copy the linklink copied!2. Income and Wealth

Together, income and wealth shape households’ economic well-being. Since 2010, OECD average household disposable income per capita has increased by 6%, cumulatively. Meanwhile, household median net wealth has fallen by 4%. In European OECD countries, 1 in 5 households find it difficult to make ends meet, and across the OECD nearly 1 in 8 live in relative income poverty. Additionally, more than 1 in 3 households are financially insecure, meaning that, while not currently income poor, they would be at risk of falling into poverty if they had to forgo 3 months of income. On average, people in the top 20% of the income distribution earn 5.4 times more than people in the bottom 20%. The wealthiest 10% of households own more than half of all household wealth. Younger people are more likely to live in households with lower income and wealth, and are at greater risk of poverty.

    
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Figure 2.1. Income and Wealth snapshot: current levels, and direction of change since 2010
Figure 2.1. Income and Wealth snapshot: current levels, and direction of change since 2010

Note: The snapshot depicts data for 2018, or the latest available year, for each indicator. The colour of the circle indicates the direction of change, relative to 2010, or the closest available year: improvement is shown in blue, deterioration in orange, and no clear or consistent change in grey, and insufficient time series to determine trends in white. For each indicator, the OECD country with the lowest (on the left) and highest (on the right) well-being level are labelled, along with the OECD average. For full details of the methodology, see the Reader’s Guide.

Source: OECD calculations based on OECD National Accounts Statistics (database), http://dx.doi.org/10.1787/na-data-en; OECD Wealth Distribution (database), http://stats.oecd.org/Index.aspx?DataSetCode=WEALTH; OECD Income Distribution Database, https://stats.oecd.org/Index.aspx?DataSetCode=IDD; and Eurostat’s database European Union Statistics on Income and Living Conditions (EU-SILC), https://ec.europa.eu/eurostat/web/income-and-living-conditions/data/database.

copy the linklink copied!Household income

Mean household net adjusted disposable income

The mean household net adjusted disposable income per capita was around USD 28 000 in 2017 in OECD countries, on average. This is based on a measure from the System of National Accounts (SNA), and reflects income after taxes and current transfers, as well as in-kind services that households receive for free or at subsidised prices from governments and non-profit institutions (for more details please refer to Box 2.1). The figure was lowest in Mexico and Latvia (at around USD 17 000) and highest in the United States and Luxembourg (where it exceeded USD 42 000). Since 2010, OECD average household net adjusted disposable income per capita has increased by 6%, cumulatively (Figure 2.2). Gains since 2010 have been largest in Estonia (up 29%, cumulatively), followed by the other Baltic States and Korea (26-27%). At the same time, the figure has fallen in Italy and, especially, in Greece, where it has dropped by -23% (i.e. by USD 5 500).

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Figure 2.2. Since 2010, household income has increased by 6% for OECD countries on average
Household net adjusted disposable income, per capita, USD at 2017 PPPs
Figure 2.2. Since 2010, household income has increased by 6% for OECD countries on average

Note: The latest available year is 2015 for New Zealand. The OECD average excludes Chile, Colombia, Iceland, Israel and Turkey, as data are not available.

Source: OECD calculations based on OECD National Accounts Statistics (database), http://dx.doi.org/10.1787/na-data-en.

 StatLink https://doi.org/10.1787/888934080865

Income gaps between the top 20% and the bottom 20%

Data describing the distribution of the SNA measure of household adjusted disposable income (above) are still experimental, and available only for a limited number of countries. However, information on the distribution of household disposable income (a more restricted income concept that does not account for social transfers in kind), “equivalised” (i.e. “adjusted” by an equivalence scale to account for economies of scale in the household) is available from the OECD Income Distribution Database, which is based on national household surveys and administrative records (for more on all this see Box 2.1). These data suggest that, on average among OECD countries, the income of those in the top 20% of the distribution is 5.4 times higher than that of the bottom 20% (Figure 2.3). Inequalities are smallest in some Central and Eastern European countries (i.e. the Czech Republic, the Slovak Republic, Slovenia) as well as in Iceland, Denmark, Finland and Belgium, where the ratio never exceeds 4. Conversely, in Chile, Mexico and the United States, people in the top 20% of the income distribution receive between 8 and 10 times more than what is received by the bottom 20%. Compared to 2010, the ratio was broadly stable on average across OECD countries, although it fell by 1.2 points in Estonia and Mexico and almost 1 point in Chile, while it increased by almost 1.8 points in Lithuania.

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Figure 2.3. The richest 20% receive 5.4 times more income than the poorest 20%, on average in OECD countries
Ratio of average (equivalised) household disposable income of the top 20% to the average income of the bottom 20% of the income distribution (S80/S20 income share ratio)
Figure 2.3. The richest 20% receive 5.4 times more income than the poorest 20%, on average in OECD countries

Note: The latest available year is 2018 for Costa Rica; 2017 for Canada, Chile, Finland, Israel, Korea, Norway, Sweden, the United Kingdom and the United States; 2015 for Germany, Iceland, Japan, Switzerland, Turkey, and South Africa; 2014 for New Zealand; 2013 for Brazil; and 2016 for all the other countries. The earliest available year is 2011 for Chile, Denmark, Germany, Israel, the Netherlands, New Zealand, Turkey, Brazil and the Russian Federation; 2012 for Australia, France, Japan, and Mexico; and 2013 for Estonia, Sweden and the United States. The OECD average excludes Colombia, Korea and Luxembourg, due to incomplete time series. Household disposable income is “equivalised”, i.e. adjusted by an equivalence scale that divides the income of each household by the square root of household size, to account for economies of scale in household needs (i.e. the notion that any additional household member needs a less than proportionate increase of household income in order to maintain a given level of welfare).

Source: OECD Income Distribution Database, https://stats.oecd.org/Index.aspx?DataSetCode=IDD.

 StatLink https://doi.org/10.1787/888934080884

Relative income poverty

Relative income poverty, defined as a disposable income below half the national median, affects 12% of people in OECD countries, on average (Figure 2.4). The share is lowest (below 6%) in Iceland, the Czech Republic and Denmark, and highest (above 17%) in Israel, the United States, Korea and Turkey. Compared to 2010, income poverty rates have remained broadly stable in the majority of OECD countries. However, the rate increased by 4 percentage points in Latvia and Lithuania, and fell by 2 percentage points in Mexico, Chile and Australia. These changes in relative income poverty reflect year-on-year changes in national median income – thus, in countries where national income has been rapidly rising (e.g. Latvia and Lithuania), the poverty threshold has risen with it, while in countries where national income has fallen (e.g. Greece and Italy) the poverty threshold has fallen with it. Changes in income poverty anchored to a specific year (e.g. 2005) are larger and affect more countries (OECD, 2015[1]).

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Figure 2.4. On average, among OECD countries, 12% of people live in relative income poverty
Share of people with (equivalised) household disposable income below 50% of the national median, percentage
Figure 2.4. On average, among OECD countries, 12% of people live in relative income poverty

Note: The latest available year is 2018 for Costa Rica; 2017 for Canada, Chile, Finland, Israel, Korea, Norway, Sweden, and the United Kingdom; 2015 for Denmark, Germany, Iceland, Japan, Switzerland, and Turkey; 2014 for Hungary and New Zealand; and 2016 for all the other countries. The earliest available year is 2011 for Chile, Denmark, Germany, Israel, the Netherlands, New Zealand, Turkey, Brazil and the Russian Federation; 2012 for Australia, France, Hungary, Japan, and Mexico; and 2013 for Estonia, Sweden and the United States. The OECD average excludes Colombia, Korea and Luxembourg, due to incomplete time series. Household disposable income is “equivalised”, i.e. adjusted by an equivalence scale that divides the income of each household by the square root of household size, to account for economies of scale in household needs (i.e. the notion that any additional household member needs a less than proportionate increase of household income in order to maintain a given level of welfare).

Source: OECD Income Distribution Database, https://stats.oecd.org/Index.aspx?DataSetCode=IDD.

 StatLink https://doi.org/10.1787/888934080903

Difficulty making ends meet

A different perspective on the economic strain experienced by households is provided by (self-reported) data on people who find it difficult to make ends meet. Based on this measure, which is available only for European countries, 21% of people have difficulty or great difficulty in making ends meet on average (Figure 2.5). This rate is well above the share of people counted as poor, based on the relative income poverty threshold (Figure 2.4), with the difference between the two measures ranging from less than one percentage point in Finland to 60 percentage points in Greece. Compared to 2010, the share of people who find it difficult to make ends meet has fallen by almost 7 percentage points on average in European OECD countries, with the largest decreases in Latvia and Hungary (more than 20 points). By contrast, it has increased by almost 16 percentage points in Greece.

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Figure 2.5. One in five people report having difficulty in making ends meet in European OECD countries
Share of the population who have difficulty or great difficulty in making ends meet, percentage
Figure 2.5. One in five people report having difficulty in making ends meet in European OECD countries

Note: The latest available year is 2016 for Iceland. The earliest available year is 2011 for Poland, and 2015 for Estonia. 2018 data are preliminary for Ireland and the United Kingdom.

Source: OECD calculations based on Eurostat’s database European Union Statistics on Income and Living Conditions (EU-SILC), https://ec.europa.eu/eurostat/web/income-and-living-conditions/data/database and a survey of household income and participation in social programs for the Russian Federation.

 StatLink https://doi.org/10.1787/888934080922

copy the linklink copied!Household wealth

Median wealth per household

Household wealth is the difference between all financial and non-financial assets (such as dwellings, land, currency and deposits, shares and equity) owned by households and all their financial liabilities (such as mortgages and consumer loans). This measure is reported for the household exactly in the middle of the distribution (with 50% of households having wealth above, and 50% below, the median). On average, among OECD countries, median wealth per household is around USD 162 000. Values range between less than one-fifth of the OECD average in the Netherlands, Latvia and Denmark, to almost three times the OECD average in Luxembourg (Figure 2.6). The variation in median wealth levels across countries is strongly related to outright homeownership rates (i.e. the share of people who own their homes without mortgage debt), as well as to the existence of generous social security benefits in old age. When compared to households’ relative position in terms of their mean disposable income (Figure 2.2), median wealth per household is relatively low in Denmark, the Netherlands and the United States – countries where the share of people who own their homes outright is among the lowest in the OECD (Balestra and Tonkin, 2018[2]). Since 2010, median wealth has fallen by 4% (about USD 6 000) across OECD countries, on average. It has increased the most in Chile (32%), largely driven by rising real-estate prices (Balestra and Tonkin, 2018[2]), followed by Canada (16%), Germany and the United States (13%), mainly reflecting higher financial wealth (Balestra and Tonkin, 2018[2]). The largest fall since 2010 occurred in Greece (-41%), followed by the Slovak Republic (-25%), Italy and Spain (-19%), mainly reflecting falls in the value of real-estate wealth (Balestra and Tonkin, 2018[2]).

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Figure 2.6. Across OECD countries, household median wealth can differ by a factor of 23
Median net wealth per household, USD at 2016 PPPs
Figure 2.6. Across OECD countries, household median wealth can differ by a factor of 23

Note: The latest available year is 2016 for Canada and the United States; 2015 for Denmark, Korea, the Netherlands, Norway and the United Kingdom; 2013 for Estonia, Finland, Ireland and Portugal; 2012 for Spain, and 2014 for all other countries. The earliest available year is 2009 for Finland, France, Greece and Spain; 2010 for Belgium, the Slovak Republic, Portugal and the United States; 2012 for Australia, Canada and Norway; 2013 for Korea, and 2011 for all other countries. The OECD average is limited to the 18 countries with data available for two time points. Data for the United Kingdom are limited to Great Britain.

Source: OECD Wealth Distribution (database), http://stats.oecd.org/Index.aspx?DataSetCode=WEALTH.

 StatLink https://doi.org/10.1787/888934080941

The distribution of household wealth is much more concentrated than that of household income. Among OECD countries on average, the wealthiest 10% of households own 52% of total household net wealth (Figure 2.7). This ranges from 34% in the Slovak Republic to nearly 80% in the United States. While these differences partly reflect the accuracy of measures for the top end of the distribution, which is challenging to measure particularly when using household surveys (Balestra and Tonkin, 2018[2]), alternative (tax-based) sources also suggest that wealth inequality is significantly higher in the United States than in Europe (Alvaredo et al., 2017[3]).

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Figure 2.7. On average, the wealthiest 10% own more than half of total household wealth
Share of wealth owned by the top 10%, percentage, 2016 or latest available year
Figure 2.7. On average, the wealthiest 10% own more than half of total household wealth

Note: The latest available year is 2016 for Canada and the United States, 2015 for Denmark, the Netherlands and Norway, 2013 for Estonia, Finland, Ireland and Portugal, 2012 for Canada and Spain, and 2014 for all other countries. Data for the United Kingdom are limited to Great Britain. The OECD average excludes Colombia, the Czech Republic, Iceland, Israel, Korea, Lithuania, Mexico, Sweden, Switzerland and Turkey, as comparable data are not available.

Source: OECD Wealth Distribution (database), http://stats.oecd.org/Index.aspx?DataSetCode=WEALTH.

 StatLink https://doi.org/10.1787/888934080960

Financial insecurity

Across the 28 OECD countries with available data, 36% of people are financially insecure (Figure 2.8) – i.e. while not currently income poor, they risk falling into this condition in the event of a sudden loss of income, e.g. through unemployment, family breakdown or disability. In other words, if their income were to suddenly stop, such people would not have enough liquid assets to keep living above the poverty line for more than 3 months (see Box 2.1 and the figure note below for further details). More than half of the population meets this definition of financial insecurity in Latvia, Greece, Slovenia, New Zealand, Chile and Poland. By contrast, only 4% of people in Korea, and fewer than 15% in Japan, are financially insecure.

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Figure 2.8. More than one-third of people in the OECD are at risk of falling into poverty
Share of individuals who are financially insecure, percentage, 2016 or latest available year
Figure 2.8. More than one-third of people in the OECD are at risk of falling into poverty

Note: The latest available year is 2016 for Canada and the United States, 2015 for Denmark, Korea, the Netherlands, Norway and the United Kingdom, 2014 for Australia, Austria, Belgium, Chile, France, Germany, Greece, Hungary, Italy, Japan, Latvia, Luxembourg, Poland, the Slovak Republic and Slovenia, 2013 for Estonia, Finland, Ireland and Portugal, and 2012 for Spain. Financially insecure people are those who are not income poor, but have insufficient liquid financial wealth to support them at the level of the income poverty line for more than three months – i.e. they have equivalised liquid financial assets below 25% of the national median income. Liquid financial wealth is defined as cash, quoted shares, mutual funds and bonds net of liabilities of own unincorporated enterprises. The income definition used follows as much as possible that used for reporting income poverty, i.e. household disposable income. However, in most cases, information on household disposable income is not available in the data sources used for computing wealth statistics; in these cases, (i.e. Austria, Belgium, Estonia, France, Germany, Greece, Hungary, Ireland, Latvia, Luxembourg, Poland, Portugal, the Slovak Republic, Slovenia and Spain) the income concept used is that of gross income (i.e. the total sum of wages and salaries, self-employment income, property income and current transfers received, all recorded before payment of taxes). Data for the United Kingdom are limited to Great Britain. The OECD average excludes Colombia, the Czech Republic, Iceland, Israel, Lithuania, Mexico, Sweden, Switzerland and Turkey, as comparable data are not available.

Source: OECD Wealth Distribution (database), https://stats.oecd.org/Index.aspx?DataSetCode=WEALTH.

 StatLink https://doi.org/10.1787/888934080979

copy the linklink copied!Income and Wealth inequalities: gaps between population groups

Strictly speaking, the income and wealth profiles of different population groups (defined based on their gender, age or education) cannot be assessed for the indicators considered in this chapter because the data are collected at the household level. Survey data usually provide information on the composition of a household (e.g. by gender and age), but not on how income and wealth are distributed across the members of that household. An implicit assumption made when reporting household-level data is that of a full and equal sharing of resources across all household members. When working with such data, the only insights into inequality that can be gained concern the different average characteristics of households (i.e. the average for households that include people aged 65+ and those that do not), or households headed by different individuals (such as men and women, young and old, and people of differing levels of education). This risks substantially under- or over-estimating the size of the gaps between these different groups. Results are also shaped by complex factors, such as the demographic structure of a country, and the types of households that are more prevalent (for example, households headed by single parents are generally more economically disadvantaged than other types of household, and their prevalence varies across OECD countries). Beyond the immediate measurement challenges, the concept of “personal” income or wealth is not simple to define, as some income and wealth components belong to the entire household (e.g. social transfers and taxes, which are typically paid or received according to the type of household considered, e.g. number of children), while others are individually held. The income inequalities described below refer to individuals grouped by age (whatever the household they belong to), while wealth inequalities refer to the age and the educational level of the household reference person.

Younger people are more likely to live in households with lower income and less wealth

When compared to children and young people (aged below 26) and to older adults (aged 51 and above), middle-aged people (26-50 years) live in households with higher equivalised disposable income, and are less likely to be income-poor. In OECD countries, on average, both children and young people, on one side, and older adults, on the other, live in households where equivalised disposable income is, respectively, 10% and 4% lower than the average household equivalised disposable income for middle-aged people. Young people and older adults are also, respectively, 35% and 20% more likely to live in an income-poor household.

In terms of wealth, households headed by people aged 55 and older have higher household median wealth and are less likely to be financially insecure (i.e. at risk of falling into poverty if they had to forgo 3 months of income). The median wealth of households with heads aged 55 and older is 53% higher than that of those headed by the middle-aged (in this case 35-54 years), while the median wealth of households headed by individuals aged under 35 is around one-third of that of households headed by middle-aged individuals. Households headed by older people are also 25% less likely to be financially insecure, relative to those headed by middle-aged individuals, while households headed by under-35s are 7% more likely to be financially insecure.

Wealth is twice as high in households headed by tertiary-educated individuals

Median wealth in households headed by individuals without a tertiary education is, on average, around half that of households headed by a person with a tertiary education. More specifically, median wealth values for the OECD on average stand at USD 91 000 for households headed by a person with below upper secondary education; USD 130 000 for households headed by a person with upper secondary education only; and USD 203 000 for households headed by a person with a tertiary education.

Rates of financial insecurity also vary according to the highest educational attainment level of the household head. On average across 28 OECD countries, the share of financially insecure households is 36% for those headed by a person with less than an upper secondary education; 37% for those headed by a person with an upper secondary education only; and 26% for households headed by a person with a tertiary education.

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Box 2.1. Measurement and the statistical agenda ahead

Together, income and wealth shape households’ consumption possibilities. Income after taxes and transfers indicates what households have available to spend, while direct measures of household consumption expenditure inform about “realised” material conditions (rather than possibilities). Wealth meanwhile provides a buffer that can help to smooth consumption and enable longer-term investments (such as in housing). While related to the concept of financial vulnerability, the broader concept of economic insecurity has been identified as a priority for well-being measurement (Stiglitz, Fitoussi and Durand, 2018[4]). While economic insecurity can be defined and measured through objective methods, people’s perceptions of their economic situation offer a useful complement. Lastly, it is essential to consider the joint distribution of income, consumption and wealth, as none of the measures used in this chapter, taken alone, provides a full picture of a household’s economic situation. For example, households that own much wealth but are income poor have higher consumption and saving possibilities than their income alone would suggest, and vice versa. The indicators used in this chapter (Table 2.1) provide insights into some but not all of the elements of the Income and Wealth dimension.

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Table 2.1. Income and Wealth indicators considered in this chapter

Average

Vertical inequality

(gap between top and bottom of the distribution)

Horizontal inequality (difference between groups by gender, age and education)

Deprivation

Household income

Mean household net adjusted disposable income per person (SNA based)

n/a

n/a

n/a

Household disposable income, equivalised (based on microdata from survey sources and administrative records)

S80/S20 ratio of household disposable income

Limited information only, based on individual characteristics (ignoring intra-household inequalities)

Relative income poverty (share of individuals with household disposable income below the relative income poverty line, set at 50% of the national median)

Difficulty in making ends meet

n/a

n/a

n/a

Share of individuals who declare to have difficulty or great difficulty to make ends meet

Household wealth

Median household net wealth per household (based on microdata)

Share of household wealth held by the 10% wealthiest households

Gaps in median household net wealth, and in financial insecurity based on characteristics of the household reference person

Financial insecurity (share of individuals with equivalised liquid financial assets below 3 months of the annual national relative income poverty line)

Mean household adjusted disposable income is obtained by summing all the (gross) income flows (earnings, self-employment and capital income, current transfers received from other sectors) paid to the (SNA) household sector and then subtracting current transfers (such as taxes on income and wealth) paid by households to other sectors of the economy. The term “adjusted”, in National Accounts vocabulary, denotes the inclusion of the social transfers in-kind (such as education and health care services) that households receive from government. The measure used here also takes into account the amount needed to replace the capital assets of households (i.e. dwellings and equipment of unincorporated enterprises), which is deducted from their income. Household adjusted disposable income is shown in per capita terms and expressed in US dollars (USD) using 2017 purchasing power parities (PPPs) for actual individual consumption. The source is the OECD National Accounts Statistics database.

Income inequality refer to the ratio of the shares of household disposable income of the top and bottom 20% of the distribution and to the gaps between the average income of different population groups (e.g. by age). Relative income poverty refers to the share of people whose household disposable income is below 50% of the national median (i.e. relative income poverty), and to the difference in this measure across different population groups. All these indicators are based on the concept of household disposable income, as measured in microdata – i.e. the market income received by all household members (gross earnings, self-employment income, capital income), plus current cash transfers received, net of income and wealth taxes and social security contributions paid by workers, and net of current transfers paid to other households. Household disposable income is “adjusted” by an equivalence scale that divides household income by the square root of household size, to account for economies of scale in household needs (i.e. the notion that any additional household member needs less than a proportionate increase of household income in order to maintain a given level of welfare). Data are drawn from the OECD Income Distribution Database, which relies on estimates supplied by National Statistical Offices and other producers of official statistics (based on household surveys or tax and administrative records), or produced by the OECD based on public use data from the European Union Statistics on Income and Living Conditions (EU-SILC). The data comply as much as possible with the 2011 Canberra Handbook (United Nations Economic Commission for Europe, 2011[5]). Negative household income values are set to zero, through special treatments as described in the Terms of Reference of the OECD Income Distribution Database (OECD, 2017[6]). Survey data can suffer from under-coverage and underreporting at both ends of the distribution.

Difficulty in making ends meet refers to the share of people who report having difficulty or great difficulty in making ends meet. The question is asked to the household reference person, and the information is available at household level only. Data come from the European Union Statistics on Income and Living Conditions, a nationally representative survey with large samples (from around 4 000 individuals in the smallest member states, to around 16 000 in the largest) covering all members of private households aged 16 or older and available for EU countries, as well as Norway and Switzerland.

Household wealth refers to the sum of non-financial (e.g. dwellings) and financial assets (e.g. deposits, shares and equity), net of their financial liabilities (e.g. loans), held by private households resident in the country, as measured in microdata (household surveys and, more rarely, administrative records). Household wealth is reported for the median household (rather than as the mean across all households) to reduce the impact of differences across countries in measuring the top end of the distribution (where most wealth is concentrated). Inequalities are measured by the share of household wealth held by the 10% of wealthiest households, and by gaps in median wealth across households headed by people with different characteristics. Values are expressed in USD using purchasing power parities (PPPs) for household private consumption; when analysing changes over time, these values are adjusted for changes in the consumer price index (CPI). The concept of household wealth used corresponds to the one presented in the OECD Guidelines for Micro Statistics on Household Wealth (OECD, 2013[7]) and excludes private and occupational pensions, whose size and distribution differ markedly across countries depending on the characteristics of their social security systems. Data are shown per household (rather than per person or per adult), with no adjustment made to reflect differences in household size. They are drawn from the OECD Wealth Distribution Database, which includes estimates that are supplied by National Statistical Offices and other producers of official statistics, or that are produced by the OECD based on public use data from the Euro-System Household Finance and Consumption Survey (for 17 European countries except the Netherlands). Differences in the extent to which rich households are oversampled in different countries (ranging from no oversampling in Australia and Austria, to large oversampling for the United States and Spain) affect cross-country differences in average wealth per household (and their inequality).

Financial insecurity, a measure of wealth deprivation, refers to the share of people who are not currently income-poor, but who have liquid financial wealth below three months of the annual national relative income poverty line. Liquid financial wealth includes cash, quoted shares, mutual funds and bonds net of liabilities. These people are considered as “financially insecure” as, in the event of a shock, their liquid financial wealth would be insufficient to support them at the level of the income poverty line for more than three months. The indicator is compiled by the OECD following the OECD Guidelines for Micro Statistics on Household Wealth (OECD, 2013[7]). Data are drawn from the OECD Wealth Distribution Database. The income concept used to compute this indicator follows as much as possible that used for reporting income poverty, i.e. household disposable income. However, for most countries, information on household disposable income is not available in the data sources used for the computation of wealth statistics; for this reason, the choice made here has been to rely on the concept of gross income (i.e. the total sum of wages and salaries, self-employment income, property income and current transfers received, all recorded before payment of taxes) when information on disposable income was not available. The poverty line is hence based on household disposable income for Australia, Canada, Chile, Denmark, Finland, Japan, Korea, Italy, the Netherlands, New Zealand, Norway, the United Kingdom and the United States, and on household gross income for the remaining countries.

Correlations among Income and Wealth indicators

Across OECD countries, the correlations among the Income and Wealth indicators are generally in the expected direction – i.e. OECD countries with higher mean income also feature lower rates of relative income poverty, lower shares of people reporting difficulty making ends meet, higher median wealth, and less financial insecurity. These correlations, however, are rarely strong, suggesting that each indicator adds something to the picture (Table 2.2).

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Table 2.2. Income and Wealth indicators are meaningfully correlated, but convey different information
Bivariate correlation coefficients among the Income and Wealth indicators

 

Mean adjusted household disposable income per person

Relative income poverty

Difficulty making ends meet

Median wealth, per household

Financial insecurity

Mean adjusted household disposable income per person

Relative income poverty

-0.36**

(35)

Difficulty making ends meet

-0.67***

(23)

0.42**

(25)

Median wealth, per household

0.33*

(28)

0.08

(29)

-0.13

(20)

Financial insecurity

-0.43**

(28)

0.02

(29)

0.53**

(20)

-0.28

(29)

Note: Table shows the bivariate Pearson’s correlation coefficient; values in parentheses refer to the number of observations (countries). * Indicates that correlations are significant at the p<0.10 level, ** that they are significant at the p<0.05 level, and *** at the p<0.01 level.

Statistical agenda ahead

The indicators used in this chapter could be strengthened in several ways:

  • SNA-based measures of household net adjusted disposable income only refer to the total value received by the household sector. Work is currently ongoing at the OECD to produce experimental measures of inequalities in the distribution of this aggregate.

  • Income and wealth data are currently collected at household level, which makes it difficult to assess intra-household differences in economic resources (e.g. those associated with different gender roles). The inclusion of survey questions probing respondents on who owns the assets or earns the income stream, whether part of these streams are not shared with other household members, and who makes the major financial decisions could help to better assess how economic resources are pooled and shared among household members (OECD, 2017[8])

  • Subjective evaluations of people’s material living conditions (e.g. difficulty in making ends meet) are currently limited to European OECD countries. International guidance should be developed to produce harmonised data with geographical coverage extending beyond Europe.

  • Developing better measures of economic security. Three partial measures of economic security are included in this report: financial insecurity and difficulty making ends meet (in this chapter), and labour market insecurity in the Work and Job Quality chapter. Stiglitz, Fitoussi and Durand (2018[4]) recommend that national statistical agencies and key international organisation work together to improve existing measures and agree on a small number of core measures of economic security.

  • More information on the joint distribution of household income, consumption and wealth at the micro-level would allow a better understanding of households’ economic well-being and inequalities. Experimental work in this direction is currently being undertaken jointly by the OECD and Eurostat.

References

[3] Alvaredo, F. et al. (2017), World Inequality Report 2018, World Inequality Lab, Paris, https://wir2018.wid.world/files/download/wir2018-full-report-english.pdf (accessed on 9 October 2019).

[2] Balestra, C. and R. Tonkin (2018), “Inequalities in household wealth across OECD countries: Evidence from the OECD Wealth Distribution Database”, OECD Statistics Working Papers, No. 2018/01, OECD Publishing, Paris, https://dx.doi.org/10.1787/7e1bf673-en.

[8] OECD (2017), How’s Life? 2017: Measuring Well-being, OECD Publishing, Paris, https://dx.doi.org/10.1787/how_life-2017-en.

[6] OECD (2017), OECD Income Distribution Database TERMS OF REFERENCE, http://oe.cd/idd (accessed on 22 November 2019).

[1] OECD (2015), In It Together: Why Less Inequality Benefits All, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264235120-en.

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