Distribution of income at the EU level

Figure 1 depicts the distribution of income in the EU. It illustrates both the distribution of income in individual Member States and income differences between countries (shown by the relative height of the bars). The bars are ordered according to the average equivalised household income, which is lowest in the post-communist countries – e.g. Romania (EUR 4,700 at PPS), Bulgaria (EUR 6,662 at PPS) and Hungary (EUR 7,505 at PPS – and is highest in Luxembourg (EUR 31,043 at PPS), followed by Cyprus, the Netherlands, Austria, France and Germany (over 20,000 at at PPS).

Income distribution in countries is indicated by the mean income in each decile, and the extent of dispersion is shown by relating the mean income of the top decile (i.e. the top 10% of income earners) to that of the bottom decile (the lowest 10% of income earners). While in absolute terms the range of distribution is the widest in Luxembourg, France and Cyprus, in relative terms inequality is greatest in Romania, Latvia, Spain and Denmark, where, on average, the income of someone in the top decile is over 10 times that of someone in the bottom decile.

Figure 1: Distribution of incomes in EU countries (in EUR at PPS), 2008 income year

In Figure 2, the distribution of income is depicted relative to median income in the EU as a whole (EUR 14,374 in PPS). Five groups are distinguished: those whose income is less than half the EU median; those whose income is between 50% and 80% of the median; those where it is between 80% and 120%; those where it is between 120% and 200%; and those where it is over twice the EU median.

Some 17% of people in the EU have less than half teh EU median income, and 20% have income between 50% and 80% of the median. A quarter have income within 20% either side of the median, just over a quarter have between 120% and 200% and 11% have more than twice the median. Most of those in the lowest income group live in EU12 countries. In Romania, Bulgaria and Hungary, over half of the population has less than 50% of EU median income. On the other hand, in Luxembourg, Cyprus and the Netherlands, 20% of the population or more have over twice this level.

Figure 2: Distribution of incomes related to the EU-median

EU-wide inequality in income can be divided into two parts: that which results from income differences between countries and that which arises from differences in income within countries. Using the mean log deviation (MLD) as the measure of income inequality, we find that around 30% of overall inequality is due to income differences between countries and 70%, over twice as much, is a result of inequalities within them (Figure 3). The contribution of inequality within countries to overall inequality is largest for those with the largest populations. Income inequality in Germany and the UK accounts for around 10% of overall inequality, in Italy for 9% and in France for 8%. 

Figure 3: Proportion of overall inequality accounted for by income differences between countries and income inequality within countries (as measured by the MLD index)