Importance and applications

Earnings data are valuable for economic indicators. When deflated by an appropriate price index they can show in general terms how employees throughout the economy are faring on average. They are useful for a wide range of users, including planners, policy-makers, employers and groups of workers. The concept of earnings relates to income which accrues to the employees. Average weekly earnings data, for example, are valuable economic indicators, and when deflated by an appropriate price index they can show in general terms how employees throughout the economy are faring, on average. They are useful for a wide range of public users, including planners, policy-makers, employers and groups of workers and can provide information for different categories of workers (for example full-time and part-time, men and women, age groups, occupational groups, industries, public or private sector, location, size of workplace, etc.). Individual workers tend to look at earnings figures from the point of view of an income earner, and want to know where they fit into the overall picture and compare with others. However the statistics compiled by most countries represent averages, which means that they are not very meaningful for individual workers, or even groups of workers. Economies are made up of a multitude of different types of employees with different occupations, working schedules, wage rates, benefits, social security schemes, etc. who are engaged in different economic activities, in different regions of the country. It may not be very meaningful to represent an "average" employee corresponding to these "average earnings". Many workers may not be able to identify themselves with official earnings statistics when they are presented as averages because these are calculated on the basis of the earnings of all the workers in the particular group, some of whom may have earned much more than the average and some much less. The real spread of earnings may be very wide.

For this reason it is useful, where possible, to have information about the distribution of earnings, showing the extremes (the lowest and highest earnings recorded), quartiles (the earnings of the lowest and highest 25 per cent of workers in the distribution), the median (the earnings of workers at the midpoint of the distribution) and the mode (the level of earnings most commonly recorded).

To understand the level of net earnings in a country, it is essential to have information on the types of benefits which workers receive (free of charge or subsidized) through the social security schemes and on income taxation. Social security benefits include family allowances, paid sick leave or paid maternity leave, pensions, education, medical services, transport, etc. This is because national practices are very different in this respect, as are the types of social security schemes (statutory or voluntary) in force and the levels of contributions, rates of income taxes and so on.

Labour cost data are valuable for many purposes and to different users; the social partners - governments, employers and trade unions - as well as the public, research workers and other institutions. In a national context, the level of labour costs and their changes can play a central role in wage negotiations, in fixing employment, wage and other policies. At the international level, comparison of labour costs is a crucial indicator of the ability of firms and countries to compete. For these purposes, labour cost should be presented by components, in particular separating employers’ contributions to social security schemes, which may be substantial in some countries. Differences in the levels of the various components will reflect differences in national legislation and practices, in particular their social security schemes. Social security may be largely financed through high general taxes, so employers' contributions to it will constitute only a small percentage of total labour cost. Other countries may aim to reduce income taxes so that the major burden of financing social security falls on employers or as in many other countries on employees. Vocational training may be financed directly by employers or through State subsidies and contributions, or a combination of both. Taxes on employment or payrolls are levied in certain countries as a trade-off measure to moderate rises in earnings. In others, concessions in the form of tax relief, wage subsidies, reduction or exemption from social security contributions, etc. are granted by the State to employers. This is principally to promote employment in specific sectors of the economy or employment of certain types of workers such as young workers or the long-term unemployed.