What’s New About Income Inequality in Europe?

What’s New About Income Inequality in Europe?

In this issue brief, Marc Morgan and Theresa Neef look at the evolution of income inequality in Europe from the perspective of the update to the Distributional National Accounts series for Europe (1980-2019) on the World Inequality Database. The authors find that in Europe, income concentration at the top has stagnated since the Great Recession, while the bottom 50% only marginally increased their share of European national income.  Western European countries decrease the income gap between the top 10% and the bottom 50% to a greater extent with taxes and transfers than the Eastern European countries. However, in the last decade, European welfare states have decreased redistribution between the rich and poor. They conclude that administrative data production on income differences in Europe still has much room to improve, especially to adequately account for the distributional changes of the years ahead.

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Key Results

• Europe is the least unequal region worldwide: the top 10% received 35% of the average income share in 2019 (same level as in 2009). The bottom 50% share went from 19% in 2009 to 20% in 2019.
• European countries were the least unequal between themselves in 2019 than at any point since 1980, as measured by the average income differences between the richer West and the poorer East.
• Western European countries continue to lead on redistributive outcomes due to greater redistribution between the top 10% and the bottom 50%. However, regressive tendencies have emerged in both East and West over the last ten years.
• Central European (Slovenia, Slovakia, Czech Republic) and Scandinavian countries were the least unequal in the region in recent years. The average incomes of the top 10% were no more than 6 times higher than those of the bottom 50%.
• Income inequality within countries has grown significantly since 1980, but less so since the Great Recession (2007-09), with wide discrepancies between countries’ levels and growth rates.

Figure-  Income Inequality in Europe

This figure shows the ratio of region-specific national income per adult relative to the European average, with a notable progression from the levels of the mid-1990s.

Contacts

Authors

• Marc Morgan (PSE; WID): marc.morgan@psemail.eu
• Theresa Neef (WIL; FU-Berlin): TNeef@diw.de

Media inquiries

• Olivia Ronsain: olivia.ronsain@wid.world; +33 7 63 91 81 68

Acknowledgments

The author gratefully acknowledges funding from the European Research Council (ERC Grant 856455) from the French National Research Agency (EUR Grant ANR-17-EURE-0001), as well as from the United Nations Development Program (Project 00093806).