Archive:Income inequality statistics, data 2012

Income Inequality- Nearly 40 per cent of national income was earned by the fifth quintile

Statistics in focus XX/2014; Author: Emanuela DI FALCO
ISSN:2314-9647 Catalogue number:KS-SF-14-XXX-EN-N

PAGE UNDER CONSTRUCTION !!!

Income inequality is a complex phenomenon, the result of interaction between several factors. It can be related to employment patterns, income sources, individual characteristics (education level, age, gender, etc.) or household features (number of earners in the household, family size, etc.). Inequality is a broader concept than poverty; while poverty mainly relates to the lowest part of the income distribution, inequality takes into account the living conditions of all people in a society.

The analysis showed that Norway and Slovenia had the lowest level of inequality (as measured by the Gini coefficient ) in Europe in 2012, and that Spain and Latvia had the highest level. Overall, ten countries had a level of inequality higher than the EU-28 average in 2012. In Europe, nearly 40% of total national equivalised income goes on average to people belonging to the highest (fifth) income quintile, and less than 10% to people in the first quintile. This distribution of income explains the income discrepancies among people. It should be noted that inequality decreased in 12 EU countries in 2008-12, mainly due to the income losses seen in the upper part of the income distribution during the financial and economic crisis.

Table, Figure or Map X: Full title of the Table, Figure or Map
Source: Eurostat (educ_ilang)

Main statistical findings

The Gini coefficient across the EU in 2012

The Gini coefficient reveals differences of approximately 10 points across the EU in 2012.

Income inequality measured by the Gini coefficient varied by approximately 10 points across Europe in 2012, with the lowest levels of inequality seen in Norway and Slovenia and the highest in Spain and Latvia. Only four countries (France, Croatia, Poland and Cyprus) had an income inequality level around the EU-28 average (30.6). In ten countries, income discrepancies were above the EU-28 average, ranging from 32 in Italy and Lithuania to 35 or more in Spain and Latvia.

In the remaining countries, the income disparities were below the EU-28 average , ranging from 28.3 in Germany to less than 24 in Slovenia and Norway. To summarise, the analysis showed high levels of inequality across southern Europe, as seen in Figure 1, but there no dominant pattern in central- and northern-European countries.

Social benefits and pensions played an important role in reducing inequality in 2012

Figure 2 shows the Gini coefficients based on total equivalised disposable household income . These were calculated without including social benefits and pensions among the income sources, to measure the impact of social transfers in reducing inequality. As expected, income inequality would have been greater in all countries if social benefits and pensions were not included, with the highest values seen in the United Kingdom and Greece and the lowest in Malta, Iceland, Norway and Slovakia. Social transfers and pensions played a crucial role in Sweden, where excluding them reduced inequality (measured by a Gini coefficient calculated without social benefits) by around 53%, and in another nine countries where excluding them reduced inequality by 40%. Excluding social benefits and pensions did not significantly affect inequality in Bulgaria and Cyprus.

Income disparities increased in Denmark and decreased in Iceland and Norway in 2008-12

Although inequality in the EU-28 remained almost at the same level in 2008-12, a different pattern is seen for individual countries. Income discrepancies decreased in 12 EU Member States and the three EFTA countries included in the analysis, and increased in the remaining countries. Despite their high levels of inequality in 2012, Romania, Bulgaria and Lithuania managed to reduce inequality by about 5 % or more over the period analysed. In contrast, despite low inequality levels in 2012, all countries included in the red circle in Figure 3 saw an increase in inequality since 2008, up to 5 % and more in Austria, Slovakia, Hungary and Denmark. Denmark and Iceland saw the biggest changes in 2008-12: a 12% increase in inequality in Denmark and a 12 % decrease in Iceland.

On average in Europe in 2012, people in the highest (fifth) income quintile earned nearly 40% of national income, and people in the lowest (first) quintile earned less than 10%

The distribution of income among quintiles follows the same pattern in all countries. The fifth quintile earns the biggest share of national income and the first quintile earns the lowest share. In the EU-28 on average, 8% of national income goes to the first quintile, 39% to the fifth quintile and 13%, 17% and 23% goes to the second, third and fourth quintile, respectively. In the Czech Republic, Iceland and Norway, people in the first quintile earn around 10% of national income (Figure 4).

The S80/S20 index: another inequality measure tells the same story

Figure 4 shows another tool to measure inequality, the S80/S20 index. This index supports the picture shown by the Gini coefficient in Figure 1, but ranks countries in a slightly different order. Here, Spain and Greece had the highest levels of inequality, Latvia had the 3rd highest level, and Norway and Slovenia once again had the lowest inequality levels. This shows that high levels of inequality are caused by significant income discrepancies between the lower and upper parts of the income distribution scale.

Figure 5 shows the level of inequality measured by the S80/S20 index, for two groups of people categorised based on age. The main conclusion is that people aged under 65 experience more inequality than elderly people do, in all countries except for France, Slovenia and Switzerland. There was no difference in Cyprus. The biggest difference was seen in Latvia and Spain.

In 2012, the biggest income gap between the upper and lower part of the income distribution scale was seen in Luxembourg, and the smallest in Romania

Looking at income distribution in more detail, the following figure plots the income levels (with the top cut-off points expressed in PPS ) related to each quintile. As expected, there were big differences between countries in 2012, reflecting differences in living standards. For example, belonging to the first quintile basically meant living in a household that earned less than 2000 PPS in Romania, and less than 4000 PPS in Bulgaria and Latvia. However, it meant living in a household that earned less than 16 000 PPS in Switzerland, less than 17 300 PPS in Luxembourg and less than 18 700 PPS in Norway. The highest quintile included households that earned more than 39 500 PPS in Luxembourg, more than 35 600 PPS in Switzerland and more than 34 400 PPS in Norway, but it also included households that earned more than 6 000 PPS in Romania and more than 9 000 in Bulgaria (Figure 6).

Figure 7 shows the change for different points on the income distribution scale (the top cut-off points for each quintile are in euros), in real terms , in 2008-12 (income reference period 2007-11). It shows the sensitivity of different points on the income distribution scale to changes over time in each country. A consistent decrease in each part of the income distribution scale is only seen in Greece, Spain and Iceland. Increases are seen in Luxembourg, Italy, the United Kingdom, Portugal and Latvia. In the remaining countries, the incomes related to each top-cut off points were higher in 2012 than in 2008, with the biggest increases seen in Slovakia and Switzerland.

At least 30% of the population stayed in the same decile in 2010-11

The longitudinal component of the EU-SILC instrument allows users to monitor income mobility issues. People can change their position on the income distribution scale over time, and can belong to different quintiles. This is related to how the financial situation of the other people living in the same country changes over time.

Looking at the income transitions in 2010-11, at least 30% of the population stayed in their original group, in all countries, with the biggest percentage observed in Romania. This high percentage of people for whom income did not change is not surprising since the period for which the transition was computed was very short. In contrast, a lot of change (around 64 % of the population) was seen in Austria, Lithuania, Greece, Croatia, the United Kingdom and Spain (Figure 8). Of the people whose income position changed, nearly 50% saw an increase in income, and nearly 50% saw a decrease.

When the transition period was increased to two or three years, income mobility increased everywhere. Moving from a one-year to two-year transition, the percentage of the population that remained in the same decile of income distribution decreased in all countries. Furthermore, when the transition period was extended to three years, 30% or more of the population in each of fifteen countries saw no change in income (from 30.3 in Austria to 41.7 in Finland).

Data sources and availability

Context

Further Eurostat information

Data visualisation

Regional Statistics Illustrated - select statistical domain 'xxx' (= Agriculture, Economy, Education, Health, Information society, Labour market, Population, Science and technology, Tourism or Transport) (top right)

Publications

Title of the publication

Publications in Statistics Explained (either online publications or Statistics in focus) should be in 'See also' above

Main tables

Title of top Main tables folder, see:

Title(s) of second level folder (if any)

Title(s) of third level folder (if any)

Database

Title of top Database folder, see: