Income distribution statistics

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Data from September 2011, most recent data: Further Eurostat information, Main tables and Database. This article analyses recent statistics on monetary poverty and income inequalities in the European Union (EU). Favourable living conditions depend on a wide range of factors, which may be divided into those that are income-related and those that are not. Income distribution within a country provides a picture of inequalities: on the one hand, inequalities may create incentives for people to improve their situation through work, innovation or acquiring new skills, while on the other, crime, poverty and social exclusion are often seen as being linked to such income inequalities.

Figure 1: At-risk-of-poverty rate and threshold, 2009
- Source: Eurostat (ilc_li01) and (ilc_li02)
Table 1: At-risk-of-poverty rate after social transfers, 2007-2009
(%) - Source: Eurostat (ilc_li02)
Table 2: At-risk-of-poverty rate after social transfers by most frequent activity status, 2009 (1)
(%) - Source: Eurostat (ilc_li04)
Figure 2: At-risk-of-poverty rate before and after social transfers, 2009 (1)
(%) - Source: Eurostat (ilc_li02) and (ilc_li10)
Figure 3: Inequality of income distribution, 2009
(income quintile share ratio) - Source: Eurostat (ilc_di11)
Figure 4: Relative median income ratio, 2009
(ratio) - Source: Eurostat (ilc_pnp2)
File:Relative median at-risk-of-poverty gap, 2009 (%).png
Figure 5: Relative median at-risk-of-poverty gap, 2009
(%) - Source: Eurostat (ilc_li11)

Contents

Main statistical findings

At-risk-of-poverty rate and threshold

In 2009, 16.3 % of the EU-27 population was assessed to be at-risk-of-poverty (see Figure 1). This share, calculated as a weighted average of national results, conceals considerable variations between countries. In four of the EU Member States, namely Latvia (25.7 %), Romania (22.4 %), Bulgaria (21.8 %) and Lithuania (20.6 %), more than one fifth of the population was assessed to be at-risk-of-poverty. The lowest proportions of persons at-risk-of-poverty were observed in the Czech Republic (8.6 %), Slovakia (11.0 %), the Netherlands (11.1 %) and Slovenia (11.3 %); Iceland (10.2 %) and Norway (11.7 %) also reported relatively low shares of their respective populations at-risk-of-poverty.

The at-risk-of-poverty threshold (also shown in Figure 1) is set at 60 % of the 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. It varied greatly in 2009 across the Member States from PPS 2 066 in Romania and PPS 3 452 in Bulgaria to a level between PPS 11 000 and PPS 12 000 in four Member States (Sweden, Austria, the Netherlands and Cyprus), peaking in Luxembourg above this range at PPS 16 226; the poverty threshold was also relatively high in Iceland, Norway and Switzerland (above PPS 12 000 in each of these countries).

In general, the at-risk-of-poverty rate (after social transfers) is stable from one year to the next (see Table 1). Between 2008 and 2009, the minor exceptions to this rule were Luxembourg (with an increase of 1.5 percentage points from 13.4 % in 2008 to 14.9 % in 2009) and the United Kingdom (with a reduction of 1.5 percentage points from 18.7 % in 2008 to 17.2 % in 2009).

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) between men and women in the EU-27 in 2009 (15.4 % compared with 17.1 % respectively). However, the differences were more notable when the population was classified according to activity status (see Table 2). The unemployed are a particularly vulnerable group: almost half (45.3 %) of the unemployed were at-risk-of-poverty in the EU-27 in 2009, with the highest rates in Germany (62.0 %), Latvia (56.7 %) and Estonia (55.1 %), while four other Member States reported that more than half of the unemployed were at-risk-of-poverty. About one in six of all retired persons in the EU-27 (15.4 %) were at-risk-of-poverty in 2009; rates were much higher in Latvia, Cyprus, Estonia and Bulgaria – with more than one third of the retired population at-risk-of-poverty. Those in employment were far less likely to be at-risk-of-poverty (8.4 % in the EU-27), although there were relatively high rates in Romania (17.6 %) and Greece (13.8 %).

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 2). In 2009, social transfers reduced the at-risk-of-poverty rate among the population of the EU-27 from 25.1 % before transfers to 16.3 % after transfers, thereby lifting 35 % of persons that would otherwise be at-risk-of-poverty above the poverty threshold. In relative terms, the impact of social benefits was lowest in Greece, Latvia, Bulgaria, Spain and Italy. In contrast, at least half of all persons who were at-risk-of poverty in Ireland, Denmark, Hungary, the Czech Republic, Austria and Sweden moved above the threshold as a result of social transfers; this was also the case in Norway.

Income inequalities

Governments, policymakers and society in general cannot combat poverty and social exclusion without analysing inequalities within society, whether they are economic in nature or social. Data on economic inequality becomes particularly important for estimating relative poverty, because the distribution of economic resources may have a direct bearing on the extent and depth of poverty (see Figure 3). There were wide inequalities in the distribution of income among the population of the EU-27 in 2009: the 20 % of the population with the highest equivalised disposable income received 4.9 times as much income as the 20 % of the population with the lowest equivalised disposable income. This ratio varied considerably across the Member States, from 3.2 in Slovenia, 3.5 in both the Czech Republic and Hungary, to 5.8 in Greece,5.9 in Bulgaria,6.0 in both Spain and Portugal, 6.3 in Lithuania, 6.7 in Romania, peaking at 7.3 in Latvia.

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 aged over 65 years. Pension systems can play an important role in addressing poverty amongst the elderly. In this respect, it is interesting to compare the incomes of the elderly with the rest of the population. Across the EU-27 as a whole, people aged 65 and more had a median income which in 2009 was around 86 % of the median income for the population under the age of 65 (see Figure 4). Hungary and Luxembourg were the only Member States where the income of the elderly was higher than the income of persons under 65. In France, Romania, Poland and Austria the median income of the elderly was more than 90 % of that recorded for people under 65; this was also the case in Iceland. In contrast, the elderly in Latvia and Cyprus had median incomes that were less than 60 % of those recorded for people under 65, with shares between 60 % and 70 % in Bulgaria and Estonia; these relatively low proportions 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-27 was an average 22.4 % below the 60 % poverty threshold in 2009. Among the countries shown in Figure 5, the at-risk-of-poverty gap was widest in Romania (32.0 %), Latvia (28.9 %), Spain (27.7 %) and Bulgaria (27.4 %), but also relatively wide in Greece (24.1%) and Portugal (23.6%). The lowest gap among the Member States was observed in Finland (15.1 %), followed by Ireland and Malta (both 16.2 %), Hungary (16.3 %) and the Netherlands (16.5 %); there was also a relatively low gap in Iceland (16.4 %).

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 Member States (Austria, Belgium, Denmark, Greece, Ireland, Luxembourg) and Norway. It was formally launched in 2004 in 15 countries and expanded in 2005 to cover all of the then EU-25 Member States, together with Iceland and Norway. Bulgaria launched EU-SILC in 2006, while Romania, Switzerland and Turkey introduced the survey in 2007. Data for Croatia are based on a different data source – namely the household budget survey (HBS).

EU-SILC comprises both a cross-sectional dimension and a longitudinal dimension. Comparisons of standards of living between countries are frequently based on gross domestic product (GDP) per capita. However, such figures say little about the distribution of income within a country; this article provides information on the distribution of income and relative poverty.

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 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. This rate may be expressed before or after social transfers, with the difference measuring the hypothetical impact of national social transfers in reducing poverty risk. 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, gender, activity status, household type, or education level. It should be noted that the indicator does not measure wealth but is instead a 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-27 aggregate is a population-weighted average of individual national figures. In line with decisions of the European Council, the at-risk-of-poverty rate is measured relative to the situation in each country rather than applying a common threshold to all countries.

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 to monitor the progress made by the EU’s Member States in alleviating poverty and social exclusion.

EU-SILC was implemented in order to provide underlying data for these indicators. Organised under framework Regulation 1177/2003, EU-SILC is now the reference source for 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 who are at-risk-of-poverty or social exclusion. EU-SILC is the source used to monitor progress towards this headline target, which is measured through indicator that is combines of the at-risk-of-poverty rate, the severe material deprivation rate, and the proportion of people living in households with very low work intensity.

Further Eurostat information

Publications

Main tables

Living conditions (t_ilc_lv)
Population structure (t_ilc_lvps)

Database

Income distribution and monetary poverty (ilc_ip)
Monetary poverty (ilc_li)
Monetary poverty for elderly people (ilc_pn)
Distribution of income (ilc_di)

Dedicated section

Source data for tables and figures (MS Excel)

Methodology / Metadata

Other information

  • 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

External links

See also

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