Annual national accounts - evolution of the income components of GDP


Data extracted in June 2020.

Planned article update: June 2021.

Highlights
Compensation of employees was the largest income component of EU GDP in 2019, accounting for 47.5 %.
Shares of income components to GDP in 2019
Source: Eurostat (nama_10_ma)

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 2019 and how these have changed over the last 20 years. The last section presents changes in main income components since 1999 which reflect mainly the impact of the economic and financial crisis.


Full article

Shares of income components to GDP in 2019

In 2019, compensation of employees was the largest income component of European Union GDP accounting for 47.5 % and 48.1 % in the euro area, while taxes on production and imports (less subsidies) accounted for 11.9 % in the EU and 11.5 % in the euro area. Gross operating surplus and mixed income accounted for 40.6 % of GDP for the EU and 40.4 % in the EA. 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 2019. The shares of the income components varied significantly across the EU countries (see Figure 1).

Table 1: Income components of GDP, per cent, in 2019 and 1999
Source: Eurostat (nama_10_ma)


Figure 1: Shares of income components to GDP in 2019
Source: Eurostat (nama_10_ma)


Compensation of employees

Eleven Member States recorded a higher share of GDP than the EU average for compensation of employees. In Germany (53.8 %), France (51.2 %), Denmark (51.1 %) and Slovenia (51.0 %), this accounted for over half the value of GDP. Sixteen Member States recorded a share of GDP that was below the EU average for compensation of employees, with the lowest proportions in Ireland (29.0 %), Greece (34.7 %), Romania (38.2%) and Poland (39.3 %).

Wages and salaries

Eleven Member States recorded a higher share of GDP than the EU average for wages and salaries with Denmark (47.2 %), Lithuania (44.8 %), Germany (44.3 %), Slovenia (43.8 %), Luxembourg (42.7 %), Latvia (40.9 %) and Croatia (40.5%) accounting for 40% and over of GDP. The lowest proportions were recorded in Ireland (24.7%), Greece (26.2 %) and Italy (29.4 %).

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 (12.6 %) and Estonia (12.5 %). Five countries reported an employers' social contribution of less than 5% of GDP: Lithuania (1.5 %), Romania (1.7%), Malta (3.3%), Denmark (3.9 %) and Ireland (4.3 %).

Taxes on production and imports (less subsidies)

Fourteen Member States recorded a higher share of GDP than the EU average for this component, with the largest values observed in Sweden (20.2 %), Croatia (18.0 %) and Hungary (15.6 %). Ireland (7.0 %), Czechia and Romania (both 9.5 %), Germany and Slovakia (both 9.9 %) all recorded shares of less than 10% 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 (63.4 %), Romania (52.3 %) and Greece (51.2 %), this component accounted for over half the value of GDP, while the lowest proportions were observed in Sweden (32.1 %), France (34.9 %) and Denmark (35.1 %).

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 1999 and 2019.
The evolution of the shares of compensation of employees and corporate profits and mixed income over the last 20 years shows the clear impact of the economic and financial crisis. Between 2000 and 2007 we observe a trend 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. See Figure 7.

Compensation of employees

The shares of compensation of employees remained stable in the EU and slightly increased in the euro area (+0.3pp). Gross operating surplus and mixed income to GDP and employers' social contributions have decreased over the last 20 years and this was off-set by an increase in the ratio of the wages and salaries and in the ratio of taxes on production and imports (less subsidies). 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 Latvia (from 42.8 % in 1999 to 49.8 % in 2019 or +7.0 percentage points (pp)), Bulgaria (6.5pp), Czechia (+5.0pp) and Sweden (+4.4pp), while Ireland recorded the largest decrease (from 39.8 % in 1999 to 29.0 % in 2019, or -10.8pp), followed by Croatia (-5.4pp) and Malta (-4.3pp). See Figure 2.

Figure 2: Changes to compensation of employees as a percentage of GDP between 1999 and 2019
Source: Eurostat (nama_10_ma)

Wages and salaries

The share of wages and salaries has slightly risen in the EU over the last 20 years, (from 37.1% in 1999 to 37.8% in 2019, or +0.7pp). However, in 17 Member States the shares of this income component to GDP have increased more substantially, with the most notable increases observed in Lithuania (from 34.1 % in 1999 to 44.8 % in 2019, or +10.7pp), Romania (+10.2pp), Bulgaria (+9.7pp) and Latvia (+6.7pp). Significant decreases in the share of this component were recorded in Ireland (from 34.0 % in 1999 to 24.7 % in 2019, or -9.3pp), Portugal (-3.5pp), Croatia (-3.2pp) and Malta (-3.1pp). See Figure 3.

Figure 3: Changes to wages and salaries as a percentage of GDP between 1999 and 2019
Source: Eurostat (nama_10_ma)

Employers' social contributions

The share of employers' social contributions has slightly decreased in the EU over the last 20 years (-0.7pp). However, in 13 Member States the shares of this income component to GDP have increased. The most notable increases were observed in Sweden (from 4.9 % in 1999 to 8.0 % in 2019, or +3.1pp) and in Greece (+2.0pp). Significant decreases in the share of this component were recorded in Lithuania (from 8.9 % in 1999 to 1.5 % in 2019, or -7.4pp), Romania (-6.5pp), Hungary (-4.7pp) and Bulgaria (-3.3pp). See Figure 4.

Figure 4: Changes to employers' social contributions as a percentage of GDP between 1999 and 2019
Source: Eurostat (nama_10_ma)

Taxes on production and imports (less subsidies)

Over the past 20 years, the share of taxes on production and imports (less subsidies) had remained rather stable (+0.1pp) in the EU. In 14 Member States, the shares of this income component to GDP have increased with the most notable increases observed in Cyprus (+5.5pp) and Greece (+3.2pp). However, 13 countries recorded a decrease in this ratio over the same period with the most significant decreases observed for Ireland (-3.5pp), Lithuania (-2.6pp), Slovenia and Sweden (both -1.6pp) and Belgium (-1.5pp). See Figure 5.

Figure 5: Changes to taxes on production and imports as a percentage of GDP between 1999 and 2019
Source: Eurostat (nama_10_ma)


Gross operation surplus and mixed income

The largest increases in the share of GDP to gross operating surplus and mixed income were observed in Ireland (from 49.4 % in 1999 to 63.4 % in 2019, or +14.0pp), Malta (+3.8pp) and Croatia (+3.7pp), while the largest decreases in this ratio were recorded in Cyprus (from 50.6 % in 1999 to 40.9 % in 2019, or -9.7pp), Greece (-7.4pp) and Bulgaria and Latvia (both -6.8pp). See Figure 6.

Figure 6: Changes to operating surplus and mixed income as percentage of GDP between 1999 and 2019
Source: Eurostat (nama_10_ma)


Figure 7: Evolution of the main income components (% of GDP, 1999-2019)
Source: Eurostat (nama_10_ma)

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 2019.

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 is wages and salaries (D.11), both in cash and in kind, while 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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