lithuania (-9.5pp) and Bulgaria ( -8.4pp). See Figure 7.

Figure 7: Changes to operating surplus and mixed income as percentage of GDP between 2001 and 2021
Source: Eurostat (nama_10_gdp)


Excel.jpg Annual national accounts - evolution of the income components of GDP: tables and figures

Data sources and availability

GDP at market prices is the final result of the production activity of resident producer units. The income components of GDP are the main focus of the generation of income accounts, which can also be presented by industries. The aim of the GDP income components is to show how the value added, which has been generated in the production process, covers compensation of employees and other taxes (less subsidies) on production. The balancing item of this account is the operating surplus of the production units and mixed income of the households who act as producing units in the domestic economy. They present the income components from the point of view of the source sectors, rather than the destination sectors. Figure 1 shows the generation of income account for the EU in 2021.

GDP and main components

Income components of GDP

Compensation of employees (D.1) is defined as the total remuneration, in cash or in kind, payable by an employer to an employee in return for work done by the latter during an accounting period. It is made up of two main components.

The first component is wages and salaries (D.11), both in cash and in kind, and the second is employers' social contributions (D.12).

Some examples of transactions included in wages and salaries are basic wages and salaries that are payable to employees at regular intervals, enhanced payments such as overtime, night work, weekend work or disagreeable or hazardous circumstances. They include bonuses, holiday pay for official holidays and annual leave and housing allowances.

Employers' social contributions (D.12) are the social contributions payable by employers to social security schemes or other employment-related social insurance schemes to secure social benefits for their employees. These may be either "actual" or "imputed" contributions. Examples of these include actual payments made by employers for the benefit of employees to insurers such as social security and other employment-related social insurance schemes. They also include imputed contributions which represent the counterpart to their social insurance benefits paid directly by employers to their employees without involving an insurance enterprise or autonomous pension fund with a segregated funding reserve.

Compensation of employees is also presented by industry through the NACE Rev.2 A*10 classification.

Taxes on production and imports (D.2) consist of compulsory, unrequited payments, in cash or in kind, which are levied by general government, or by the institutions of the EU in respect of the production and importation of goods and services, the employment of labour, the ownership or use of land, buildings or other assets used in the production process. These taxes are payable irrespective of profits made.

Subsidies (D.3) are current unrequited payments which general government or the institutions of the EU make to resident productions. Their objective is mainly for influencing levels of production, prices of product or the remuneration of the factors of production.

Gross operating surplus (B.2g) and mixed income (B.3g) is the balancing item of the generation of income account. Operating surplus is a measure of the surplus accruing from the production process before deducting any explicit or implicit interest charges, rent of other property incomes payable on the financial assets, land or other natural resources which have contributed to this production. The latter contains an element of remuneration for work done by the owner or other members of the households that cannot be separately identified from the return to the owner as an entrepreneur and it is associated with the self-employed.

Context

European institutions, governments, central banks as well as other economic and social bodies in the public and private sectors need a set of comparable and reliable statistics on which to base their decisions. National accounts can be used for various types of analysis and evaluation. The use of internationally accepted concepts and definitions permits an analysis of different economies, such as the interdependencies between the economies of the EU Member States, or a comparison between the EU and non-member countries.

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