Archive:Income poverty statistics

Data extracted in May 2018.

Planned article update: May 2019.

Highlights

The at-risk-of-poverty rate (after social transfers) in the EU remained unchanged in 2016, at 17.3 %.

In 2016, social transfers lifted 8.6 % of the EU’s population above the poverty threshold.

The 20 % of the population with the highest disposable income in the EU in 2016 received 5.2 times as much income as the bottom 20 %.

At-risk-of-poverty rate, 2016

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 that is enjoyed by the 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.

Full article

At-risk-of-poverty rate and threshold

The at-risk-of-poverty rate (after social transfers) in the EU-28 remained almost stable between 2010 and 2013, rising from 16.5 % to 16.7 %. Between 2013 and 2014, the at-risk-of-poverty rate increased by 0.5 percentage points and then increased slightly in 2015 (up 0.1 points) to reach 17.3 %, where it stayed in 2016.

The rate for the EU-28, calculated as a weighted average of national results, conceals considerable variations across the EU Member States (see Figure 1). In eight Member States, namely Romania (25.3 %), Bulgaria (22.9 %), Spain (22.3 %), Lithuania (21.9 %), Latvia (21.8 %), Estonia (21.7 %), Greece (21.2 %) and Italy (20.6 %), one fifth or more of the population was viewed as being at-risk-of-poverty; this was also the case in Serbia (25.5 %), Turkey (22.5 %, 2015 data) and the former Yugoslav Republic of Macedonia (21.9 %). Among the Member States, the lowest proportions of persons at-risk-of-poverty were observed in the Czech Republic (9.7 %), Finland (11.6 %) and Denmark (11.9 %), while Iceland (8.8 %) also reported a relatively low share of its population as being at-risk-of-poverty.

Figure 1: At-risk-of-poverty rate and threshold, 2016
Source: Eurostat (ilc_li01) and (ilc_li02)

The at-risk-of-poverty threshold (also shown in Figure 1) is set at 60 % of national median equivalised disposable income. For spatial comparisons, 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 2016 from PPS 2.9 thousand in Romania to PPS 13.5 thousand in Austria, with the threshold in Luxembourg (PPS 16.8 thousand) above this range; the poverty threshold was also relatively low in the former Yugoslav Republic of Macedonia (PPS 2.9 thousand), Serbia (PPS 3.2 thousand) and Turkey (PPS 3.4 thousand, 2015 data) and relatively high in Switzerland (PPS 16.3 thousand) and Norway (PPS 17.2 thousand).

Different groups in society are more or less vulnerable to monetary poverty. In 2016, there was a small difference in the EU-28 at-risk-of-poverty rate (after social transfers) between the two sexes, with the latest rates equivalent to 16.6 % for males compared with a higher figure (17.9 %) for females (see Figure 2). The largest gender differences in 2016 were observed in the Baltic Member States (2.7-4.8 points higher for females), Slovenia (2.7 points) and Germany (2.6 points), while Bulgaria, the Czech Republic, Cyprus, Sweden and Belgium also reported at-risk-of-poverty rates for females that were 2.0 or more points higher than for males, as was the case in Norway. By contrast, there were five EU Member States where the at-risk-of-poverty rate was slightly higher among men than women, namely Denmark, Malta, the Netherlands, Finland and Spain, and this was also the case in the former Yugoslav Republic of Macedonia and Serbia.

Figure 2: At-risk-of-poverty rate after social transfers, 2016
(%)
Source: Eurostat (ilc_li02)

The differences in at-risk-of-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 (48.6 %) of all unemployed persons in the EU-28 were at-risk-of-poverty in 2016, with by far the highest rate in Germany (70.5 %), while seven other EU Member States (the three Baltic States, Bulgaria, the Czech Republic, Sweden and Romania) reported that at least half of the unemployed were at-risk-of-poverty in 2016.

Table 1: At-risk-of-poverty rate after social transfers by most frequent activity status, 2016
(%)
Source: Eurostat (ilc_li04)

Around one in seven (13.8 %) retired persons in the EU-28 were at-risk-of-poverty in 2016. Rates that were at least twice as high as the EU-28 average were recorded in all three Baltic Member States: Lithuania (30.6 %), Latvia (41.9 %) and Estonia (45.0 %).

Those in employment were far less likely to be at-risk-of-poverty (an average of 9.6 % across the whole of the EU-28 in 2016). There was a relatively high proportion of employed persons at-risk-of-poverty in Romania (18.9 %) and to a lesser extent in Greece (14.1 %) and Spain (13.1 %), while Luxembourg, Italy, Bulgaria, Portugal and Poland each also reported that more than 1 in 10 members of their respective workforces were at-risk-of-poverty in 2016.

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 25.6 % of single person households in 2016. By contrast, the at-risk-of-poverty rate for households with two or more adults was less than half this rate, at 11.5 %. 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 11.0 %.

Figure 3: At-risk-of-poverty rate by household type, households without dependent children, 2016
(% of specified population)
Source: Eurostat (ilc_li03)

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 observed in Malta was repeated in the former Yugoslav Republic of Macedonia except that single person households reported the lowest rate among the three types analysed. In a small majority of Member States (15 out of 28), the at-risk-of-poverty rate for two adult households where at least one person was aged 65 or over was lower than the rate for the broader category of all households with two or more adults, most notably in Greece where the difference was 7.5 points. At the other extreme, in Malta the at-risk-of-poverty rate for two adult households where at least one person was aged 65 or over was 13.2 points higher than for all households with two or more adults, and a large difference was also observed in Switzerland (9.0 points).

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 more than one third (34.0 %). Comparing the rates for households with two adults, those with just one dependent child (13.6 %) had a risk of poverty that was just more than 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 apart from Slovenia reported that households composed of two adults and a single child were the least likely to be at risk of poverty; in Slovenia the lowest risk of poverty was recorded among households composed of two adults with three or more dependent children. Most EU 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 Bulgaria and Romania, and to a lesser extent Portugal, Italy, Slovakia, Spain and Greece; this situation also occurred in all three of the candidate countries for which data are available.

Figure 4: At-risk-of-poverty rate by household type, households with dependent children, 2016
(% of specified population)
Source: Eurostat (ilc_li03)

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 2016, social transfers reduced the at-risk-of-poverty rate among the population of the EU-28 from 25.9 % before transfers to 17.3 % after transfers, thereby lifting 8.6 % of the population above the poverty threshold; 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 — moving at most 6.0 % of people above the poverty threshold — in Greece, Romania, Bulgaria, Poland, Italy, Slovakia, Portugal, Lithuania and Latvia, as well as in Turkey (2015 data) and the former Yugoslav Republic of Macedonia. Looking at the impact in relative terms, half or more of all persons who were at-risk-of poverty in Finland, Ireland and Denmark moved above the threshold as a result of social transfers, as was also the case in Iceland and Norway.

Figure 5: At-risk-of-poverty rate before and after social transfers, 2016
(%)
Source: Eurostat (ilc_li02) and (ilc_li10)

Income inequalities

Governments, policymakers and society in general cannot combat poverty and social exclusion without analysing 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 2016: a population-weighted average of national figures for each of the individual EU Member States (see Figure 6) 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). This ratio varied considerably across the Member States, from 3.5 in the Czech Republic and 3.6 in Slovenia, Slovakia and Finland, to more than 6.0 in Latvia, Italy, Spain, Greece, and more than 7.0 in Lithuania and Romania, peaking at 7.9 in Bulgaria. Among the non-member countries shown in Figure 6, Iceland (3.3) and Norway (3.7) also reported particularly low ratios for the inequality of income distribution, while in Turkey (8.6, 2015 data) and Serbia (9.7) the latest ratios were higher than in any of the EU Member States.

Figure 6: Inequality of income distribution, 2016
(income quintile share ratio)
Source: Eurostat (ilc_di11)

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 years 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 years and above had a median income in 2016 which was equal to 93 % of the median income for the population under the age of 65 years (see Figure 7). In six EU Member States (Luxembourg, Greece, France, Spain, Italy and Hungary) the median income of the elderly was equal to or higher than the median income of persons under the age of 65 years, and this was also the case in the former Yugoslav Republic of Macedonia, Serbia and Turkey (2015 data). In Austria, Poland, Romania, Portugal and Slovakia, the median income of the elderly was at least 90 % of that recorded for people under the age of 65 years, and this was also the case in Iceland and Norway. Ratios below 80 % were recorded in the Czech Republic, Cyprus, Sweden, Belgium, Denmark, Malta, Lithuania, Latvia and Estonia. Relatively low ratios may broadly reflect pension entitlements.

Figure 7: Relative median income ratio, 2016
(ratio of the median equivalised disposable income of people aged 65 and above to the median equivalised disposable income of those aged below 65)
Source: Eurostat (ilc_pnp2)

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, 25.0 % below the poverty threshold in 2016 (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 (36.2 %), with gaps above 25.0 % also reported for Greece, Italy, Spain, Bulgaria, Croatia, Lithuania, Portugal and Slovakia. The gap was even higher in Serbia (38.1 %) and also relatively high in the former Yugoslav Republic of Macedonia (32.9 %) and Turkey (27.8 %, 2015 data). The lowest at-risk-of-poverty gap among the Member States was observed in Finland (13.9 %), followed by Malta (15.9 %).

Figure 8: Relative median at-risk-of-poverty gap, 2016
(%)
Source: Eurostat (ilc_li11)

Source data for tables and graphs

Income poverty: tables and figures

Data sources

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 (EC) No 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 onwards. 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 and euro area data are population-weighted averages of data for the Member States.

Context

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 people at risk of poverty or social exclusion for more information.