Is the gap between rich and poor growing?

During the past several years, the issues of income and wealth inequality have been intensely discussed. The so-called Gini coefficient has established itself internationally as the standard measure for income distribution and economic inequality.

This coefficient takes values between 0 (perfectly equal distribution of income) and 1 (extremely unequal distribution: one person owns everything). When it comes to the Gini coefficient, practically nothing has changed in Austria. According to statistics from the OECD and Eurostat, Austria’s Gini coefficient has remained almost constant during the past 10 years – in 2005 it was 0.26, and currently stands at 0.27. So there is no real reason to worry.

However, the trend looks much different in neighboring Germany, where the current index value is 0.29, up from 0.26 in 2005. The gap between rich and poor has thus widened quite a bit more in Germany than it has in Austria during the past 10 years – and will most likely continue to do so in most European countries.

Some countries with more equal income distribution are for example the Netherlands with a coefficient of around 0.25, as well as Sweden, Slovenia, and Slovakia with around 0.24 each. The EU country with the most equitable distribution is Norway, which has a Gini coefficient of 0.22. This value has been improving in Norway since 2010. The country’s favourable income distribution can be attributed to its high degree of prosperity as well as its high social welfare contributions.

At the other end, Bulgaria has the most unequal levels of income and wealth distribution in the EU, with a Gini coefficient of 0.35. However, the trend is positive in some other European countries, for example in Turkey and in Greece, where the coefficient has been decreasing steadily for several years. In 2004 the index values were still 0.43 in Turkey and 0.35 in Greece, but the current values have improved to 0.41 and 0.34.

In general, it can be observed that although the inequality gap in Europe is still not very large compared to other continents, it will steadily widen as time goes on. Inequitable wealth distribution has many negative consequences. From the economic perspective, it means that an increasing share of money is put aside or invested by the wealthy, rather than flowing directly into the economy when it is spent by poorer households. In addition, a lower quality of life has negative effects on a country’s education, health, and safety standards.

Download this file (0515_regiodata_ginicoefficient_EN.jpg)Download chart: Gini Coefficient by Country

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