Income and inequality

Disposable income is the income available to households for consumption or saving after direct taxes and social insurance contributions have been deducted and social transfers (such as pensions and benefits) have been added. It is an important indicator of living standards.

To compare incomes across households of different sizes and compositions, disposable income is adjusted to account for the number of adults and children in each household and the fact that household members share certain expenses. The resulting measure is called equivalised disposable income.

The next graph presents the evolution of median annual disposable income. The median divides the population into two equal groups: 50% have higher income and 50% have lower income.

The next graph presents the evolution of median annual disposable income by age group.

The next graph presents the evolution of median annual disposable income by educational attainment.

The next graph presents the evolution of median annual disposable income by household composition.

The Gini index measures inequality. It ranges from 0 (perfect equality, where everyone has the same income) to 100 (maximum inequality, where one person receives all income). A higher value indicates greater inequality.

The next graph presents the evolution of the Gini index using three definitions of income: before pensions and other social benefits, after pensions but before other benefits, and after pensions and benefits. In all three cases, income is measured after direct taxes and social insurance contributions.

Comparing the three measures illustrates the contribution of pensions and other social benefits to reducing income inequality.

Another way to measure income inequality is to divide the population into five equal groups (quintiles), ranked by equivalised disposable income. The first quintile (Q1) includes the 20% of the population with the lowest income, while the fifth quintile (Q5) includes the 20% with the highest income.

The next graph shows the share of total disposable income received by each quintile.

The next graph presents the income thresholds separating the five quintiles. These thresholds indicate the level of annual equivalised disposable income at which a person moves from one quintile to the next.

Income inequality can also be measured by comparing the income shares of different quintiles. The Q5/Q1 ratio compares the richest 20% of the population with the poorest 20%, Q5/Q3 compares the richest 20% with the middle 20%, and Q3/Q1 compares the middle 20% with the poorest 20%.

The next graph presents the evolution of these three ratios. Higher values indicate greater income differences between the respective groups.

Taxes, pensions and other social benefits reduce income inequality by redistributing income across households.

The next graph compares the Q5/Q1 income ratio before taxes and social benefits (market income) and after taxes and benefits (disposable income). The difference between the two measures illustrates the redistributive role of taxes and social benefits.

The next graph presents the evolution of the Q5/Q1 income ratio in each Greek region, measuring income inequality within each region.