An analysis of the impact of the increase in social security contributions approved in 2023

Abstract

Rationale The latest pension reform, approved in 2023, included three measures to increase social security contributions, aiming to boost social security revenue. This article analyses the impact and calculates the ex ante effect of the changes approved. Takeaways •The growth in the maximum contribution base will have an uneven impact on workers and firms, among other reasons because the contributions made by middle-aged and more highly-educated workers and by employees of large firms are more likely to be subject to the cap on contributions. •The higher social security contributions approved in 2023 will also have an uneven impact across the wage distribution. In particular, effective contribution rates will increase more for high wage levels. •The recently adopted increase in social security contributions could boost social security revenue ex ante by 0.9% of GDP in 2050. But this revenue growth could be smaller if higher labour costs adversely affect competitiveness, wages or employment.