That is, such unusual shocks are associated with lower persistence than other shocks and hence have a higher propensity to wipe out the history of past shocks. This simulation is conducted under the assumption that individuals would not change their behavior in the labour market. SERIEs 9, 351387 (2018). Income inequality has grown steadily in Spain over the past two decades. Specifically, the correlation between the educational attainment level of the head of household and his/her partner verges on 70% in Spain (see panel 1 of Fig. Germany and the United States, following a few years of stable inequality in disposable income, saw a significant increase in 2011 and Poorer countries have tended to have higher income inequality (EQ1.2). Section2 describes the different data sets that are used for the analysis. This change, which was more significant at the bottom part of the wage distribution, almost unwound half of the increase in inequality observed during the crisis. General government debt, % of GDP, 2021, Household debt: Particularly in the lower part of the distribution, earnings and income dropped considerably during downturns and rose during economic booms.Footnote 2. Income and wealth inequality in euro area countries have both increased since 1999, albeit marginally (Chart 1). Self-employment income made up 14% of total income within the 9th decile and 7% within the 1st decile. The main data source is the Survey of Household Finances (EFF), conducted by the Banco de Espaa, which provides information on wages, income, consumption and wealth. Use this code to embed the visualisation into your website. There are no substantial differences between men and women or between persons with different levels of educational attainment on the number of days workers are not at workbecause they are off work, on unpaid leave or laid off. For example, there are individual differences in hourly wages, in the ability to obtain income other than labour income, in access to public goods or in decisions on household formation, consumption and saving. b. Those numbers are much higher than the incidence of part time in other sociodemographic groups. Table4 shows estimates of predictive income distributions, using household income data from the panel sample of the EFF, where income dynamics varies depending on the households position in the income distribution in the preceding period and the size of the shock they receive at each age.Footnote 16 In this regard, according to the evidence shown in the table, in the face of (very) negative shocks (those in the bottom part of the shock distribution), the situation of households in the upper part of the income distribution tends to deteriorate sharply, to a much greater extent than in the case of households in the lower part of the income distribution. Consequently, inequality indicators remained unchanged in the case of hourly earnings, while they grew considerably, particularly in the lower part of the distribution, in the case of total earnings (see Fig. As well as being influenced by individuals expected income and the uncertainty surrounding that income, the purchase of these goods is also affected by wealth, which also determines potential access to external financing, as well as the point in the life cycle of the members of the household, and their access to public or subsidised goods (see Attanasio and Pistaferri 2016). First, there is a higher incidence of part-time work among the groups of workers with the lowest hourly wages. Provided by the Springer Nature SharedIt content-sharing initiative, Over 10 million scientific documents at your fingertips, Not logged in However, this is linked, at least in part, to the lower educational level of the older generations and, therefore, it will foreseeably change in the future in view of the increase in the level of educational attainment observed since the start of the last century.Footnote 9. The most important key figures provide you with a compact summary of the topic of "Inequality in Spain" and take you straight to the corresponding statistics. 13, households in the percentiles below 20% of consumption spending suffered a decline in consumption of up to 10%, while households close to and above the median suffered a reduction of up to 14%. In this regard, total consumption and per capita consumption show less inequality between households than net income (as Blundell et al. 10 shows, total income fell across the board, but unlike the case of individual wage income discussed above, lower-income households income performed better than that of households in higher percentiles. The analysis in this paper highlights the narrow wage dispersion in Spain while the high unemployment rate leads to a high level of inequality in terms of gross per capita income. For this purpose, we analyse below the EFF data for 2014 on gross per capita income and total household income, as the overall income of all household members and its characteristics. In this respect, notable increases in inequality are also observed in other countries, such as Germany, the Netherlands, the United Kingdom and Austria (see panel 2 of Fig. % of gross national income 2022 Spain (red), DAC Countries (black) Private flows Indicator: 4 004.9 Total Million US dollars 2021 Spain Million US dollars: Total Million US dollars When part-time employees are included, the reduction in inequality during the early years of the recovery was more significant, since the P90/P10 ratio decreased from 5.1 in 2014 to 4.7 in 2016. 1504, Banco de Espaa, OECD (2017) Pensions at a glance, 2017: OECD and G20 indicators. Focus 28(1):2330, Blundell R, Pistaferri L, Preston I (2008) Consumption inequality and partial insurance. 4 the evolution of inequality in all of these dimensions over the last recession period is described, whereas in Sect. We try our best to use economicconcepts which are consistentwith national accounting (i.e. If this does not solve the problem, you may want to try with a different browser. We are indebted to all seminar participants at the Banco de Espaa in particular to scar Arce and Pablo Hernndez de Cos. We are very grateful to Virginia Snchez Marcos and Manuel Bagues for their work in improving the paper during the editorial process. On average, the wage income of Spanish household members amounts to 60% of the households total annual income, making it a prime candidate for analysis in the study of inequality. This fact, coupled with the increase in unemployment affecting mostly youth, low tenured and low skilled, disproportionately increased inequality in income per capita. As in Blundell (2011) we show that public transfers were important to cushion the income negative shock. In any event, unlike the case of income or consumption, the level of wealth inequality in Spain is lower than that in comparable countries. 4 shows that, in 2014, more than 50% of incomes in the first decile came from pensions and other, mainly non-employment, transfers. Total household income inequality dropped from 8.2 to 7.0 on the P90/P10 indicator. Science performance (PISA), Mean score, 2018, Air and GHG emissions, Carbon dioxide (CO2), latest available year, Gross domestic product (GDP), US dollars/capita, 2022 By doing so, it becomes possible to track very precisely the evolution of all income or wealth levels, from the bottom to the top. Econ J 127(603):12441278, Bover O, Casado JM, Garca-Miralles E, Labeaga JM, Ramos R (2017) Microsimulation tools for the evaluation of fiscal policy reforms at the Banco de Espaa, Documentos Ocasionales, no. WID.world uses 2011 Purchasing Power Parity round for international comparisons. On EPA data for Q2 of each year. Moreover, wage income is not the only component of household income, as in addition to income from paid employment there is income from self-employment and there are unemployment benefits, pensions and other transfers that serve as a form of social insurance in situations of hardship. Euro At present, Spain is one of the most unequal nations in Europe, and income inequality in the country is forecasted to grow in the near future. The dashboard should have a minimum width of 768px to be displayed properly. Labour Econ 19(5):792801, Barcel C, Villanueva E (2016) The response of household wealth to the risk of job loss: evidence from differences in severance payments. Specifically, in accordance with the latter indicator, the ratio is 7.0 in gross terms and 6.1 in net terms. 3). On average, within the period considered 50% of individuals aged 1835 were living with their parents. Furthermore, there are interesting facts regarding the contractual conditions of groups of workers with the lowest hourly wage (panel 2 of Table2). Reference year 2017. Finally, reliable series for the consumption of fixed capital (capital depreciation) estimates are not readily available for a large number of countries, so we combine various sources and develop new methods to derive consistent global series. income to give after-tax income. Source: National Statistics Institute (EPA). Annu Rev Econ 2(1):479506, Kaas L, Kocharkov G, Preugschat E (2017) Wealth inequality and homeownership in Europe, Goethe University Frankfurt, mimeo, Kaplan G (2012) Moving back home: insurance against labor market risk. However, in order to analyse the change in inequality if this income is taken into account it has been proxied. In addition, surveys only cover a limited time span and make it impossible to offer a long-term perspective on inequality trends. Am Econ Rev 98:18871921, Bonhomme S, Hospido L (2017) The cycle of earnings inequality: evidence from Spanish social security data. Understanding the causes and consequences of inequality, however, requires an analysis of the various relevant dimensions of this concept (wages, household income, consumption and wealth). On the contrary, hourly wage differentials are not particularly high in international standards. 2012). (2018): The Spanish Personal Income Tax: Facts and Parametric Estimates, mimeo. The inequality in total consumption dropped slightly in the lower part of the consumption distribution, while remaining virtually unchanged above the median. Number of Minimum Vital Income recipients in Spain in 2022, by autonomous community (in 1,000s) . All these methodological choices can explain slightly different values between WID.world and other data portals. In turn, capital income amounted to 10% of total income of the 9th decile, and then decreased progressively for the lower deciles, down to 2% in the first decile.Footnote 10 The inequality indicators for market income, which comprises wage income, self-employment income and capital income, are very similar to those observed for wage income. However, when part-time employees are taken into account and the analysis period is extended, the increment in wage inequality between 2006 and 2014 becomes significant. This is the case because EES has more precise information on the effective hours worked allowing for a better estimation of hourly wage per worker. volume9,pages 351387 (2018)Cite this article. See Pijoan and Snchez-Marcos (2010), Izquierdo and Lacuesta (2012), Carrasco et al. Thus, it has been observed that in households headed by a person under 55years, the availability of more wealth allows for more stable consumption, whereas in households headed by a person over 55, wealth barely plays any role in consumption stabilising. For similar patterns in the United States and Norway see Arellano et al. One mechanism households can use to insure against negative shocks is to delay the purchase of durable goods such as cars or household equipment. Hence, the shock uit is a rank. Finally, there was a very slight tendency for some families to consolidate the household so that some families could benefit from the greater stability of their parents pensions. In Appendix 3 we present robustness results for the period 20082014, both for the cross section and the longitudinal analysis, using different data sets. PubMedGoogle Scholar. Working paper, CEMFI, Institute for Fiscal Studies (2011) Quantitative analysis of VAT rate structure. In Spain the level of inequality is lower when total household gross income is analysed and it decreased during the crisis as a result of public pensions evolving more favourably than wages. Labor market conditions and fertility in Europe. This is different to the experience of other OECD countries. In particular, household members in the workforce may choose to migrate abroad or households including women of childbearing age may change their plans to have children. Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. There is empirical evidence using various methodological approaches and applying criteria to impute to households the value of public services provided by general government that shows that these services have a significant redistributive effect (see Goerlich 2016). The way in which a households consumption changes in response to fluctuations in income also depends on its level of wealth and, to a lesser extent, the age of its members. In May, the government announced a Minimum Vital Income scheme (IMV), as a form of financial support to people living in "very high" or "extreme" poverty on less than 4,350 (US$5,105) per year.. Lastly, the recovery in the value of real-estate assets in recent years should have helped temper wealth inequality. Drawing on information by Eurostat, in 2014 the hourly wage of workers in the ninth decile of the distribution in Spain was 3.3 times higher than that of those in the first decile. b. The authors declare that they have no conflict of interest regarding this research. This percentage falls to 8% when those aged 3549 are considered. Annual net income in Spain: average per person in 2021, by age group. The late age at which young people leave the parental home and the high pension replacement rate (OECD 2017), among other factors, mean that Spains inequality in total household income is relatively lower, when compared with that of other countries (panel 3 of Fig. The Gini index for net wealth rose by almost a tenth of a percent over the period from 2008 to 2014, after a period in which it had remained stable (see Fig. Specifically, the proportion of part-time work is 37% among women, 39% among young people, 32% among workers with lower levels of educational attainment and 41% among new labour market entrants. Given these developments, the change in total household income in the lower percentiles was primarily driven by changes in pensions. Panel 2 of Fig. Moreover, as already mentioned, faced with the risk of a negative shock causing a significant reduction in their income, higher-income households tend to increase their savings, which is an additional explanatory factor in the dynamics of wealth inequality.Footnote 20 However, differences in wealth inequality derive not only from different saving habits, but also from differences in the composition of households asset portfolios and the evolution of their prices. This indicator has a different unit, selecting it will unselect the others. This mechanism led to an increase in the female labour force participation rate in the early years of the crisis, with couples registering as unemployed together. Am Econ Rev Pap Proc 106(5):651655, Gabaix X, Lasry J-M, Lions P-L, Moll B (2016) The dynamics of inequality. All income that households decide not to consume are savings; households wealth will vary according to the assets in which they invest their savings, the price paid and the rate of return obtained. a. The latest available year of the Spanish Survey of Household Finances (EFF) and the Structure of Earnings Survey (EES) is 2014. WID.world is entirely funded by public, non-profit actors and personaldonations. In addition, the fact that the unemployment rate remained high, even in the most expansionary periods, meant that inequality in gross income per capita before the crisis was also high in Spain by international standards (panel 1 of Fig. The analysis shows less wage dispersion in Spain than in other comparable economies, even after the crisis years, while the surge in unemployment during the period resulted in a high level of inequality in per capita income. Market exchange rates values can be obtained in our custom menus. J Econ Perspect 30(2):328, Babeck J, Du Caju P, Kosma T, Lawless M, Messina J, Rm T (2012) How do European firms adjust their labour costs when nominal wages are rigid? Strong job destruction during the crisis caused a rise in inequality, but this was smaller in the lower part of the distribution largely thanks to public subsidies, benefits and especially pensions. Specifically, on the EPA figures, the differential would be around 17% for women, 22% for young people compared with older workers, 37% for university graduates compared with workers with only lower secondary education, and 22% for new hires compared with those with more than 10years tenure. Income inequality rose most strongly in the Czech Republic, Finland, New Zealand and Sweden. International comparison of inequality indicators. What distinguishes WID.worlds inequality data from the OECD, the World Bank, or other inequality data providers? One way to identify how household formation reduces the differences in household members individual wage income is by comparing the measures of inequality of individual wage income and household wage income (see the first four columns of Table3). Overview and forecasts on trending topics, Industry and market insights and forecasts, Key figures and rankings about companies and products, Consumer and brand insights and preferences in various industries, Detailed information about political and social topics, All key figures about countries and regions, Market forecast and expert KPIs for 1000+ markets in 190+ countries & territories, Insights on consumer attitudes and behavior worldwide, Business information on 70m+ public and private companies, Detailed information for 35,000+ online stores and marketplaces. However, household surveys, the data sources traditionally used to observe these dynamics, do not capture these evolution very well. Inequality in per capita consumption rose during the crisis, particularly as a result of the drop in spending on durable goods. This increase in wealth inequality is also confirmed with other concentration measures. For more information on the network of researchers, click here. Recent economic literature has emphasised the heterogeneity of access to different assets and their returns to explain the fact that wealth is more concentrated than income (see Gabaix et al. See Basso et al. While not pursued here, income is sometimes decomposed into transitory and permanent components, and this distinction is potentially relevant because shocks of different durability will be expected to have different effects on consumption. These changes were mainly intended to increase tax collection, with changes in the composition of this tax being marginal, such that the redistributive potential from the measures was minimal. Should you have further questions on the data, do not hesitate to contact us. 30 Citations 94 Altmetric Metrics Abstract This paper analyses the level of inequality in Spain and how it evolved over the course of the past crisis and the early stages of the current recovery. There are already many on line economic data portals, why using WID.world? The biggest drop in the fertility rate was in households in the percentile below the median per capita income, remaining constant in the higher percentiles, suggesting that this mechanism helped adjust spending for some low-income households.Footnote 22. Labour Econ 39:3554, Barcel C, Villanueva E (2018) The risk of job loss, household formation and housing demand: evidence from differences in severance payments. Source: Garca-Miralles et al. In particular, if imputed income from home ownership is added to total household income, inequality measured by the P90/P10 ratio falls from 6.3 to 5.9 in per capita income and from 7.0 to 6.7 in total income in 2014. This increase in inequality is concentrated at the low end of the distribution. Matea (2015) shows that once educational differences across European countries are taken into account, there is no major difference in the percentage of persons reporting to be household heads among the over-35s. Only few institutions provide inequality estimates and those who do so (e.g. According to the literature, young peoples decision to leave the family home is generally very closely linked to their job stability and, where there is a high incidence of short-term contracts, this is generally achieved at a relatively late age (Matea 2015; Barcel and Villanueva 2016, 2018). In such cases we review all existing series and attempt to combine them in the most sensible manner. For more information on WID.world and its history, clickhere. Both measures peaked in 2014 and have since stabilised. The national income items that have increased most are rents and retained earnings of firms. Similarly to Blundell (2011) we contribute to the literature of how households were able to insure themselves against the big financial crisis and how those mechanisms varied by age and wealth. At the high end of the distribution there were larger differences; specifically the P90/P50 ratio was 2.1. inequality in Spain. However, in 2016 the P90/P10 ratio returned to the 2014 value of 6.3. The key novelty of the WID.world project is to use such data in a systematic manner, allowing comparisons between countries and over long time periods. Parliament will have four weeks to back the measure which tops up incomes to a guaranteed level of between 461 and 1015 depending on individual households' circumstances or see it fall, which. The deterioration in the labour market during the crisis led to a rise in the participation rate among household members not previously in the labour force. If prices of these assets perform better than those of real estate assets, this would tend to increase wealth inequality, and vice versa. The key factor underlying developments in earned income during the crisis was the strong job destruction, of temporary jobs. Between 2008 and 2014 there was a modest increase in the proportion of adults over 35 living with their parents, although the increase was strongest among unemployed adults. In addition, people do not generally take decisions in isolation but as members of a household, where different members may receive income and share the use of certain goods. 1). The average number of hours corresponds to October, which is the EES reference month. 8). We analyze the way in which inequality between Spanish households, in terms of their income, consumption and wealth, has varied over the course of the recent crisis. 2012). Banco de Espaa, mimeo, Basso H, Bover O, Casado JM, Hospido L (2017) Income risk asymmetries, consumption and wealth: the dynamics of inequality in the Spanish Survey of Household Finances. This is consistent with the evidence in other European countries that most of the adjustment was done in a context of nominal wage rigidities (Babeck et al. Differences in the asset portfolios held by different population strata, in terms of asset types and their rates of return, are also important in understanding inequalities in wealth and how they have evolved. Latest available data for a fixed period, Use this code to embed the country dashboard into your website. Copy the URL to open this chart with all your selections. To illustrate this, the third panel of Fig. They are described in the Metadata associated to each variable and in the associated methodological documents. Income, consumption and wealth inequality: relationship between the variables and main conclusions drawn from their recent performance. This simulation shows that unemployment benefits managed to narrow the increase in market income inequality by a third between 2008 and 2014 compared to a situation in which they did not exist.Footnote 21 On the other hand, in the lower part of the per capita income distribution there is also an important fraction of households receiving pension income and pensions performed more favourably during the crisis (see panel 4 in Fig. It is also one of the European countries with the lowest percentage of old people living alone or in institutional households. For more information on what you will find (and will notfind) on WID.world, click here. Find all indicators on Innovation and Technology. This text provides general information. In consequence, Spain is one of the countries where the age of mothers at first birth is the highest and the fertility rate is the lowest (Adsera 2011). Income inequality among individuals is measured here by five indicators. If we consider a simulation where couples were formed under a random mating assignment, inequality in household income would be substantially lower than inequality in individual income. Households in the 80th percentile and above registered losses of approximately 5%, whereas the intermediate percentiles were situated close to 10%. Nevertheless, Spains wealth inequality is moderate by international standards, as ownership of real assets is more widespread than in other countries. In Sect. Spain The source for global inequality data. We develop a methodology for constructing measures of income risk as a function of social security . Despite the fact that the EFF allows researchers to do both an analysis at the individual and the household level, when analysing individual earnings, the paper extensively uses the microdata of the Spanish Structure of Earnings Survey (EES). Specifically, percentiles below 20% suffered a drop of less than 10%, and in some cases almost no drop at all, while those in higher percentiles, which were more dependent on developments in wage income, saw their total income fall by at least 15%. 11 shows, the probability of young people aged 1835 living with their parents had decreased since 2002. This paper analyses the level of inequality in Spain and how it evolved over the course of the past crisis and the early stages of the current recovery. Moreover, despite having a progressive tax system, Spanish direct taxes do not change the international ranking of Spain when comparing gross and net income per capita inequality. The most significant changes were apparent in the distribution by age, studies and seniority, with a drop of around 14pp in the share of workers aged under 30, around 13pp in that of workers with an educational attainment of less than post-compulsory secondary education, and 21pp in that of employees with fewer than three years of tenure in the company. Constraints on companies ability to change working conditions in sector-wide agreements prior to the labour-market reform of 2012 meant the bulk of the adjustment requirement fell on jobs and hours worked (Anghel and Izquierdo 2018). For instance, workers wage income is a function of their hourly wage and of the number of hours they work over a specific period. Income deriving from unemployment benefits in this percentile, which had been just 8% of per capita income before the crisis, rose to 30% in 2014, highlighting the importance of these benefits as an insurance mechanism (see panel 1 and 2 in Fig. The recent economic crisis caused a marked rise in wealth and income inequality indicators in many OECD countries, including Spain. OECD (2015) estimates that around 80% of the . Inequality in the US has been growing substantially in recent decades. Finally, in order to cover the evolution of inequality during the early years of the recovery (specifically between 2014 and 2017), Sect. Specifically, according to the Earnings Structure Survey (EES) data, there are up to five days difference in time actually worked per month between different age groups and between new labour market entrants and all other workers. Organisation for Economic. Overall, per capita consumption inequality rose across the whole distribution, as it did in the case of per capita income. As a consequence of the crisis, and mainly as a result of many young people losing their jobs, the lower part of the per capita income distribution included a larger share of unemployed people who lost their wage income and started receiving unemployment benefits. This is the case mainly because the EFF sample is representative of all the population (including persons who are employed, unemployed and inactive at the time of the survey), whereas the EES data refer only to persons who have been working throughout the month of October of the year of reference. However, most of the people who joined the labour force were unable to find work. The availability of this database for years 2004 and 2010 is particularly relevant to analyse the impact of the economic crisis, the empirical evidence shows significant increases in both income. The way household income per capita developed during the crisis was largely driven by job losses and the replacement of wages by unemployment benefits. Lastly, households themselves decide what portion of their net income they wish to consume, depending among other factors on the level of uncertainty underlying their future income expectations, their stage of life, their available wealth and the public or subsidised goods available to them. Econometrica 84:20712111, Garca-Miralles E, Guner N, Ramos R (2018). In Spain, inequality in income risk is related to the prevalence of high unemployment, but also to the large share of short-term temporary employment that produces high job turnover (Felgueroso, Garca-Prez, Jansen, and Troncoso Ponce ). From the HFCS data for Germany, it was possible to verify greater mobility in Spain, as over the same period 72.5% of the German population in the lowest 20% of the income distribution remained in this situation in 2014. In this case, the reduction of unemployment for the less-educated was especially slow in the first few years of the recovery, which limited the decline in the inequality indices. As discussed before, a typical household in the lower part of the total income distribution is mainly supported by income from retirement pensions and other transfers, such as survivors pensions. In the case of education, for instance, this is particularly true for preschool and primary education, as well as for compulsory secondary education, while the effects are less clear in the case of higher education.Footnote 18. But the pattern of increasing inequality was not general.

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