Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 577/98 on the organisation of a labour force sample survey in the Community
Date: 2006-10-02
Institutions: European Commission
Subjects: EU statistics, employment statistics, pay, sample survey, statistical method

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 2.10.2006 
COM(2006) 565 final 

2006/0180 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Council Regulation (EC) No 577/98 on the organisation of a labour force 
sample survey in the Community 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

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•  Grounds for and objectives of the proposal 

In  February  2005,  following  the  mid-term  review  of  the  Lisbon  Strategy,  the 
Commission  presented  a  Communication  on  growth  and  jobs  which  proposed  a  new 
start  for  the  Lisbon  Strategy,  refocusing  efforts  on  two  goals:  delivering  stronger, 
lasting  growth  and  more  and  better  jobs.  This  included  a  complete  revision  of  the 
governance of the European Employment Strategy so as to maximise efficiency and the 
synergies  between  national  measures  and  Community  action.  Earnings  are  a  central 
element  in  this  context,  influencing  the  overall  costs  of  production,  the  level  of 
employment  and  income,  and  the  social  situation  of  employees  and  their  families. 
Information on wages and their determinants are a key element to monitor economic, 
employment,  education  and  gender  equality  policies  assuring  that  the  benefit  of  EU 
growth and jobs reach everyone in society. It will also contribute to the evaluation of 
the new social agenda 2005-2010. 

To  meet  these  targets,  the  Commission  needs  information  on  the  structure  and 
distribution  of  earnings  in  the  Member  States  by  socio-economic  characteristics  and 
also in relation to the different forms of paid employment. This information is essential 
in order to analyse and understand the labour market and the changes taking place in 
the structure of the labour force. The advantages of having data on wages and salaries 
in relation to other employment characteristics are widely recognised.  

The Labour Force Survey (LFS) is basically the first and most authoritative reference 
source for labour market information and therefore wages, as a fundamental variable to 
explain labour market behaviour, should be included as a compulsory variable in this 
survey to allow a more complete analysis of labour markets.  

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•  General context 

In  1998,  Council  Regulation  (EC)  No  577/98  introduced  income  as  a  new  survey 
characteristic  for  which  labour  force  survey  data  should  be  provided.  However, 
because  of  the  sensitivity  of  this  kind  of  information,  it  was  introduced  only  as  an 
option,  to  allow  the  Member  States  to  test  the  feasibility  of  collecting  this  kind  of 
information  in  a  labour  force  survey,  to  ascertain  the  best  way  of  doing  so  without 
increasing  the  general  non-response  rate  and  to  check  the  quality  of  the  information 
collected. 

Initially,  in  the  implementing  regulation,  the  Income  module  was  made  up  of  five 
variables: monthly take-home pay from the main job, additional payments from main 
job, unemployment allowances, additional payments of unemployment allowances and 
sickness,  disability  or  invalidity  allowances.  The  present  proposal  restricts  the  data 
requested  to  "Monthly  salary  from  the  main  job".  The  aim  of  this  variable  is  not  to 
collect information on the levels of salaries in the EU Member States; it is to be used as 
a variable to explain labour market behaviours. 

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In  1998,  only  two  Member  States  were  collecting  and  providing  this  information  to 
Eurostat.  Since  then,  grants  have  been  awarded  to  Member  States  willing  to  test  the 
introduction of this variable in their surveys or to examine the link between LFS results 
and administrative sources. About half of the Member States are now collecting wages 
in the LFS with satisfactory results and best practices for data collection have also been 
identified.  

The value of collecting this information for policy purposes is widely recognised and a 
full  coverage  of  the  EU  is  needed.  However  certain  Member  States  demand  a 
simplification of the previous optional variable, in order to start the data collection and 
others can only include the variable in their LFS regular questionnaire if there is a legal 
obligation to provide this information.  

Therefore, it is essential to amend Council Regulation (EC) No 577/98 accordingly and 
introduce wages from the main job as a compulsory variable in the LFS.  

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•  Existing provisions in the area covered by the proposal 

Council  Regulation  (EC)  No  577/98  introduced  income  as  a  new  optional  survey 
characteristic for which labour force survey data should be provided. The aims of the 
proposal for a Regulation presented in this memorandum are: 

- to change the optional status of this survey characteristic 

- to limit the information to be provided on income to "wages from the main job" 

-  to  allow  Member  States  which  will  supply  this  information  using  administrative 
sources  a  time-limit  of  18  months  to  transmit  the  data,  and  consequently  reduce  the 
response burden. 

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•  Consistency with other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

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Consultation methods, main sectors targeted and general profile of respondents 

The members of the Working Group on Labour Market Statistics and the Directors of 
social statistics have been consulted and their opinions have been taken into account. 
The present proposal received broad support both from the Directors of social statistics 
and from the Working Group on Labour Market Statistics. 

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Summary of responses and how they have been taken into account 

To avoid extra burden, several Member States have asked to use administrative data as 
the  basis  for  the  provision  of  these  data.  Using  administrative  data  means  that  data 
transmission  will  take  longer.  The  Commission  accepted  this  situation,  which  is 
reflected in the proposal for a Regulation. 

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As wages are a sensitive issue, the questions on wages have high non-response rate in 
general.  Nevertheless,  the  response  rate  can  be  improved.  Some  countries  have 
achieved  quite  good  response  rates  for  this  variable  and  the  reasons  for  this  success 
have been identified and presented as good practices.  

Another  problem  commonly  mentioned  is  the  difficulty  in  agreeing  on  a  harmonised 
definition of wages. Some countries can only provide gross salaries, others net salaries 
and some others definitions which do not correspond to either of these two concepts. A 
common  definition  is  essential  when  levels  or  trends  on  salaries  are  measured. 
However,  the  data  on  wages  collected  by  the  LFS  will  be  used  solely  as  background 
information to build the ranking of the salaries (deciles), in order to analyse the effects 
of  wages  on  labour  market  behaviours.  In  this  case  a  common  definition  is  not  so 
relevant and will not have any significant impact on the ranking. 

Lastly,  some  Member  States  have  suggested  that  EU-SILC  could  be  used  to  support 
analysis based on wages, since the problems of definition and response rate seem to be 
less  relevant  when  this  source  is  used.  While  the  LFS  may  not  be  the  best  source  of 
data on wages, it allows linkage to a wider range of other socio-economic variables and 
has  a  much  larger  sample  size.  This  latter  feature  allows  more  detailed  cross-
classification. These two aspects are considered sufficient to justify the use of the LFS 
in this context. 

•  Collection and use of expertise 

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Scientific areas of expertise concerned 

The  national  representatives  in  Eurostat's  Working  Group  on  "Labour  Market 
Statistics"  are  experts  with  an  in-depth  knowledge  of  earnings  and  labour  force 
surveys. 

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Methodology used 

Open discussion between the experts at the meetings of the Working Group on "Labour 
Market  Statistics",  with  conclusions  recorded  in  the  minutes  and  pilot  studies 
conducted in most Member States. 

Grants were awarded to Member States willing to test the introduction of this variable 
in their surveys or to examine the link between LFS results and administrative sources. 
Best practices for collecting data of this kind were identified from the technical reports 
provided by the Member States in the framework of these grants. 

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Main organisations/experts consulted 

The experts were from the national statistical institutes. 

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Summary of advice received and used 

There has been no mention of the existence of potentially serious risks with irreversible 
consequences. 

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225 

Best  practices  for  the  collection  of  wages  data  in  the  LFS  have  been  identified  and 
disseminated. Examples of good practices could include the following: 

-  Questions  should  be  easy  to  answer  and  limited  in  number;  interviewers  should  be 
ready  to  provide  all  necessary  clarification  on  the  inclusion  or  exclusion  of  specific 
allowances.  

- It is better to start with a question on exact salary, if possible checking against the pay 
slip, and if the person is not able to answer, to propose some earning bands.  

- An introductory letter or explanation from the interviewer tends to give good results 
as far as willingness to answer the questions on this subject is concerned.  

Moreover,  in  a  number  of  countries,  non-response  could  be  corrected  by  imputation 
using other sources, such as administrative registers or other surveys (e.g. Structure of 
Earnings Survey). Several countries have tried this, with positive results.  

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Means used to make expert advice publicly available 

All the final reports from the grants given to test questions on wages in the LFS or to 
link  administrative  sources  with  LFS  data  were  included  in  the  Circa  website.  The 
same will be done with information on imputation. 

•  Analysis of effects and consequences 

We have considered the three following options: 

Option A: Keep the optional status of the variable income and use EU SILC to collect 
information  on  the  structure  and  distribution  of  earnings  in  the  Member  States  by 
socio-economic characteristics. 

Option  B:  Make  the  optional  status  of  the  LFS  variable  "income"  (as  specified  in 
Regulation  No  577/98)  compulsory,  by  imposing  a  common  definition  of  wages  and 
the same deadline for the data transmission as for the other LFS variables (12 weeks 
after the end of the reference period) 

Option C: Change the optional status of the LFS variable "wages from the main job" to 
compulsory,  being  flexible  in  the  definition  used  and  allowing  a  longer  period  of 
18 months  for  data  transmission  in  the  case  of  those  countries  using  administrative 
sources. 

The  option  selected  was  option  C,  because it represents a good compromise between 
Community policy needs and a relatively minor burden for Member States. Adopting 
an approach with a flexible definition of wages provides the necessary information for 
policy needs and allows easier implementation in the Member States, as there are fewer 
questions  to  be  included  in  the  LFS  questionnaire.  Furthermore,  this  allows  Member 
States to use administrative data without adverse effects.  

Option A is highly unsatisfactory in terms of policy needs, because not all the countries 
will  be  able  to  provide  data  using  the  LFS,  and  EU  SILC  do  not  provide  the  same 
richness of information.  

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Option B is too rigid and burdensome for the Member States. It would (a) require the 
addition  of  several  questions  in  the  LFS  questionnaire,  (b)  possibly  compromise  the 
general  quality  of  the  LFS  because  of  the  high  risk  of  an  increase  in  non-response 
levels and (c) preclude the use of administrative data.  

3)  LEGAL ASPECTS OF THE PROPOSAL 

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•  Summary of the proposed action 

The  main  objective  is  to  give  the  Commission  the  tools  to  prepare  socio-economic 
analyses linking wages from the main job with labour characteristics, for all Member 
States. A Regulation of the Council and of the Parliament which changes the optional 
status of the LFS variable "wages from the main job" to compulsory is the instrument 
to attain this objective. At the same time, it allows extra time for transmission of these 
data for countries willing to use administrative sources. 

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•  Legal basis 

Article  285  provides  the  legal  basis  for  Community  statistics.  The  Council,  acting  in 
accordance with the codecision procedure, shall adopt measures for the production of 
statistics where necessary for the performance of the activities of the Community. This 
Article  sets  out  requirements  relating  to  the  production  of  Community  statistics  and 
requires  conformity  to  standards  of  impartiality,  reliability,  objectivity,  scientific 
independence, cost-effectiveness and statistical confidentiality. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

With  the  present  proposal  the  use  of  administrative  sources  is  allowed  in  order  to 
lighten  the  respondents’  burden.  An  approach  with  a  flexible  definition  of  wages 
provides the necessary information for policy needs and allows easier implementation 
in  the  Member  States  in  that  fewer  questions  need  to  be  included  in  the  LFS 
questionnaire.  

The  proposal  would  entail  a  minimum  workload  and  have  no  significant  financial 
implications  since  it  assumes  that  only  one  or  two  questions  would  be  added  to  the 
national labour force survey questionnaire or that wages data would be imputed from 
an administrative source.  

•  Choice of instruments 

Proposed instruments: regulation. 

Other means would not be appropriate for the following reason(s). 

Selection  of  the  appropriate  category  for  an  act  of  the  EP/Council  depends  on  the 
legislative  goal.  Given  the  information  needs  at  European  level,  the  trend  in 
Community statistics has been to use regulations rather than directives for basic acts. A 
regulation is preferable because it lays down the same law throughout the Community, 
which means that the Member States may not apply them incompletely or selectively; a 

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regulation  is  directly  applicable,  which  means  that  it  does  not  need  to  be  transposed 
into national law. Directives, on the other hand, whose purpose is the harmonisation of 
national  laws,  are  binding  on  Member  States  as  regards  their  objectives,  but  leave  to 
the  national  authorities  the  choice  of  form  and  methods  used  to  attain  the  objectives 
agreed at Community level. Directives must be transposed into national law. The use of 
a regulation is in line with other statistical legal acts on statistics adopted since 1998. 

4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

5)  ADDITIONAL INFORMATION 

•  European Economic Area 

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The proposed act concerns an EEA matter and should therefore extend to the European 
Economic Area. 

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2006/0180 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Council Regulation (EC) No 577/98 on the organisation of a labour force 
sample survey in the Community 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 285(1) thereof, 

Having regard to the proposal from the Commission1, 

After consulting the Statistical Programme Committee (SPC), in accordance with Article 3 of 
Council Decision 89/382/EEC, Euratom of 19 June 19892, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty3, 

Whereas: 

(1) 

(2) 

(3) 

In  accordance  with  the  Lisbon  Strategy  and  as  confirmed  by  its  mid-term  review  in 
2005, Europe must focus its policies further on growth and employment to achieve the 
Lisbon goals. 

The development of the Community and the operation of the internal market increase 
the need for comparable data which allow impact on the labour market of the structure 
and  distribution  of  wages  to  be  examined,  particularly  as  a  means  of  analysing  the 
progress of economic and social cohesion.  

In  order  to  carry  out  the  tasks  assigned  to  it,  the  Commission  requires  data  on  the 
ranking of wages by socio-economic characteristics and also in relation with different 
forms of paid employment, which are essential to analyse and understand the labour 
market and the changes taking place in the structure of the labour force. In this regard, 
the  advantages  of  having  data  on  wages  by  deciles  in  relation  to  other  employment 
characteristics are widely recognised.  

1 
2 
3 

OJ C , , p. . 
OJ L 181, 28.6.1989, p. 47. 
OJ C , , p. . 

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(4) 

The  Community  Labour  Force  Survey  is  essentially  the  first  and  most  authoritative 
reference  source  for  labour  market  information  in  the  European  Union,  and 
information on wages, as a fundamental variable to explain labour market behaviour, 
should be a standard element of this survey in order to allow more complete analysis 
of labour markets  

(5) 

Council Regulation (EC) No 577/984 should therefore be amended accordingly, 

HAVE ADOPTED THIS REGULATION: 

Regulation (EC) No 577/98 is hereby amended as follows: 

1. In Article 4, point (l) of paragraph 1 is replaced by the following: 

Article 1 

"(l) wages from the main job;" 

2. Article 6 is replaced by the following: 

“Article 6 

Transmission of the results 

Within twelve weeks of the end of the reference period the Member States shall forward to 
Eurostat the results of the survey, without direct identifiers. 

Data corresponding to the survey characteristic 'wages from the main job' can be forwarded to 
Eurostat within eighteen months of the end of the reference period when administrative data 
are used to supply this information." 

Article 2 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

4 

OJ L 77, 14.3.1998, p. 3. Regulation as last amended by Regulation (EC) n°2257/2003 of the European 
Parliament and of the Council ( OJ L 336, 23.12.2003, p. 6). 

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