Income distribution statistics
From Statistics Explained
Data from October 2012, 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). 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.
Main statistical findings
At-risk-of-poverty rate and threshold
In 2010, 16.4 % 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 across the EU Member States. In six countries, namely Latvia (21.3 %), Romania (21.1 %), Bulgaria (20.7 %), Spain (20.7 %), Lithuania (20.2 %) and Greece (20.1 %), more than one fifth of the population was viewed as being at-risk-of-poverty. The lowest proportions of persons at-risk-of-poverty were observed in the Netherlands (10.3 %) and the Czech Republic (9.0 %). Norway (11.2 %) and Iceland (9.8 %) also reported relatively low shares of their respective populations as being 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. This threshold varied considerably in 2010 across the EU Member States from PPS 2 122 in Romania and PPS 3 528 in Bulgaria to a level between PPS 11 000 and PPS 12 000 in the Netherlands, Cyprus and Austria, before peaking in Luxembourg at PPS 16 049; the poverty threshold was also relatively high in Norway and Switzerland (exceeding PPS 13 000 in both of these countries).
In general, the at-risk-of-poverty rate (after social transfers) is relatively stable from one year to the next (see Table 1). Between 2009 and 2010, the only exceptions to this rule were Latvia (with a reduction of 4.4 percentage points from 25.7 % in 2009 to 21.3 % in 2010) and Estonia (with a reduction of 3.9 percentage points from 19.7 % in 2009 to 15.8 % in 2010). The at-risk-of-poverty rate after social transfers increased by at least one percentage point in Slovakia, Ireland, Spain and Slovenia between 2009 and 2010. Croatia had a larger increase (2.6 percentage points), although this could be due to a change of data source in 2010.
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 2010 (15.6 % compared with 17.0 %). The largest difference of 3.3 percentage points (19.0 % for men and 22.3 % for women) was observed in Bulgaria. Furthermore, Sweden, Cyprus, Austria, Slovenia and Italy all reported that female at-risk-of-poverty rates were at least 2.5 percentage points higher than the corresponding rates for men in 2010. By contrast, there were four EU Member States where the at-risk-of-poverty rate was slightly higher among men than women, namely Lithuania, Latvia, Hungary and Luxembourg.
The differences in poverty rates were more notable when the population was classified according to activity status (see Table 2). The unemployed are a particularly vulnerable group: almost half (45.0 %) of unemployed persons in the EU-27 were at-risk-of-poverty in 2010, with by far the highest rates in Germany (70.3 %) and Lithuania (55.6 %), while four other Member States (Bulgaria, Latvia, the United Kingdom and Estonia) reported that slightly less than half of the unemployed were at-risk-of-poverty in 2010. About one in seven of all retired persons in the EU-27 (13.9 %) were at-risk-of-poverty in 2010; rates were much higher in Cyprus (41.1 %) and Bulgaria (30.0 %). Those in employment were far less likely to be at-risk-of-poverty (an average of 8.4 % across the whole of the EU-27), although there were relatively high proportions of employed persons at risk-of-poverty in Romania (17.2 %) and Greece (13.8 %), while Spain, Lithuania, Poland and Luxembourg each reported that in excess of one in ten of their respective workforces was at-risk-of-poverty in 2010.
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 2010, social transfers reduced the at-risk-of-poverty rate among the population of the EU-27 from 25.9 % before transfers to 16.4 % after transfers, thereby lifting almost 37 % 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, Italy, Romania and Bulgaria. By contrast, at least half of all persons who were at-risk-of poverty in Ireland, Hungary, Denmark, Sweden, Finland, the Netherlands, the Czech Republic and Luxembourg moved above the threshold as a result of social transfers; this was also the case in Norway and Iceland.
Governments, policymakers and society in general cannot combat poverty and social exclusion without analysing the inequalities within society, whether they are economic in nature or social. 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 (see Figure 3). There were wide inequalities in the distribution of income among the population of the EU-27 in 2010: the 20 % of the population with the highest equivalised disposable income received five 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 3.4 in Slovenia and Hungary, and 3.5 in Sweden and the Czech Republic, to 5.9 in Bulgaria, 6.0 in Romania, 6.9 in Latvia and Spain, peaking at 7.3 in Lithuania.
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 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 above had a median income which in 2010 was equal to 88 % 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, Italy, Lithuania 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. By contrast, the elderly in Cyprus had median incomes that were less than 65 % of those recorded for people under 65, with ratios between 70 % and 80 % in Denmark, Estonia, Bulgaria, Belgium, Latvia, Finland and Sweden; 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-27 was, on average, 23.2 % below the 60 % poverty threshold in 2010. Among the countries shown in Figure 5, the relative median at-risk-of-poverty gap was widest in Lithuania (32.6 %), Spain and Romania (both 30.6 %), Bulgaria (29.6 %) and Latvia (29.4 %); Croatia also reported a relatively wide gap (28.6 %). The lowest gap among the EU Member States was observed in Finland (13.8 %), followed by Ireland (15.2 %), the Netherlands (16.2 %) and Hungary (16.5 %).
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 countries 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 (2008 and 2009 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.
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. 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 education level. 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-27 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 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 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 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 for more information.
Further Eurostat information
- 23 % of EU citizens were at risk of poverty or social exclusion in 2010 Statistics in focus 9/2012
- 51 million young EU adults lived with their parent(s) in 2008 Statistics in focus 50/2010
- Combating poverty and social exlusion. A statistical portrait of the European Union 2010
- Income and living conditions in Europe (2010)
- Over-indebtedness of European households in 2008 Statistics in focus 61/2010
- The life of women and men in Europe – A statistical portrait (available in English, French and German)
- The Social Situation in the European Union 2009
- Living conditions in Europe (2002 – 2005) – statistical pocketbook
- Living conditions and welfare (t_livcon), see:
- Living conditions and welfare (livcon), see:
- Income and living conditions (ilc)
- Income distribution and monetary poverty (ilc_ip)
- Monetary poverty (ilc_li)
- Monetary poverty for elderly people (ilc_pn)
- Distribution of income (ilc_di)
- Income distribution and monetary poverty (ilc_ip)
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 )
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
- EU Employment and Social Situation Quarterly Review - December 2011
- OECD - Better Life Initiative: Measuring Well-being and Progress
- OECD - StatExtracts - Income distribution - Inequality: Income distribution - Inequality - Country tables
- Employment and Social Developments in Europe (2011)