Austria’s Non-Wage Labor Costs: A Comparative Analysis

Non-wage labor costs remain a persistent issue in Austria, sparking debate between employer representatives and the government regarding potential reductions. While employer groups advocate for cuts to boost competitiveness, the Finance Ministry emphasizes the need for counter-financing given existing budget constraints. This article examines the current state of non-wage labor costs in Austria, compares them to neighboring Germany, and explores the key components contributing to these expenses.

Current State of Non-Wage Labor Costs in Austria

According to estimates from the Austrian Institute for Economic Research (WIFO), employers’ ancillary wage costs in Austria currently stand at 29.59% of gross wages [WIFO]. This figure has been trending downwards, falling from 31.26% in 2013, but Austria still maintains one of the highest levels in Europe. Recent reductions in contributions to the family burden equalization fund (FLAF) and accident insurance have contributed to this decline.

Austria vs. Germany: A Comparative Look

A key point of contention is the disparity between Austria and Germany. The Chamber of Commerce (WKÖ) reports that the employer share of non-wage labor costs in Germany is 23%, significantly lower than Austria’s 29.59% [WIFO]. This difference is seen as a competitive disadvantage for Austrian businesses.

Key Components of Non-Wage Labor Costs

Pension insurance constitutes the largest share of non-wage labor costs in Austria, accounting for 12.5% of gross wages. Health insurance and contributions to the family burden equalization fund (FLAF) follow closely behind. Other significant costs include municipal tax, unemployment insurance contributions, housing subsidies, accident insurance, and employee pension funds.

Recent Reductions in Employer Contributions

Several employer contributions have been reduced in recent years:

• FLAF contribution: Reduced from 4.5% to 3.7%
• Accident insurance contribution: Reduced from 1.4% to 1.1%
• Insolvency fee surcharge: Reduced from 0.55% to 0.1%
• Unemployment insurance contribution (employers & employees): Reduced by 0.05 percentage points to 5.9%

Budgetary Challenges and Future Outlook

Finance Minister Markus Marterbauer has indicated that any further reductions in non-wage labor costs would require approximately ten billion euros in counter-financing, given the current budget shortage [WIFO]. WIFO boss Gabriel Felbermayr suggests a step-by-step approach may be feasible, while the head of the Fiscal Council, Christoph Badelt, acknowledges the potential appropriateness of reductions but highlights the challenge of securing counter-financing.

About WIFO

The Austrian Institute for Economic Research (WIFO) is a private non-profit association founded in 1927 by Friedrich Hayek and Ludwig von Mises [Austrian Institute of Economic Research – Wikipedia]. It employs 124 individuals, including 64 researchers, and serves as a leading provider of economic analysis and policy consulting in Austria [Austria – EUROCONSTRUCT].