Archive:Income components statistics

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This article analyses recent statistics on income components ^[1]of households in the European Union (EU). While statistics measuring monetary poverty, deprivation and work intensity are widely disseminated by Eurostat, data on income, collected at a very detailed level are currently not completely exploited.

The aim of this article is therefore to improve the income distribution dissemination so as to help the general public to better understand what the income distribution is in each country and across Europe, providing key information on the income components and raising the relevance of EU-SILC data on income.

For this article, the total household gross income, income components and their means and shares are calculated for 2014. The total household gross income is further broken down into (i) income from employment, (ii) income from pensions, (ii) income from benefits and allowances and (iv) income from other sources ^[2]. For the analysis of the income components, we look at the breakdowns by different sub-populations such as income quintile groups, household composition and the degree of urbanisation (for a detailed definitions see the section Data sources and availability).

Figure 1: Shares of income components EU-28, 2014
Source: Eurostat

Figure 2: Share of income components by income quintiles groups EU-28, 2014
Source: Eurostat

Figure 3: Shares of income components, 2014
Source: Eurostat

Table 1: Shares of income components by lowest and highest quintile, 2014
Source: Eurostat

Table 2: Income components of households, 2014
Source: Eurostat

Figure 4: Share of income components by household types EU-28, 2014
Source: Eurostat

Table 3: Shares of income components by household types, 2014
Source: Eurostat

Figure 5: Shares of income components by degree of urbanisation EU-28, 2014
Source: Eurostat

Table 4: Share of income components, by degree of urbanisation, 2014
Source: Eurostat

Figure 6: Mean and medians by income quintiles groups EU-28, 2014
Source: Eurostat

Main statistical findings

Distribution of income components by quintile income groups

In 2014, according to EU-SILC data, the main source of income in the EU-28, was work (67.9%), followed by pensions (20.6%); benefits (6.8%) and other sources (4.5%), as shown in Figure 1. The distribution of income components across the income quintile groups for the EU-28 follows a slightly different pattern: Although work remains the main source of income, the shares range from 43.5 % in the lowest (first or bottom 20%) quintile to 75.3 % in the highest (fifth or top 20 %) quintile. The second biggest disparity across the quintiles can be observed in the income from benefits: it is households in the first income quintile who receive the highest share of its total income from this source (26.9 %), while the lowest share (2.7%) is observed in the sub-population receiving the highest share of equalised disposable income (fifth quintile). Regarding the two remaining sources of income, pensions and other sources, the differences in rates are not as wide, with the first quintile receiving 25.4 % of its income from pensions compared with 15.3 % for the fifth quintile. The highest share of pensions (30.5 %) is received by the second quintile. The highest share of income from other sources is received by the fifth income quintile (6.6%); followed by the first quintile (4.2 %) and the fourth (3.1%), while the second and third quintiles receive the same share (2.9%), also shown in Figure 2.

The majority of EU Member States report a similar pattern (see Figure 3). Work constitutes the main source of income relative to all income components for households across all the Member States and non-Member States ranging from 59.9 % in France to 77.1 % in Estonia. The differences in income shares originating from pensions were wider across the countries (from 13.4% in Estonia to 28.7 % in Greece); followed by benefits (2.9 % in Greece to 14.4 % in Ireland), while the income from other sources constituted a relative small share of the households’ total income on average across all the EU Member States, with the lowest being in Romania (0.5 %) and the highest in France (10.7 %) (see Figure 3).

The data show that in all Member States, the top 20% households’ main source of income is employment, ranging from 57.3% in France to 90.5 % in Estonia. The composition and shares of income sources show a certain variation when we look at the bottom 20 % households. In six Member States, we can observe that the households with the lowest share of equalised disposable income, have other income sources than employment. In Latvia and Estonia it is pensions that constitute the greatest share of income for these households (42.8 % and 45.6 % respectively), while in Denmark (38.6%), Belgium (40.0 %), Finland (38.9%) and Ireland (60.4 %) benefits exceed the employment share (see Table 1).

Pensions as source of income among the households with the highest share of income (fifth quintile) show a relative low share with the lowest being in Estonia (2.7 %) and the highest being Portugal (22.9 %). Pensions play a much bigger role among the bottom 20 % of the households ranging from 10 to almost 50 percent (10.5 % in Luxembourg to 45.6 % in Estonia). In about half of the Member States, pensions as a source of income constitute a smaller share than benefits among the bottom 20% of households, as can be seen in Table 1. In the top income quintile the benefits make a small proportion per household with the lowest being Greece (1.1 %) and highest Cyprus (9.1 %). On the contrary, benefits make from around 10 to 60 % of the households total gross income in the first income quintile. In eleven Member States, these poorest households received more than 30 % of their income from benefits (Hungary, Spain, Luxembourg, Germany, Sweden, United Kingdom, the Netherlands, Denmark, Finland, Belgium and Ireland, see Table 1). This figure was especially high in Belgium and Ireland, where respectively 40.0% and 60.4% of income of people in first quintile comes from benefits. The share of income from other sources is highest among the French richest households (18.9 %), while among the bottom 20 % the component ‘other’ make between 0 to 8 % of the households income with the highest observed in Cyprus (8.4 %).

Mean and median for income components

Looking at the means and medians measures for the different income components at EU-28 level, which give us a simple measure of the income inequality ^[3] , most households in the EU-28 have a lower median income regardless of the source compared to the mean (see Table 2). At EU-28 level, the largest disparity between the mean and the median is found for the income coming from other sources with the mean-to-median-ratio of 6.15; followed by benefits (ratio of 1.63), work (ratio of 1.21) and lastly pensions (ratio of1.19). Across the income quintile groups, the fifth quintile has the largest difference between the mean and median for the income from other sources (ratio of 4.10); followed by benefits (ratio of 2.14), work (ratio of 1.12) and pensions (ratio of 1.11). Work, as source of income, is most unequally distributed among the poorest households (first quintile) with the mean-to-median ratio of 1.15, see Figure 6.

Distribution of income components by household types

The income components are not uniformly distributed between households with different composition of adults and dependent children, as can be seen from Figure 4. For the EU-28 as a whole, households with dependent children total gross income had a greatest share based on employment (84.2%), followed by households composing of a single person with dependent children (65.9%). The share of benefits is the highest among the group of single persons with children (22.1%). On the other hand, pensions as source of income make the greatest share for households composed of a single person without children (35.9%) as well as households without children regardless of the number of adults (32.0 %). The share of income from other sources is greatest for single person household with dependent children (8.1%), followed by single persons (6.2%), then households without children (5.3%) and lastly for people with dependent children (3.3%). In summary, we can see that employment is the main source of income for households with children and for single persons with children. This picture is also confirmed at the country level, i.e. households with children have a highest share of employment of their total gross income in all the Member States and non-Member States. This is also the case for single persons with dependent children with the exception of the United Kingdom, Ireland and Cyprus where single person households without children have a slightly higher share of employment as an income source (the difference is + 3.8 pp, + 3.7 pp, + 2.9 pp respectively). A similar pattern apply for benefits, i.e. if there are children in a household (both for single person households and households with dependent children), the share of benefits is higher compared to households without children with only two exceptions, namely Denmark and the Netherlands in which households without children have a slightly higher share of benefits of its total gross income (see Table 3).

Distribution of income components by degree of urbanisation

At EU-28 level, there is almost no difference in the EU-28 rates for the different income components between the three types of areas, i.e. densely populated areas (cities), intermediate urbanised area (towns and suburbs) and thinly-populated area (rural area). The largest share of households’ total gross income is employment regardless of the degree of urbanisation (68.2% for cities, 68.7% for towns and suburbs and 66.0 % for rural area); followed by pensions (19.8%, 20.6% and 22.2%), next is the component of benefits (6.8%, 6.5% and 7.6%). The smallest share of the total gross income across all the areas is the income source ‘other’ which is highest in the cities (5.1%); followed by almost the same shares for towns and suburbs and rural area (4.0% and 4.1% respectively), as shown in Figure 5. Across the EU Member States and non-Member States distribution of income components follows a similar pattern, however the data shows the widest difference in the shares for the income component from pensions in the rural area (ranging from 14.8% in the rural area of Estonia to 34.1% in rural area of Greece). Regarding income from employment, the largest spread is found in the cities (ranging from 59.5 % in the cities in France to 79.7% in the cities in Estonia). In summary, the greatest variation in shares is found for pensions between the rural areas, followed by cities and lastly by towns and suburbs across Member States and non-Member States (see Table 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 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 — namely 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.

Total Household gross 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.

Total Household gross income is divided into four sources: income from employment, from pensions, from benefits and allowances as well as income from other sources. Each component is defined as follows:

In the source Income from employment the following is included: Employee cash or near cash income and company car (as from 2007 operation), cash benefits or losses from self-employment.

In the source Income from pensions the following is included: Pension from individual private pension plans, old-age benefits, survivor` benefits.

In the source Income from benefits and allowances the following is included: Family/children related allowances, social exclusion not elsewhere classified, housing allowances, unemployment benefits, sickness benefits and disability benefits, education-related allowances.

In the source Income from other sources the following is included: Income from rental of a property or land, regular inter-household cash transfer received, Interest, dividends, profit from capital investments in unincorporated business and Income received by people aged under 16.

For each income component the weighted arithmetic average is computed. Zero values greatly influence those averages and therefore there had been excluded from the data. The cross-sectional weight DB090 is being used for this purpose. The average of the total household gross income is also computed in the same way. On the basis of the computed arithmetic averages of each component the relative shares are computed by dividing the averages of each component by the average of the total 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.

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 onsocial inclusion statistics for more information

Further Eurostat information

Publications

Statistical books

News releases

Statistics in focus

Income inequality: nearly 40 per cent of total income goes to people belonging to highest (fifth) quintile — Statistics in focus 12/2014
Is the likelihood of poverty inherited? — Statistics in focus 27/2013
Living standards falling in most Member States — Statistics in focus 8/2013
Children were the age group at the highest risk of poverty or social exclusion in 2011 — Statistics in focus 4/2013
In 2009 a 6.5 % rise in per capita social protection expenditure matched a 6.1 % drop in EU-27 GDP — Statistics in focus 14/2012
23 % of EU citizens were at risk of poverty or social exclusion in 2010 — Statistics in focus 9/2012

Other information

Regulation (EC) No 1177/2003 of 16 June 2003 concerning Community statistics on income and living conditions (EU-SILC)
Regulation (EC) No 646/2009 of 23 July 2009 implementing Regulation (EC) No 1177/2003 concerning Community statistics on income and living conditions (EU-SILC)

Notes

↑ In the composition of “Income Components’’, “Pensions” are NOT included in the “Benefits’’ group, they are in a separate income group.
↑ The main component of income from other sources is capital income.
↑ The difference between the mean and the median is a simple measure of wealth inequality. In most countries, the mean (average) household wealth will be higher than the median household wealth, reflecting the usual situation that most households have low wealth compared to the mean and a smaller number of households have wealth above the mean. The greater the asymmetry, the greater the degree of inequality is likely to be. However, this is not always the case, as a symmetrical distribution could contain great inequality if it has very long tails in both directions (OECD guidelines for Micro Statistics Wealth, 2013).

[1] In the composition of “Income Components’’, “Pensions” are NOT included in the “Benefits’’ group, they are in a separate income group.

[2] The main component of income from other sources is capital income.

[3] The difference between the mean and the median is a simple measure of wealth inequality. In most countries, the mean (average) household wealth will be higher than the median household wealth, reflecting the usual situation that most households have low wealth compared to the mean and a smaller number of households have wealth above the mean. The greater the asymmetry, the greater the degree of inequality is likely to be. However, this is not always the case, as a symmetrical distribution could contain great inequality if it has very long tails in both directions (OECD guidelines for Micro Statistics Wealth, 2013).

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