Labour Market and Wage Developments in Europe 2025

The relative situation of low wage earners has improved since the pandemic

In-work poverty has continued its decreasing trend, highlighting the improving income situation of workers living in low-income households, relative to other workers. In-work poverty represents the share of persons at work who have an equivalised disposable income below 60% of the national median. It reached 8.2% in 2024 from a peak of 9.8% in 2016 and 8.9% in 2021 (Graph 2.7, panel a). Between 2016 and 2024, in-work poverty decreased in around half of the Member States, and notably by more than 1 percentage point in Germany, Greece, Hungary, Italy, Poland, Portugal, Romania and Spain. However, it increased by more than 1 percentage point in Croatia, Luxembourg, Malta, and Slovakia. Overall, beyond the impact of support measures adopted during the pandemic and the energy crisis, these improvements may also reflect a more sustained wage growth among lower-income working households compared to others. At the same time, in-work poverty is also affected by other factors, such as other sources of household income (including the income of other household members and social benefits), the household’s composition (e.g. the number of dependent children), and work intensity of the household .

Also the share of low-wage earners has decreased in the EU. The share of low-wage earners, reflecting the proportion of employees earning two-thirds or less of the median gross hourly earnings in a country, decreased in the EU, from 15.2% in 2018 to 14.7% in 2022 . This indicates that, on average, low hourly wages tended to increase more than other wages, or people moving out of low- paid jobs, and thus to get closer to the median (Graph 2.7, panel b). The situation, however, varies greatly across Member States. The share decreased by more than 2 percentage points in Lithuania, Poland, Portugal, Slovakia and Slovenia. In contrast, it increased by more than 2 percentage points in Belgium, Bulgaria, Greece, Luxembourg, Hungary and Romania, indicating in those countries a compression of the hourly wage distribution at the bottom. However, this may not fully reflect the wages ultimately perceived by workers - due to differences in hours worked during a month.

These developments may somewhat contrast with a widespread perception of an unfair distribution of income. In the Special Eurobarometer survey on Fairness, inequality, and intergenerational mobility held in 2022 , across the EU, 57% of respondents indicated that large differences in people’s incomes are acceptable to properly reward differences in talents and efforts. At the same time, 37% of respondents tended to believe that, by and large, people do not get what they deserve (versus only 35% that believe the opposite). The perception of unfairness was marked in Cyprus (65% of respondents), Greece (60%) or Slovenia (55%), and less in Luxembourg (18%), Denmark (25%) or Finland (26%). Furthermore, based on the 2024 European Working Conditions Survey conducted by Eurofound, 14% of responding men and more than 18% of responding women disagree that they get appropriately paid when considering all their efforts and achievements in their jobs. The share of workers who consider their pay as inappropriate is above 16% in agriculture, education, heath, as well as in commerce and hospitality.

Looking more in-depth at the distribution of wages and their ability to prevent material deprivation can provide further insights about wage adequacy. A declining rate of in-work poverty or a decreasing share of low-wage earners is not sufficient to conclude that wages are adequate. It is also key to examine the wage distribution to allow for a better comparison of wages across and within groups of workers. Moreover, the degree of material deprivation of workers can help to better understand to what extent wages provide for a decent living . Boxes 2.1 and 2.2 present those indicators, as well as their pros and cons when it comes to assessing wage adequacy.

Wages have played an important role in improving the situation of vulnerable workers

Minimum wages have increased more than the average in most Member States, improving the relative situation of minimum wage earners. Between 2019 and 2024, most Member States where a statutory minimum wage exists showed large increases in the Kaitz indexes, that represent the ratio of the gross minimum wage to the mean or average earnings (Graph 2.8, panel a). Among the 18 Member States for which data is available (for 2024, or for 2023), the ratio of the minimum wage to the average earnings increased in 15 Member States. This reflects sizeable updates aimed at mitigating the effects of the high inflation on the lowest paid (see also Section 2.2). The ratio remained stable in four countries, (Belgium, Hungary, Ireland and Luxembourg) and dropped only in three (Bulgaria, Lithuania and Malta).

Graph 2.8: Kaitz index and wage ratio W20/W50 (for single-person households, working full-time)

Note:

In panel a: The Kaitz index can only be for Member States with statutory minimum wage. In panel b: Member States are sorted according to their GDP per capita in PPP 2023. The wage ratios is calculated for single-person households working full-time.

Source:

Eurostat [earn_avgr2] and own calculations based on EU SILC microdata.

In half of Member States, wage decile ratios also point to declining disparities at the bottom of the wage distribution. The gap between lower and median wages can be assessed using ratios of percentiles to the median of the gross wage distribution computed for full-time single workers . For instance, the ratio of the 2nd decile to the median wage increased in 13 countries (Austria, Cyprus, Denmark, Estonia, Finland, Hungary, Greece, Lithuania, Malta, Portugal, Slovakia, Slovenia and Spain), indicating narrowing disparities. The ratio remained stable in five other countries (Belgium, Germany, Luxembourg, the Netherlands and Latvia). However, it decreased in nine Member States (Bulgaria, Croatia, Czechia, France, Ireland, Italy, Poland, Romania and Sweden) (Graph 2.8, panel b). Among the latter countries, Bulgaria, Croatia, Poland and Romania displayed strong real wage increases: lower-wage earners also benefitted from some increases in real terms, although disparities increased. In contrast, Czechia, France, Italy, Sweden showed expanding disparities between lower- wage earners and the median, while real wages remained below 2019 levels (see also section 2.2). This points to relatively weak average wage growth for lower-middle-wage earners in these countries.

Minimum wage increases have a significant impact on the wages of low-paid workers earning beyond minimum wage. A 1% increase in minimum wages results on average in a 0.3% increase in the wages of low-paid employees, but only large minimum wage increases (at least 15% in nominal terms) have a significant impact . Minimum wage updates can also benefit workers with higher wages, but with a time lag compared to spillover effects on low wages, as collective agreements take some time to translate national minimum wage increases to the whole wage distribution. As a result, increases in minimum wages appear to initially compress the wage distribution, but the extent to which compression persists depends notably on sectors and collective bargaining characteristics . In addition, spill-overs on other low-to-medium wages may have been less marked after 2022 due to high inflation. Firms faced increasing cost pressures (notably in energy- intensive industries) and were less able to increase wages as they would have done before, considering increases in minimum wages.

Wage disparities based on skill levels and occupations vary widely across Member States. Some countries, including Estonia, Ireland, Latvia, or Portugal, exhibit a highly polarised wage structure, hinting at a high wage premia for skills and large differences in wages across occupations . In contrast, a more compressed distribution is observed in Czechia, Denmark, Slovakia or Sweden, with overall lower wage premia for skills. Over time, the wage differentials along skills, thus the skill premia, increased in 10 countries, in particular in Finland, Ireland and Malta. This is consistent with the evidence pointing to the increased labour demand for digital or cognitive skills and an associated wage premium for those workers. This may also hint at specific skill gaps, e.g. linked to the twin transition, or the high labour shortages following the pandemic . Seven countries experienced a decrease in wage polarisation, especially Poland, Romania and Slovakia, despite tight labour markets.

Women and third country nationals are more likely to remain in low-paid jobs. In 2023, women's gross hourly earnings remained on average 12.0% below those of men in the EU . The gender pay gap has decreased compared to 2019, for the EU (from 14.1%), as well as in 21 EU countries. However, the gap tends to increase with age (as a result of the career interruptions women may experience during their working life), and is on average higher in the private sector than in the public sector. Furthermore, in 2023, the persistence in low-paid jobs for at least 4 years ranged from less than 2% in Finland, Denmark and Sweden and more than 10% in Latvia, Estonia, Hungary, Malta, Cyprus, Portugal, Lithuania, Ireland, Bulgaria . In a majority of countries, women are more likely to experience low pay for multiple years compared to men, with wider gender differences in Cyprus, Czechia, Estonia, Latvia, Lithuania and Malta. The persistence of low-paid jobs is significantly higher among migrants than native employees, except notably in Sweden.

Yet, middle class workers have become more exposed to material deprivation in some countries

An in-depth analysis of worker’s material deprivation provides valuable insights whether wages are sufficient to afford basic goods and services. One can argue that the more adequate wages are, the less workers are materially deprived. Although it is not universally agreed what this implies in terms of ultimate purchasing power, this concept of material deprivation, developed by Eurostat, provides a commonly agreed framework at the EU level . The concept lists goods and services generally required for a household to lead a decent life and integrate meaningfully into society. As such it is relevant to analyse the extent to which individuals (or households) can afford these 13 pre-defined ‘basic’ items . There are a number of caveats though. In particular, the level of deprivation can be affected not only by wage rates but also by work intensity, other sources of incomes and household composition, as well as other factors such as the relative prices of these basic items (e.g. energy) and in which quantity they are needed (see also Box 2.2) .

Developments in the average number of items deprived among workers are assessed, accounting for household composition or work intensity. The situation of two groups of workers is considered: single, full-time workers without children and all workers. This allows, respectively, to look at wage adequacy for a single worker, excluding the effects of second wage earners in the household or other dependent household members (including family benefits), and also the actual average situation of workers. In essence the results are similar for both types of workers . The analysis also provides further insights into the role played by hours worked and gross wages vis-à- vis other sources of income. The section then focuses on the three lower monthly gross wage quintiles in each Member State, as deprivation is expected to generally affect lower-wage workers.

Overall, workers’ material deprivation of basic items depends on GDP per capita, but the distribution of incomes also matters. At EU level in 2023, workers reported on average to be deprived of 1.3 basic items (1.4 for single, full-time workers). Less than 10% of workers lacked 5 or more basic items, i.e. faced social and material deprivation, according to Eurostat’s definition. In countries with a lower GDP per capita, such as Bulgaria, Greece and Romania, workers report on average to be deprived of 2 or more items and the share of socially and materially deprived workers lies above 15%. This underlines the key role of GDP per capita, and ultimately national productivity in determining the standards of living of a country’s workers. At the same time, in some countries with medium GDP per capita, notably Czechia, Estonia and Slovenia, workers have similar or fewer deprivation items (ranging from an average of 0.8 items for single, full-time workers in Slovenia to 1.1 items in Estonia) than countries with a higher GDP per capita such as Denmark and Germany (resp. 1.2 and 1.5 items reported on average). This suggests that the income distribution can also play a significant role in reducing material deprivation, either via wages - notably by ensuring that more workers benefit from economic growth - or via redistribution by the tax-benefit system.

Since 2019 lower-middle and middle wage earners have increasingly struggled to afford basic goods or services, in particular in higher income countries. Between 2019 and 2023 the average number of material deprivation items reported by workers tended to decrease in catching-up countries, consistent with a strong real wage growth. However, it increased in many higher income Member States (Graph 2.9 and Graph A.2.1.2 in the annex) . The worsening in some Member States reflects increases in energy and food prices which led to a growing share of workers being deprived of proper heating or quality food, and a slow recovery in real wages (see Section 2.2). The increase in deprivation was marked for the lower-middle wage earners and the middle wage earners, represented respectively by the 2nd and 3rd wage quintiles, but less for the lowest wage earners (Graph A.2.1.3 in Annex 2.1) . Thus, lower-middle wage groups, that benefitted less from support measures and minimum wage increases than the lowest wage earners, have become more vulnerable . From 2024, the persistence of inflation in some services, which replaced food and energy as drivers of inflation, may also affect workers in those lower-middle wage groups.

Less hours worked is one reason for the increase in deprivation for some workers. Between 2019 and 2023, the number of hours worked declined in most countries. This concerns the hours worked for full-time employees in almost all countries (except in Cyprus and Poland where it slightly increased and in Denmark, Lithuania where it stayed stable), as well as for part-time workers in most higher income Member States. This decline in hours worked, coupled with the strong decreases in real hourly wages experienced over 2022-2023, is likely to have contributed to the increase in workers’ material deprivation. Conversely, in lower income Member States, real hourly wages and working hours of part-time workers tended to increase, except in Romania, which may have helped to reduce the material deprivation of workers.