Living conditions in Europe - income distribution and income inequality


Data extracted in April 2021.

Planned article update: May 2022.

Highlights


In 2019, median equivalised disposable income averaged PPS 17 422 per inhabitant in the EU, ranging from PPS 7 338 in Romania, to PPS 28 943 in Luxembourg.

In 2019, the 20 % of the EU population with the lowest equivalised disposable income accounted for 7.9 % of total disposable income.

In 2019, EU median equivalised disposable income was 71 % higher for people with a high education level compared with those with a low education level.


Median equivalised disposable income, 2019
(PPS per inhabitant)
Source: Eurostat (ilc_di03)


This article is part of a set of statistical articles that form Eurostat’s online publication, Living conditions in Europe. Each article helps provide a comprehensive and up-to-date summary of living conditions in Europe, presenting some key results from the European Union’s (EU’s) statistics on income and living conditions (EU-SILC), which is conducted across the EU Member States, as well as most of the EFTA and candidate countries.

Some of the monetary data presented in this article are shown in national currencies while the rest are shown in purchasing power standards (PPS). A PPS is a unit that takes account of price-level differences between countries.

Note that the data for the EU are calculated as population-weighted averages of national data for the EU Member States. For example, distribution of income (into income quintiles) reflects the average distribution within the Member States rather than the distribution within the EU as a whole. To take into account differences in household size and composition, the concept of equivalised disposable income is used. It is based on expressing total net (referred to as disposable) household income in relation to the number of ’equivalent adults’, using a standard (equivalence) scale.

Full article

Key findings

Median equivalised disposable income

In 2019, median equivalised disposable income varied considerably across the EU Member States, ranging from PPS 7 338 per inhabitant in Romania, to PPS 28 943 in Luxembourg. The EU average was PPS 17 422.

Median equivalised disposable income fell, in real terms, in two of the EU Member States in 2019: Luxembourg and the Netherlands. A marginal decrease was also noted in Norway and Switzerland.

Income distribution

Across nearly all EU Member States, the 20 % of the population with the highest disposable incomes (the top or fifth quintile) accounted for at least one third of total income, a share that in 2019 reached a peak of 47.1 % in Bulgaria. The exception was Slovakia, where the share was marginally lower with 32.3 %. By contrast, the 20 % of the population with the lowest incomes (the bottom or first quintile) together accounted for less than one tenth of all income, except in Czechia (10.3 %) and Slovenia (10.0 %). Between 2014 and 2019, Luxembourg recorded the biggest fall in income share for the first quintile (down 0.9 percentage points) and Ireland the largest increase (up 1.4 percentage points), followed by Greece and Portugal (up 1.1 percentage points)

Income quintile share ratio and Gini coefficient

The S80/S20 income quintile share ratio is based on a comparison of the income received by the top quintile and that received by the bottom quintile of the population. By contrast, the Gini coefficient measures the extent to which the distribution of income differs between a perfectly equal distribution (where each member of the population has exactly the same income) and full inequality (where a single person receives all of the income).

Distribution of income measured by Gini coefficient

Based on the Gini coefficient, Bulgaria (40.8 %), Lithuania (35.4 %), Latvia (35.2 %) and Romania (34.8 %) experienced the highest levels of inequality in disposable income in 2019 in the EU; note that high coefficients were also recorded in Kosovo* (44.2 %), Turkey (41.7 %) and Montenegro (34.1 %). The lowest levels of income inequality among the EU Member States, using this measure, were recorded in Czechia (22.8 %, Slovenia (23.9 %) and Slovakia (24.0 %).

(*Kosovo: this designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo Declaration of Independence)


Income inequality across different age groups

In 2019, the EU income quintile share ratio for older persons (defined here as people aged 65 years and over) was lower — at 4.2 — than the average ratio for the whole population (5.0). This pattern was repeated across all of the EU Member States, except in Portugal (where the ratio was the same for older persons as for the population as a whole).

Social transfers, the main instrument for the realisation of welfare policies, can play a major role to help reducing income inequalities

In 2019, social transfers reduced income inequality among the EU population: the Gini coefficient for income was 50.2 % before social transfers (and before pension payments) but decreased to 30.2 % after taking account of these transfers.

Income distribution

Median equivalised disposable income in the EU highest in Luxembourg and lowest in Romania

In 2019, median equivalised disposable income averaged PPS 17 422 per inhabitant in the EU. Across the EU Member States, it ranged from PPS 28 943 in Luxembourg and PPS 23 687 in Austria, to PPS 8 371 in Bulgaria and PPS 7 338 in Romania.

Map 1 shows that the highest levels of median equivalised disposable income were recorded in western and Nordic EU Member States as well as in EFTA countries: median equivalised disposable income of PPS 20 000 per inhabitant or more was recorded in Luxembourg, Austria, Germany, Denmark, Belgium, the Netherlands, France, Sweden and Finland, as well as in Switzerland, Norway and Iceland (2018 data). By contrast, median equivalised disposable incomes were lower in most southern and eastern Member States as well as in candidate countries; median equivalised disposable incomes of less than PPS 10 000 per inhabitant were recorded in Greece, Hungary, Bulgaria and Romania, as well as in Turkey, Montenegro, Serbia and North Macedonia.

Map 1: Median equivalised disposable income, 2019
(PPS per inhabitant)
Source: Eurostat (ilc_di03)

Among the population aged 18-64 years, people with a tertiary level of education (ISCED levels 5-8) recorded notably higher levels of median equivalised disposable income in 2019 than those who had, at most, completed either a low (ISCED levels 0-2) or medium (ISCED levels 3-4) level of education. This was the case in all EU Member States as well as all non-member countries shown in Figure 1.

Figure 1: Median equivalised disposable income of the population aged 18-64 years, analysed by educational level, 2019
(PPS per inhabitant)
Source: Eurostat (ilc_di03) and (ilc_di08)

In 2019, EU median equivalised disposable income was 71 % higher for people with a high level of educational attainment (PPS 23 483 per inhabitant) when compared with the level of income for people with a low level of educational attainment (PPS 13 764). The largest relative income gap between persons with low and high levels of educational attainment was recorded in Romania where the median for people with a high level was 3.3 times as high as the median for people with a low level. In Bulgaria, Lithuania, Croatia and Latvia, the median for people with a high level was at least double the median for people with a low level; this was also the case in the four candidate countries shown in Figure 1 and in Kosovo (2018 data). By contrast, the median equivalised disposable income for people with a high level of educational attainment was only 40 % higher in the Netherlands than the median for people with a low level of educational attainment, and in Denmark even less (26 %); this was also the case in Norway (35 %) and Iceland (17 %, 2018 data).

Changes in median equivalised disposable income

The EU median equivalised disposable income in nominal terms (in other words, without adjusting for inflation) rose by 2.9 % between 2018 and 2019 — see Table 1. The median equivalised disposable income increased in all EU Member States, most notably in Romania (19.4 %), Bulgaria (17.6 %), Latvia (11.6 %), and Hungary (11.3 %). The growth rate was lowest in Finland (1.4 %), and France (1.5 %), while Italy and Spain also recorded increases below 2.0 %. The only EU Member State with a negative growth rate was Luxembourg (-9.7 %).

Table 1: Median equivalised disposable income per inhabitant, 2018 and 2019
Source: Eurostat (ilc_di03) and (prc_hicp_aind)

Median equivalised disposable income fell in real terms in two EU Member States.

After adjusting for inflation (using the harmonised indices of consumer prices), the developments of median equivalised disposable incomes in real terms between 2018 and 2019 were different compared with the nominal developments. These differences reflect the levels of inflation recorded in 2019, ranging from 0.3 % in Portugal, to 3.4 % in Hungary and 3.9 % in Romania, with an average of 1.4 % in the EU. In fact, in real terms, median equivalised disposable incomes rose in the EU by 1.5 %, a bit more than half the 2.9 % increase in nominal terms.

The largest real increases in median equivalised disposable income in 2019 were recorded in the same group of countries as in nominal terms, although Romania (up 15.0 %) and Bulgaria (up 14.8 %) were the only ones to record an increase above 10.0 % (see Figure 2). Median equivalised disposable incomes fell in real terms in two of the EU Member States: Luxembourg (down 11.1 %), and the Netherlands (down 0.2 %). Median equivalised disposable income also fell in real terms in 2019 in Norway (down 0.2%) and Switzerland (down 0.7 %).

Figure 2: Real change in median equivalised disposable income in national currency per inhabitant, 2018-2019
(%)
Source: Eurostat (ilc_di03) and (prc_hicp_aind)


On average, the top 20 % of earners received almost two fifths of total disposable income in the EU Member States

A more detailed analysis that focuses on income distribution is presented in Table 2. It is based on ordering the disposable incomes of individuals and then dividing these into quintiles (fifths), in other words, from the 20 % of the population with the highest incomes (referred to as the top or fifth income quintile) down to the 20 % of the population with the lowest incomes (referred to as the bottom or first income quintile).

Table 2: Share of equivalised disposable income for the first and fifth income quintiles, 2014 and 2019
Source: Eurostat (ilc_di01)

In 2019, 38.2 % of the disposable income in the EU Member States could be attributed to people in the top 20 % of the income distribution, while people in the bottom quintile of the income distribution received a 7.9 % share of disposable income.

In 2019, the highest 20 % of earners in Bulgaria, Lithuania, Latvia, Romania, Portugal and Cyprus received 40.0 % or more of the disposable income within their respective economies. A similar situation was also recorded in Turkey and Serbia. In most of the EU Member States, the share of the highest 20 % of earners in 2019 was at least 35.0 %, although it was below this level in Belgium (34.5 %), Czechia (34.4 %), Slovenia (34.0 %) and Slovakia (32.3 %). A similar situation was also recorded in Iceland (34.0 %; 2018 data) and Norway (34.8 %).

Figure 3: Distribution of equivalised disposable income by income quintile, 2019
(%)
Source: Eurostat (ilc_di01)

At the other end of the income scale, people in the bottom quintile of the income distribution received less than 7.9 % (which was the average in the EU Member States) of disposable income in 12 Member States, among which they had less than 7.0 % in Spain, Italy, Lithuania, Latvia, Bulgaria and Romania (where the lowest share of 5.7 % was recorded). Only in Czechia and Slovenia was the share above 10.0 %, while it was close to this level in Slovakia and Finland (both 9.7 %).

Decline in the share of disposable income attributed to the bottom and top income quintiles

In the EU, between 2014 and 2019, the shares of disposable income that were accounted for by the bottom and top income quintiles changed slightly. The share of income for the bottom earners went up from 7.7 % to 7.9 %, and the share for the top earners fell from 38.7 % to 38.2 %.

There were 10 EU Member States that reported a smaller share for the lowest income quintile in disposable income in 2019 than had been observed in 2014; note that there are breaks in time series for Belgium, Bulgaria, Estonia, Luxembourg and the Netherlands. The share of the lowest income quintile decreased most in Luxembourg (down 0.9 percentage points). Relatively large decreases were also recorded in Norway (down 0.8 points) and Switzerland (down 0.5 points). By contrast, there were 14 Member States where the lowest income quintile’s share rose and three where it remained unchanged. The share of the lowest income quintile increased most in Ireland (up 1.4 percentage points), followed by Portugal and Greece (both up 1.1 points). A notable increase was also recorded in Serbia (up 1.6 points).

At the other end of the income scale, in 18 EU Member States the share of the top income quintile in disposable income fell between 2014 and 2019, while the top income quintile’s share rose in 9 Member States. The share of disposable income received by the top income quintile rose by 5.1 percentage points in Bulgaria and by 2.9 points in Luxembourg. An increase of more than 1 point was also observed in Norway (1.2 points). By contrast, the share of the top income quintile fell by 1 point or more in nine Member States, including three where it fell by more than 3 points: Cyprus, Slovakia and Estonia. A decrease of more than 3 points was also recorded in North Macedonia.

Almost one third of the EU population in 2019 was in an income decile that was more than one decile different from where they had been three years earlier (in 2016)

This next section analyses the share of the population who experience fluctuations in their economic well-being over time, by studying the proportion of people that had moved up/down the income ladder.

The analysis is based on how people’s ranking in terms of their disposable income changed compared with three years earlier. It is based on income deciles, which are similar to income quintiles but instead of grouping individuals into five quintiles, the ranking is divided into ten deciles. As such, the highest decile refers to the 10 % of the population with the highest incomes.

It is important to note that upward or downward income transitions may occur as a result of direct changes in an individual’s financial situation (more or less income) or from aggregate changes across the whole economy. For example, an individual whose income is unchanged may move to a lower income decile if there is a more general increase in incomes across the remainder of the population.

It is also important to consider that these measures of income mobility reflect not only changes in income but also other dynamic aspects of labour markets (such as the demand for labour, unemployment levels, flexible working patterns and job (in)security). Furthermore, the measures reflect changes in family composition as the indicator is based on equivalised disposable income attributed to each household member.

These remarks notwithstanding, close to one third (31.6 %) of the EU population were more than one income decile higher or lower in 2019 than they had been three years earlier, with a higher proportion (16.3 %) having moved up more than one decile than had moved down (15.3 %) — see Table 3.

Table 3: Share of population moving more than one income decile within three years, 2014-2019
(%)
Source: Eurostat (ilc_di30c)

Among the EU Member States, more than one fifth of the population in Hungary (25.3 %), Luxembourg and Greece (both 20.9 %) was more than one income decile higher in 2019 than three years earlier. Equally, at least one fifth of the population in three Member States experienced a downward transition of more than one income decile: 21.0 % in Greece, 21.8 % in Hungary and 22.6 % in Poland.

Income mobility remains broadly stable

Upward income mobility (of more than one decile over three years) for the EU was slightly higher in 2019 as it had been in 2014, the share of the population whose income was more than one decile higher in 2014 compared with three years earlier was 16.1 %, whereas in 2019 the equivalent share was 16.3 %, while downward mobility (of more than one decile) was the same.

Using this measure of changing by more than one decile compared with three years earlier, upward income mobility decreased most notably in Latvia, Lithuania, Cyprus, Portugal, Bulgaria (break in series) and Estonia (break in series), where the share was more than 2 percentage points lower in 2019 than it had been in 2014. Downward income mobility decreased by close to 6 points between 2014 and 2019 in Latvia.

There were a few examples of more widespread increases or decreases in income mobility in 2019 compared with 2014. The share of the population classified more than one income decile higher than three years earlier increased between 2014 and 2019 by at least 4.0 percentage points in Hungary, Romania and Luxembourg. There were also several examples where a larger share of the population experienced a fall of more than one income decile in 2019 than in 2014; increases of 4 points or more were observed in Romania and Poland.

Impact of social transfers on income

This next section compares the situation for disposable income before and after social transfers to assess the impact and redistributive effects of welfare policies. These transfers cover assistance that is given by central, state or local institutional units and include, among others, pensions, unemployment benefits, sickness and invalidity benefits, housing allowances, social assistance and tax rebates.

Figure 4: Contribution of social transfers to median equivalised disposable income, 2019
(PPS per inhabitant)
Source: Eurostat (ilc_di03), (ilc_di13) and (ilc_di14)

Social transfers contributed PPS 4 866 per inhabitant to median equivalised disposable income in the EU

Figure 4 shows the overall impact of social transfers; this information is split between transfers for pensions and other transfers, for example, social security benefits and social assistance that have the aim of alleviating or reducing the risk of poverty.

In 2019, median equivalised disposable income in the EU was PPS 4 866 per inhabitant higher as a result of all social transfers (including pensions), and was PPS 1 355 higher from social transfers other than pensions.

Among the EU Member States, there were considerable variations in the contribution made by social transfers to median equivalised disposable income in 2019. The largest transfers were observed in Luxembourg, where social transfers (including pensions) increased the median equivalised disposable income by PPS 9 924 per inhabitant. Social transfers (including pensions) were also relatively high in Austria (PPS 7 470) and France (PPS 6 345), as well as in Belgium (PPS 6 095).

A somewhat different pattern emerges if pensions are excluded from the analysis: in 2019, social transfers other than pensions contributed more than PPS 2 000 per inhabitant to median equivalised disposable income in Sweden (PPS 2 794), Belgium (PPS 2 665), Ireland (PPS 2 449), Luxembourg (PPS 2 293), Austria (PPS 2 082) and Denmark (PPS 2 010).

It is interesting to compare the level of social transfers across the EU Member States including and excluding pensions. In Estonia, in 2019 social transfers including pensions were only around 1.7 times as high as social transfers excluding pensions. However, in Greece the same ratio was much higher, as the value of social transfers including pensions was 8.4 times as high as social transfers excluding pensions. The next highest ratios were recorded in Portugal and Romania where transfers including pensions were 6.6 and 6.3 times as high as transfers excluding pensions.

Social transfers were often targeted at families without children

Across the EU, median equivalised disposable income before social transfers was higher (PPS 14 756 per inhabitant in 2019) for persons living in nuclear households comprising two or more adults with dependent children than for the other two types of household shown in Table 4. For people living in households with two or more adults without dependent children the median was PPS 10 566 per inhabitant, while for households composed of a single person with dependent children the median was PPS 10 564.

Table 4: Median equivalised disposable income before and after social transfers, analysed by household type, 2019
(PPS per inhabitant)
Source: Eurostat (ilc_di04) and (ilc_di13b)

This pattern held across each of the EU Member States. The impact of social transfers was considerable, as the level of median equivalised disposable income for people in the EU living in households composed of two or more adults without children reached PPS 19 223 per inhabitant in 2019, after including social transfers; this was 81.9 % higher than before social transfers (PPS 10 566). For comparison, social transfers led to a 30.6 % increase in the median equivalised disposable income of people living in households composed of a single person with dependent children. The impact of social transfers was considerably lower for people living in households composed of two or more adults with dependent children (up 15.1 %).

The re-distributive impact of social transfers in the EU resulted in the highest levels of median equivalised disposable income after social transfers being recorded (among the three types of households shown in Table 4) for people living in households that were composed of two or more adults without dependent children. This pattern was observed in nearly all of the EU Member States in 2019; the only exceptions were Denmark, Estonia and Latvia, where the highest levels of median equivalised disposable income were recorded for people living in households composed of two or more adults with dependent children. In all Member States, the lowest levels of median equivalised disposable income after social transfers were for households composed of a single adult with dependent children. This was also generally the case in the non-EU countries shown in Table 4, although Turkey was an exception as the median equivalised disposable income for such households was higher than for households composed of two or more adults with dependent children.

The comparison of median equivalised disposable income before and after social transfers reveals that most governments directed the greatest share of their support — in the form of social transfers including pensions — towards households with two or more adults without dependent children. For example, the median equivalised disposable income among people living in this type of household in Greece increased from PPS 4 369 per inhabitant to PPS 10 762 as a result of social transfers (an increase of 146 %). Social transfers also resulted in median equivalised disposable incomes at least doubling for people living in households with two or more adults without dependent children in France, Luxembourg, Portugal and Italy.

In Ireland, social transfers were targeted more towards households composed of a single adult with dependent children

Ireland was an exception to this pattern, as the impact of social transfers was felt more by people living in households composed of a single adult with dependent children. For such households, median equivalised disposable income in Ireland in 2019 was 129.5 % higher as a result of social transfers (compared with a 47.8 % increase for people living in a household composed of two or more adults without dependent children, and a 17.3 % increase for people living in households with two or more adults with dependent children).

In absolute terms, as a result of social transfers, median equivalised disposable income for people living in household composed of a single adult with dependent children increased by PPS 8 126 per inhabitant in Ireland.

The highest increases in income were recorded for people living in Luxembourg in households with two or more adults without dependent children; they saw their income in 2019 increase by PPS 19 282 per inhabitant as a result of social transfers. There were also considerable increases in income for people living in this type of household in France, Sweden, Austria and Belgium, as well as in Norway and Switzerland, as social transfers resulted in median equivalised disposable income increasing by more than PPS 10 000 per inhabitant in 2019.

Income inequality

As noted above, while median equivalised disposable income provides a measure of average living standards, devoid of the potential distortion of aggregate measures such as GDP per capita, it still fails to offer a complete picture as it does not capture the distribution of income within the population and thereby does little to reflect economic inequalities.

The Gini coefficient

The Gini coefficient is an indicator that is used to measure income inequality. The Gini coefficient may be expressed in percentage terms in a range from 0, corresponding to perfect equality (in other words, income is equally distributed among every individual in a given society), to 100, corresponding to perfect inequality (in other words, when all of the income is received by a single person). Thus, a lower Gini coefficient reflects a more equal distribution of income.

In 2019, the Gini coefficient for the EU was 30.2 %. The highest income disparities among the EU Member States (with a Gini coefficient of at least 35.0 % as shown by the darkest shade in Map 2) were recorded in Bulgaria, Lithuania and Latvia. A second group of Member States, with a Gini coefficient above the EU average of 30.2 % (in the range of 30.5 % to 34.8 %), comprised Romania, Spain, Italy, Luxembourg, Portugal, Cyprus, Greece and Estonia. At the other end of the range, income was more evenly distributed in Czechia, Slovenia and Slovakia, where the Gini coefficient was less than 25.0 %. Among the non-member countries shown in Map 2, relatively high coefficients were observed in Serbia (33.3 %), Montenegro (34.1 %) and Turkey (41.7 %, while relatively low coefficients were observed in Norway (25.4 %) and Iceland (23.2 %; 2018 data).

Map 2: Gini coefficient for equivalised disposable income per inhabitant, 2019
(%)
Source: Eurostat (ilc_di12)

The S80/S20 income quintile share ratio

Income inequalities within countries may also be illustrated through the income quintile share ratio, which is calculated as the ratio between the share of income received by the top quintile and the share of income received by the bottom quintile. High values for this ratio suggest that there are considerable disparities in the distribution of income between upper and lower income groups.

In 2019, the income quintile share ratio for the EU was 5.0 — see Figure 5. This signifies that, on average, the income received by the 20 % of the population with the highest incomes was five times as high as the income received by the 20 % of the population with the lowest incomes.

Figure 5: Income quintile share ratio, 2019
Source: Eurostat (ilc_di11)

Among the EU Member States, the income quintile share ratio ranged from a low of 3.3 in Slovakia and Czechia and also below 4.0 in Slovenia, Belgium, Finland and the Netherlands to a value of at least 6.0 in Italy, Lithuania, Latvia and Romania, peaking at 8.1 in Bulgaria.

The distribution of income was often more equitable among older people

On the basis of the same measure, older people (aged 65 years and over) in the EU experienced less income inequality than the whole population, as their income quintile share ratio was 4.2 in 2019. This pattern of a more equitable distribution of income among older people (compared with the total population) was apparent in the vast majority of EU Member States, the only exceptions being Slovenia and Portugal (3.4 % and 5.2 % respectively for both the older and the whole population) . Income inequality was even slightly higher among older people in Iceland (2018 data).

Impact of social transfers on inequalities

The effect of welfare systems, in other words, pensions and other social transfers, in addressing income inequality can be demonstrated by comparing Gini coefficients before and after social transfers, to provide a quantitative assessment of their redistributive impact.

In 2019, the Gini coefficient for median equivalised disposable income before all social transfers was 50.2 % in the EU, which decreased to 30.2 % after social transfers. The impact of pensions and other social transfers on income inequality was particularly large in Portugal, Greece and Germany — where the Gini coefficient decreased by 23.1 to 25.7 percentage points — and in Sweden where the coefficient decreased by 29.7 points, see Figure 6.

Figure 6: Gini coefficient for equivalised disposable income per inhabitant, 2019
(%)
Source: Eurostat (ilc_di12), (ilc_di12b) and (ilc_di12c)

Data sources

The data used in this article are derived from EU-SILC. EU-SILC data are compiled annually and are the main source of statistics that measure income and living conditions in Europe; it is also the main source of information used to link different aspects relating to the quality of life of households and individuals.

The reference population for the information presented in this article is all private households and their current members residing in the territory of an EU Member State (or non-member country) at the time of data collection; persons living in collective households and in institutions are generally excluded from the target population. The data for the EU are population-weighted averages of national data.

Tables in this article use the following notation:

Value in italics     data value is forecasted, provisional or estimated and is therefore likely to change;
: not available, confidential or unreliable value.

Context

Gross domestic product (GDP) is a measure of the total output of an economy. From the perspective of living conditions, GDP may also be calculated as the sum of primary incomes that are distributed by resident producer units (in the form of wages, rents, interest and profits). When population is taken into account, GDP per capita provides both a convenient measure of average incomes and of the living standards enjoyed by the inhabitants living in a specific economy, as well as (when adjusted to take account of price differences between countries through the use of purchasing power parities) — a measure for comparing living standards between countries.

Nevertheless, GDP per capita is a relatively simple, aggregate measure and in order to have a more detailed picture of living conditions, it is pertinent to analyse the distribution (rather than average levels) of household income. A number of different statistical measures are available for this purpose, including household disposable income, in other words, the total income that households have at their disposal for spending or saving. While the aggregated level of household disposable income is available from national accounts and might be used for a general analysis of the household sector, this indicator lacks any distributional dimension. It is therefore preferable to base any analysis of income distributions on micro data sources, in other words, statistical surveys for a representative sample of actual households, rather than aggregate macroeconomic measures. Such surveys facilitate an analysis of median equivalised income levels or the distribution of income across socioeconomic strata of the population.

In order to take into account differences in household size and composition and thus enable comparisons of income levels, the concept of equivalised disposable income is used. It is based on expressing total net (also referred to as disposable) household income in relation to the number of ’equivalent adults’, using a standard (equivalence) scale. Eurostat uses a ’modified OECD scale’ which gives a weight to each member of a household (and then adds these up to arrive at an equivalised household size), taking into account the number of persons in each household and the age of its members (more details are provided in a glossary). Household disposable income, derived as the sum of the income received by every member of the household and by the household as a whole, is divided by the equivalised household size to determine the equivalised disposable income attributed to each household member.

The median of the equivalised disposable income distribution is typically used in the EU as a key measure for analysing standards of living within each economy. It is simply the income level that divides the population into two groups of equal size: one group encompasses half the population with a level of disposable income above the median and the other group encompasses the half of the population with a level of disposable income below the median. The use of the median (rather than the arithmetic mean) avoids any potential distortion that may be caused by the existence of extreme values, such as a few extremely rich households that may raise the arithmetic mean.

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