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Archive:Living standard statistics - median equivalised disposable income

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This article examines living standards in the European Union (EU-28) and selected EFTA countries (Iceland, Norway and Switzerland), as measured by the median equivalised disposable income. The analysis focuses on the cumulative changes, the annual change each year and the change in median disposable income for the first and fifth quintiles within the EU-28 Member States and selected EFTA countries.

The cumulative change in the median income over between 2008 and 2012 shows that living standards have fallen in 21 Member States and Iceland.

All figures are based on EU-SILC (EU Statistics on income and living conditions) data collected in and prior to 2013. The data collected during 2013 relates to income for reference period 1 January to 31 December 2012 (with the exception of the United Kingdom and Ireland).

Table 1: Change in median equivalised disposable income, 2008-2012
Source: Eurostat (ilc_di03) and (prc_hicp_aind)
Figure 1: Cumulative change over four years and change 2011-2012, in real terms
Source: Eurostat (ilc_di03) and (prc_hicp_aind)
Figure 2: Change in median income between 2011 and 2012, adjusted for inflation
Source: Eurostat (ilc_di03) and (prc_hicp_aind)
Table 2: Median equivalised disposable income in 2012 and change 2011-2012
Source: Eurostat (ilc_di03) and (prc_hicp_aind)
Table 3: Change in median disposable income for first and fifth quintiles, 2008-2012
Source: Eurostat (ilc_di01) and (prc_hicp_aind)
Figure 3: Change in the median disposable income in coutries where the top quintile has seen a smaller fall, or larger increase, in income than the bottom quintile, 2008-2012
Source: Eurostat (ilc_di01) and (prc_hicp_aind)
Figure 4: Change in the median disposable income in countries where the top quintile has seen a larger fall, or smaller increase, in income than in the bottom quintile, 2008-2012
Source: Eurostat (ilc_di01) and (prc_hicp_aind)
Figure 5: Change in median disposable income for the first and fifth quintiles, 2011-2012
Source: Eurostat (ilc_di01) and (prc_hicp_aind)
Table 4: Change in median disposable income for the first and fifth quintiles, 2011-2012
Source: Eurostat (ilc_di01) and (prc_hicp_aind)
Table 5: Change in median income in national currencies in nominal terms
Source: Eurostat (ilc_di03) and (prc_hicp_aind)

Main statistical findings

Changes over the period 2008-2012

The overall change in living standards seen over a number of years can be analysed using the median equivalised disposable income as an indicator. Table 1 shows the cumulative change seen in each country over the period 2008-2012. This illustrates how living standards have changed over the period as a whole. The table also shows the annual change in real terms in median disposable income for each year from 2008 to 2012.

As we can see in Table 1 the cumulative change in the median income over the four-year period 2008-2012 shows that living standards have fallen in 21 Member States and Iceland. The sharpest fall in real terms was seen in Greece, where the median income fell by 34.1 % over the four years. It also fell by 23.2 % in Iceland, 19.9 % in Latvia, 16.2 % in Croatia, 14.9 % in Spain, 14.8 % in Ireland, and 12.0 % in both Cyprus and Lithuania. The median income fell by slightly under 10 % in Bulgaria (7.5 %), Slovenia (7.6 %), Portugal (7.7 %) and Hungary (8.1 %) over the same period. The largest increases, meanwhile, were recorded in Norway (8.7 %), Slovakia (8.3 %), Switzerland (7.7 %) and Sweden (5.9 %).

Considering the latest figures (for 2012) presented in Table 1 and Figure 1 for the change in the median equivalised disposable income in the context of the cumulative change recorded over four years, it is clear that the same trend, of falling median income, has continued in a number of Member States. Greece, Cyprus, Portugal, Slovenia, Italy, Croatia, Spain, Ireland and Hungary have all experienced a decrease in their median equivalised disposable income over the four-year period and also recorded a decrease in the latest set of annual figures. Luxembourg, the Netherlands, Romania, Austria, Denmark, Germany, Bulgaria and the Czech Republic all also saw a fall in median income over both the four-year period and in 2012, but of a smaller magnitude. Meanwhile in Latvia, Lithuania and Estonia, as well as Iceland, the median equivalised disposable income rose over 2012, although the cumulative change over the four-year period remains negative. A number of Member States also saw an increase in the median equivalised disposable income in 2012 and over the four years 2008-2012. These were Belgium, Malta, Sweden and Poland, as well as Norway and Switzerland. The only three Member States which saw an increase in the median equivalised disposable income over the four years but a decrease in 2012 were Slovakia, Finland and France. (Figure 1).

Between 2008 and 2009, the median equivalised disposable income, expressed in the national currency and adjusted for inflation, fell in 11 Member States and in Iceland and Norway (see Table 1). The sharpest fall in real terms was seen in Latvia, at 18.9 % and in Lithuania at 18.0%. The most significant increases were recorded in Slovakia at 6.9 % and in Portugal at 5.7 %.

In 2010, the median equivalised disposable income, expressed in the national currency, fell in 16 Member States and in Iceland compared with 2009 (see Table 1). The sharpest fall in real terms was seen in Greece, at 12.3 %. It increased in 12 Member States with the largest increases in Poland (2.5 %) and Slovakia (2.4 %).

In 2011, the median equivalised disposable income, expressed in national currency, fell in 16 Member States and Iceland compared with 2010 (see Table 1). The sharpest fall in real terms was seen in Greece, where it fell by 16.0 %. There were also significant falls of 5.1 % in Bulgaria, 4.9 % in Romania and 4.5 % in Portugal. The median equivalised disposable income increased in 10 Member States. The largest increases were seen in Lithuania (8.0 %), Norway (5.9 %) and Slovakia (5.5 %).

In 2012, the median equivalised disposable income, expressed in national currency, fell in 21 Member States compared with 2011 (see Table 1). The sharpest fall in real terms was seen in Greece, where it fell by 12.9 %. It also fell significantly by 9.0% in Cyprus, by 7.7 % in Croatia and by 6.7 % in Hungary. It increased in six Member States and in all three selected EFTA countries. The largest increases were recorded in Estonia (5.5 %) and Lithuania (5.0 %).

Changes over the period 2011-2012

In 2012, the nominal median disposable income (i.e. not adjusted for inflation), expressed in the national currency, fell in 11 Member States compared with 2011. Table 2 shows that the sharpest falls were seen in Greece, where median disposable income fell by 12.0 %, in Cyprus by 6.2 % and in Croatia by 4.5 %. The median disposable income increased most significantly in Estonia by 9.9 %, in Iceland by 9.2 % and in Lithuania by 8.3 %.

Nominal changes in income do not, however, give the full picture, as inflation must also be considered. It is easier to interpret how living standards have evolved if the median income is first adjusted by the annual rate of change in the Harmonised Index of Consumer Prices (HICP), so that the real change in income can be seen.

Living standards measured by median equivalised disposable income after adjusting for inflation fell in 21 EU Member States in 2012 compared with 2011, increased in six Member States and remained at the same level in one Member State. An increase was seen in all of the selected EFTA countries. As presented in both Figure 2 and Table 2, the sharpest falls were seen in Greece, where the median income decreased by 12.9 %, in Cyprus by 9.0 % and in Croatia by 7.7 %. The largest increases were observed in Estonia by 5.5% and in Lithuania by 5.0%.

Changes within the first and fifth quintiles

The median disposable income does not, alone, give a complete picture of the changes taking place across the income distribution. Table 3 and Figure 3 and 4 show the change in real terms, between 2018 and 2012, in the median disposable income of those in the first and fifth quintiles of the income distribution (i.e. the fifth of the population with the lowest income and the fifth of the population with the highest income). The change is calculated using the median of the interval covered by each quintile.

In order to examine the effect of changes in income on income inequalities in greater depth, we need to gain a better understanding of the income dynamics in different parts of the income distribution. To facilitate this analysis, we divided the countries into a number of groups, according to the cumulative change seen between 2008 and 2012 in the median disposable income of the first and fifth quintiles of the income distribution. The countries in each group thus share similar characteristics, in terms of the changes seen in income over this period. The first group of countries are: Greece, Spain, Slovenia, Italy, Hungary, Portugal, Ireland, Cyprus, Bulgaria, Estonia, Romania, Luxembourg, Germany, Austria, the Czech Republic, Belgium, Malta, Denmark, Sweden and Poland. These countries all saw a smaller fall, or a larger rise, in income in the top quintile of the distribution than in the bottom quintile, i.e. those on the lowest incomes have seen their living standards fall proportionally more than those on the highest incomes (see Figure 4). The countries in the second group are: Croatia, Lithuania, Latvia, the Netherlands, France, the United Kingdom, Slovakia, Finland, Iceland, Norway and Switzerland. The countries in this group all saw a larger fall, or a smaller increase, in income in the top quintile than in the bottom quintile, i.e. those on the highest incomes have seen their living standards fall proportionally more than those on the lowest incomes (see Figure 5).

Overall, income inequality is rising in 20 Member States (those in the first group), as the income of those in the fifth quintile (those with the highest incomes) decreased less or increased more than that of those in the first quintile (those on the lowest incomes).

Income fell most sharply in the first quintile of the median disposable income distribution in most Member States

Between 2011 and 2012, the first quintile’s income fell in real terms (i.e. adjusted for inflation) in 18 Member States as well as in Iceland and Norway (Table 4 and Figure 5). The sharpest falls were seen in Greece, where the median income of this quintile fell by 14.6 %, Cyprus (10.2 %), Portugal (9.6 %) and Slovenia (8.3 %). The median disposable income increased most significantly in Switzerland (7.5 %), Estonia (6.3 %) and Ireland (3.5 %).

The fifth quintile’s income fell in 18 Member States, to varying extents. The sharpest falls were seen in Greece, where the median of this quintile fell by 13.1 %, Slovakia (9.7 %) and Cyprus (6.3 %). The largest increases in the median disposable income of this quintile were, meanwhile, recorded in Bulgaria (7.8 %), Estonia (7.4 %) and Lithuania (6.0 %).

In Table 5 nominal changes (not taking into account the effects of inflation) are shown. The sharpest decrease is observed in Greece (-29.5 %) and the highest increase in Poland (+19.3 %).

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 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 — the household budget survey (HBS)). Data for the former Yugoslav Republic of Macedonia are available since 2010 and for Serbia from 2013. EU-SILC comprises both a cross-sectional dimension and a longitudinal dimension. EU-SILC is the main source of information used in the European Union for developing indicators for monitoring poverty and social exclusion.

Definitions

Income: Gross income includes income from market sources and cash benefits. The former includes employee cash or near-cash income, non-cash employee income, cash benefits from self-employment, income from rental of property or land, regular inter-household cash transfers received, interest, dividends, profit from capital investments in unincorporated businesses, income received by people aged under 16 and pensions from individual private plans. Cash benefits are the sum of all unemployment, old-age, survivor’s, sickness and disability benefits; education-related, family/children-related and housing allowances; and benefits for social exclusion or those not elsewhere classified. Direct taxes and regular inter-household cash transfers paid are deducted from gross income to give disposable income.

The current definition of total household disposable income used for calculating the indicators presented excludes imputed rent — i.e. money that the household saves on full (market) rent by living in its own accommodation or in accommodation it rents at a price that is lower than the market rent. The definition of income currently used also excludes non-monetary income components, in particular the value of goods produced for own consumption, social transfers in kind and non-cash employee income except company cars.

Median: The median is the point on the income scale which divides the population into two equal groups, i.e. the individuals in one half of the population earn less than the median income and those in the other half earn more. The median thus splits the population into two groups that are equal in size, but with one group earning collectively more than half of total earnings and one group less.

Income reference period: 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, and IE, for which the survey is continuous and income is collected for the last twelve months. The data used in this publication are derived from EU-SILC operation 2012. With the exception of the United Kingdom and Ireland, the income reference period is therefore 1 January 2011 to 31 December 2011.

Equivalised disposable income: In order to reflect differences in household size and composition, the income figures are given per equivalent adult. This means that the total household income is divided by its equivalent size using the ‘modified OECD equivalence scale’ and the resulting figure is allocated to each member of the household, whether adult or children. The scale gives a weight of 1.0 to the first adult, 0.5 to any other household member aged 14 and over and 0.3 to each child below the age of 14. The equivalent size of a household that consists of 2 adults and 2 children below the age of 14 is therefore: 1.0 + 0.5 + (2 x 0.3) = 2.1. Equivalised disposable income is therefore an indicator of the economic resources available to a standardised household. For a lone-person household it is equal to household income. For a household comprising more than one person, it is an indicator of the household income that would be needed by a lone-person household to enjoy the same level of economic wellbeing.

Inflation adjustment: In order to take account of inflation in year-to-year income changes we have used the HICP (Harmonised Index of Consumer Prices). The HICP is the consumer price index as it is calculated in the European Union, according to a harmonized approach and a single set of definitions.

Income quintiles: Quintiles refer to the position in the frequency distribution. The quintile cut-off value is obtained by sorting all incomes, from lowest to highest, and then choosing the value of income under which 20 % (lower limit), 40 % (second limit), 60 % (third), 80 % (fourth) and 100 % (upper limit) of the sample are located. A quintile as such is associated with the segment boundaries between two quintiles. The first segment includes income below the lower quintile cut-off (20 %), the second segment includes income located between the lower cut-off and the second quintile cut-off, and so on. In total, there are five segments. From these segments, the median income by quintile is calculated using cut-off points of 1st, 3rd, 5th, 7th and 9th deciles that correspond respectively to the median of 1st, 2nd, 3rd, 4th and 5th quintiles.

EU-average: EU aggregates are computed as the population-weighted averages of national indicators.

Context

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 social inclusion statistics for more information.

See also

Further Eurostat information

Publications

Main tables

Database

  • Income and Living conditions: Income and living conditions (ilc),Income distribution and monetary poverty (ilc_ip) ,Distribution of income (ilc_di), Material deprivation (ilc_md) (Implementation of changes in variables)

Dedicated section

Methodology / Metadata

Source data for tables, figures and maps (MS Excel)

Other information

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