Income distribution statistics
- Data extracted in February 2016. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: January 2017.
This article analyses recent statistics on monetary poverty and income inequalities in the European Union (EU). Comparisons of standards of living between countries are frequently based on gross domestic product (GDP) per capita, which presents in monetary terms how rich one country is compared with another. However, this headline indicator says very little about the distribution of income within a country and also fails to provide information in relation to non-monetary factors that may play a significant role in determining the quality of life of a particular population. On the one hand, inequalities in income distribution may create incentives for people to improve their situation through work, innovation or acquiring new skills. On the other hand, such income inequalities are often viewed as being linked to crime, poverty and social exclusion.
- 1 Main statistical findings
- 2 Data sources and availability
- 3 Context
- 4 See also
- 5 Further Eurostat information
- 6 External links
Main statistical findings
At-risk-of-poverty rate and threshold
The at-risk-of-poverty rate (after social transfers) in the EU-28 remained almost stable between 2011 and 2013, dropping from 16.9 % to 16.7 %. Between 2013 and 2014, the at-risk-of-poverty rate increased by 0.5 percentage points to reach 17.2 %. This share, calculated as a weighted average of national results, conceals considerable variations across the EU Member States (see Figure 1). In six Member States, namely Romania (25.4 %), Spain (22.2 %), Greece (22.1 %), Bulgaria (21.8 %), Estonia (21.8 %) and Latvia (21.2 %), one fifth or more of the population was viewed as being at-risk-of-poverty; this was also the case in Serbia (25.4 %) and the former Yugoslav Republic of Macedonia (22.1 %). Among the Member States the lowest proportions of persons at-risk-of-poverty were observed in the Netherlands (11.6 %) and the Czech Republic (9.7 %), while Norway (10.9 %) and Iceland (7.9 %) also reported relatively low shares of their populations as being at-risk-of-poverty.
The at-risk-of-poverty threshold (also shown in Figure 1) is set at 60 % of national median equivalised disposable income. It is often expressed in purchasing power standards (PPS) in order to take account of the differences in the cost of living across countries. This threshold varied considerably among the EU Member States in 2014 from PPS 2.4 thousand in Romania to PPS 13.0 thousand in Austria, with the threshold in Luxembourg (PPS 17.0 thousand) above this range; the poverty threshold was also relatively low in the former Yugoslav Republic of Macedonia (PPS 2.5 thousand) and Serbia (PPS 2.7 thousand) and relatively high in Switzerland (PPS 15.4 thousand) and Norway (PPS 16.7 thousand).
Different groups in society are more or less vulnerable to monetary poverty. There was a relatively small difference in the at-risk-of-poverty rate (after social transfers) for the two sexes in the EU-28 in 2014: with the latest rates equivalent to 16.7 % for males compared with a slightly higher figure (17.7 %) for females (see Figure 2). The largest gender difference in 2014 (3.2 percentage points) was observed in Estonia, while Latvia, Cyprus, Lithuania, Sweden and Italy also reported at-risk-of-poverty rates for females that were 2.0 or more percentage points higher than for males, as was the case in Switzerland and Norway. By contrast, there were seven EU Member States where the at-risk-of-poverty rate was slightly higher among men than women, namely Denmark, Hungary, Poland, Romania, Spain, Greece and Slovakia, and this was also the case in Serbia, Iceland and the former Yugoslav Republic of Macedonia.
The differences in poverty rates were wider when the population was classified according to activity status (see Table 1). The unemployed are a particularly vulnerable group: almost half (47.2 %) of all unemployed persons in the EU-28 were at-risk-of-poverty in 2014, with by far the highest rate in Germany (67.4 %), while eight other EU Member States (the three Baltic States, the United Kingdom, Hungary, Romania, Bulgaria and Luxembourg) reported that at least half of the unemployed were at-risk-of-poverty in 2014.
Around one in eight (12.7 %) retired persons in the EU-28 were at-risk-of-poverty in 2014; rates that were at least twice as high as the EU-28 average were recorded in Estonia (35.6 %) and Latvia (29.4 %).
Those in employment were far less likely to be at-risk-of-poverty (an average of 9.5 % across the whole of the EU-28). There was a relatively high proportion of employed persons at-risk-of-poverty in Romania (19.6 %) and to a lesser extent in Greece (13.4 %), Spain (12.5 %) and Estonia (11.8 %), while Luxembourg, Italy, Portugal and Poland each reported that in excess of 1 in 10 members of their respective workforces were at-risk-of-poverty in 2014.
At-risk-of-poverty rates are not uniformly distributed between households with different compositions of adults and dependent children. Among households without dependent children (see Figure 3), people living alone were most likely to be at risk of poverty, a situation faced by 25.1 % of single person households in 2014. By contrast, the at-risk-of-poverty rate for households with two or more adults was less than half this rate, at 11.2 %. Looking specifically at two adult households where at least one person was aged 65 or over, the at-risk-of-poverty rate was slightly lower, at 10.2 %.
The majority of EU Member States reported a similar pattern. Single person households had the highest at-risk-of-poverty rates among households without dependent children in all Member States except in Malta, where two adult households where at least one person was aged 65 or over had a higher rate; a similar situation to that in Malta was observed in Switzerland (2013 data) and the former Yugoslav Republic of Macedonia. The at-risk-of-poverty rate for two adult households where at least one person was aged 65 or over was generally lower than the rate for the broader category of all households with two or more adults, although this was not the case in Latvia, the United Kingdom, Austria, Bulgaria, Belgium, Croatia, Cyprus and Malta.
Turning to households with dependent children (see Figure 4), the highest at-risk-of-poverty rate in the EU-28 was recorded for single persons with dependent children, at close to one third (32.5 %). Comparing the rates for households with two adults, those with just one dependent child (13.6 %) had a rate that was about half that recorded for households with three or more dependent children (26.9 %). Among the three household types shown in Figure 4, all EU Member States reported that households composed of two adults and a single child were the least likely to be at risk of poverty. Most Member States also reported that the at-risk-of-poverty rate was highest for single persons with dependent children, although there were a number of exceptions where the rate was higher for households composed of two adults with three or more children, most notably Romania and Bulgaria, and to a lesser extent Poland and Greece as well as the United Kingdom, Spain, Hungary and Croatia; this situation also occurred in the former Yugoslav Republic of Macedonia and to a lesser extent Serbia.
Social protection measures can be used as a means for reducing poverty and social exclusion. This may be achieved, for example, through the distribution of benefits. One way of evaluating the success of social protection measures is to compare at-risk-of-poverty indicators before and after social transfers (see Figure 5). In 2014, social transfers reduced the at-risk-of-poverty rate among the population of the EU-28 from 26.1 % before transfers to 17.2 % after transfers, thereby lifting above the poverty threshold 8.9 % of the population; without social transfers these people would be at-risk-of-poverty. Comparing at-risk-of-poverty rates before and after social transfers, the relative impact of social benefits was low in Romania, Greece, Italy, Bulgaria, Latvia, Poland and Estonia, as well as in the former Yugoslav Republic of Macedonia. By contrast, half or more of all persons who were at-risk-of poverty in Ireland, Denmark and Finland moved above the threshold as a result of social transfers, as was also the case in Iceland and Norway.
Governments, policymakers and society in general cannot combat poverty and social exclusion without analysing the inequalities within society, whether they are economic or social in nature. Data on economic inequality become particularly important for estimating relative poverty, because the distribution of economic resources may have a direct bearing on the extent and depth of poverty. There were wide inequalities in the distribution of income in 2014: a population-weighted average of national figures for each of the individual EU Member States shows that the top 20 % of the population (with the highest equivalised disposable income) received 5.2 times as much income as the bottom 20 % (with the lowest equivalised disposable income) (see Figure 6). This ratio varied considerably across the EU Member States, from 3.5 in the Czech Republic, to more than 6.0 in Lithuania, Portugal, Latvia, Greece, Estonia, Spain and Bulgaria, peaking at 7.2 in Romania. Among the non-member countries shown in Figure 6, Iceland (3.1) and Norway (3.4) also reported particularly low ratios, while in the former Yugoslav Republic of Macedonia (7.2) the ratio was as high as in Romania, and was even higher in Serbia (9.8).
There is policy interest in the inequalities felt by many different groups in society. One group of particular interest is that of the elderly, in part reflecting the growing proportion of the EU’s population that is aged 65 and over. Pension systems can play an important role in addressing poverty among the elderly. In this respect, it is interesting to compare the incomes of the elderly with the rest of the population. Across the EU-28 as a whole, people aged 65 and above had a median income which in 2014 was equal to 94 % of the median income for the population under the age of 65 (see Figure 7). In six EU Member States (Luxembourg, Hungary, Romania, Spain, France and Greece) the median income of the elderly was equal to or higher than the median income of persons under 65, and this was also the case in the former Yugoslav Republic of Macedonia and Serbia. In Italy, Poland, Austria, Portugal, Ireland, Slovenia, Slovakia and Germany the median income of the elderly was at least 90 % of that recorded for people under 65, and this was also the case in Norway and Iceland. Ratios below 80 % were recorded in Finland, Denmark, Malta, Belgium, Lithuania, Cyprus, Latvia and Estonia, as well as in Switzerland (2013 data); these relatively low ratios may broadly reflect pension entitlements.
The depth of poverty, which helps to quantify just how poor the poor are, can be measured by the relative median at-risk-of-poverty gap. The median income of persons at risk of poverty in the EU-28 was, on average, 24.6 % below the poverty threshold in 2014 (see Figure 8); this threshold is set at 60 % of the national median equivalised disposable income of all persons. Among the EU Member States, the relative median at-risk-of-poverty gap was widest in Romania (35.2 %) and Bulgaria (33.2 %), with a gap above 25 % also reported for Spain, Greece, Portugal, Slovakia, Italy and Croatia. The gap was higher in Serbia (40.3 %) and the former Yugoslav Republic of Macedonia (36.1 %) than in any of the Member States. The lowest at-risk-of-poverty gap among the Member States was observed in Finland (13.9 %), followed by Luxembourg (16.3 %), France (16.6 %) and the Netherlands (16.9 %).
Data sources and availability
EU statistics on income and living conditions (EU-SILC) were launched in 2003 on the basis of a gentlemen’s agreement between Eurostat, six EU Member States (Austria, Belgium, Denmark, Greece, Ireland, Luxembourg) and Norway. EU-SILC was implemented in order to provide underlying data for indicators relating to income and living conditions — the legislative basis for the data collection exercise is Regulation 1177/2003 of the European Parliament and of the Council. The collection of these statistics was formally launched in 2004 in 15 Member States and expanded in 2005 to cover all of the remaining EU-25 Member States, together with Iceland and Norway. Bulgaria and Turkey launched EU-SILC in 2006, Romania in 2007, Switzerland in 2008, while Croatia introduced the survey in 2010 (2009 data for Croatia are based on a different data source — namely the household budget survey (HBS)). Data for the former Yugoslav Republic of Macedonia are available since 2010 and for Serbia from 2013. EU-SILC comprises both a cross-sectional dimension and a longitudinal dimension.
Household disposable income is established by summing up all monetary incomes received from any source by each member of the household (including income from work, investment and social benefits) — plus income received at the household level — and deducting taxes and social contributions paid. In order to reflect differences in household size and composition, this total is divided by the number of ‘equivalent adults’ using a standard (equivalence) scale, the so-called ‘modified OECD’ scale, which attributes a weight of 1.0 to the first adult in the household, a weight of 0.5 to each subsequent member of the household aged 14 and over, and a weight of 0.3 to household members aged less than 14. The resulting figure is called equivalised disposable income and is attributed to each member of the household. For the purpose of poverty indicators, the equivalised disposable income is calculated from the total disposable income of each household divided by the equivalised household size; consequently, each person in the household is considered to have the same equivalised income.
The income reference period is a fixed 12-month period (such as the previous calendar or tax year) for all countries except the United Kingdom for which the income reference period is the current year of the survey and Ireland for which the survey is continuous and income is collected for the 12 months prior to the survey.
The at-risk-of-poverty rate is defined as the share of people with an equivalised disposable income that is below the at-risk-of-poverty threshold (expressed in purchasing power standards — PPS), set at 60 % of the national median equivalised disposable income. In line with decisions of the European Council, the at-risk-of-poverty rate is measured relative to the situation in each EU Member State rather than applying a common threshold. The at-risk-of-poverty rate may be expressed before or after social transfers, with the difference measuring the hypothetical impact of national social transfers in reducing the risk of poverty. Retirement and survivors’ pensions are counted as income before transfers and not as social transfers. Various analyses of this indicator are available, for example: by age, sex, activity status, household type, or level of educational attainment. It should be noted that the indicator does not measure wealth but is instead a relative measure of low current income (in comparison with other people in the same country), which does not necessarily imply a low standard of living. The EU-28 aggregate is a population-weighted average of individual national figures.
At the Laeken European Council in December 2001, European heads of state and government endorsed a first set of common statistical indicators for social exclusion and poverty that are subject to a continuing process of refinement by the indicators sub-group (ISG) of the social protection committee (SPC). These indicators are an essential element in the open method of coordination (OMC) to monitor the progress made by the EU’s Member States in alleviating poverty and social exclusion.
EU-SILC is the reference source for EU statistics on income and living conditions and, in particular, for indicators concerning social inclusion. In the context of the Europe 2020 strategy, the European Council adopted in June 2010 a headline target for social inclusion — namely, that by 2020 there should be at least 20 million fewer people in the EU at risk of poverty or social exclusion than there were in 2008. EU-SILC is the source used to monitor progress towards this headline target, which is measured through an indicator that combines the at-risk-of-poverty rate, the severe material deprivation rate, and the proportion of people living in households with very low work intensity — see the article on social inclusion statistics for more information.
- Children at risk of poverty or social exclusion
- European social statistics (online publication)
- Housing conditions
- Housing statistics
- People at risk of poverty or social exclusion
- Social inclusion statistics
Further Eurostat information
- Living conditions in Europe — 2014 edition
- European social statistics — 2013 edition
- Income and living conditions in Europe — 2010 edition
- Combating poverty and social exclusion. A statistical portrait of the European Union 2010
- The life of women and men in Europe — A statistical portrait
- The risk of poverty or social exclusion affected 1 in 4 persons in the EU in 2014
- More than 120 million persons at risk of poverty or social exclusion in 2013
Statistics in focus
- Income inequality: nearly 40 per cent of total income goes to people belonging to highest (fifth) quintile — Statistics in focus 12/2014
- Is the likelihood of poverty inherited? — Statistics in focus 27/2013
- Living standards falling in most Member States — Statistics in focus 8/2013
- Children were the age group at the highest risk of poverty or social exclusion in 2011 — Statistics in focus 4/2013
- In 2009 a 6.5 % rise in per capita social protection expenditure matched a 6.1 % drop in EU-27 GDP — Statistics in focus 14/2012
- 23 % of EU citizens were at risk of poverty or social exclusion in 2010 — Statistics in focus 9/2012
- Income and living conditions (ilc), see:
- Income distribution and monetary poverty (ilc_ip)
- Monetary poverty (ilc_li)
- Monetary poverty for elderly people (ilc_pn)
- In-work poverty (ilc_iw)
- Distribution of income (ilc_di)
Methodology / Metadata
- Income and living conditions (ESMS metadata file — ilc_esms)
- Comparative EU Statistics on Income and Living Conditions: Issues and Challenges (Proceedings of the International Conference on EU Comparative Statistics on Income and Living Conditions, Helsinki, 6–8 November 2006)
- Individual employment, household employment and risk of poverty in the EU — A decomposition analysis — 2013 edition
- Statistical matching of EU-SILC and the Household Budget Survey to compare poverty estimates using income, expenditures and material deprivation — 2013 edition
- Using EUROMOD to nowcast poverty risk in the European Union — 2013 edition
Source data for tables and figures (MS Excel)
- Regulation 1177/2003 of 16 June 2003 concerning Community statistics on income and living conditions (EU-SILC)
- Regulation 1553/2005 of 7 September 2005 amending Regulation 1177/2003 concerning Community statistics on income and living conditions (EU-SILC)
- Regulation 1791/2006 of 20 November 2006 adapting certain Regulations and Decisions in the fields of ... statistics, ..., by reason of the accession of Bulgaria and Romania
- Employment and social analysis, see:
- OECD — Better Life Initiative: Measuring Well-being and Progress