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Europe has large income disparities. States in the West and Northern Europe have higher disposable incomes on average than many countries in the South and East.
advertisementTwo-thirds of the world’s richest countries are in Europe, according to the 2023 Legatum Prosperity Index, but income inequality is rampant across the Old Continent.
The average household income set aside for spending and saving varies widely not only between EU member states, but also among other European countries.
There appears to be a clear geographical disparity. The highest levels of median disposable income are recorded in the Western and Northern European countries, while most states in the South and East have lower levels.
Access to goods and services in a country depends primarily on income distribution, which varies widely and creates inequality.
Due to different tax systems and price levels, it can be difficult to accurately compare disposable income levels in different countries.
However, one way to measure and compare differences is to look at the median equivalent disposable income per inhabitant in each country’s purchasing power standard (PPS). This will give you an idea of your standard of living.
Household disposable income is defined by Eurostat, the EU’s statistical agency, as the amount of money a household has available for spending and saving, excluding taxes and transfers. This income is adjusted and “equalized” according to household size and composition so that it is comparable across all households.
PPS, on the other hand, helps equalize prices between countries. This is a kind of artificial currency that eliminates differences in price levels and allows a single new power to purchase the same goods and services in any country.
With that in mind, which countries in Europe have the highest and lowest disposable incomes? And how wide is income inequality?
Median disposable income per inhabitant in the EU in 2022 ranged from 9,671 PPS in Bulgaria to 33,214 PPS in Luxembourg. The EU average was 18,706 PPS per inhabitant.
Including European Free Trade Area (EFTA) and EU candidate countries, Luxembourg was followed by Norway (27,090 PPS) and Switzerland (26,389 PPS). This figure was also just over 25,000 PPS in the Netherlands and Austria.
Nordic countries outperform the EU average but fail to take top spot
Median disposable income per inhabitant was above the EU average in five Nordic countries.
Norway ranked second, but no other country made it into the top five.
Finland (20,941 PPS) ranked 10th out of 35 countries on the list, and Sweden (20,573 PPS) ranked 13th.
Iceland and Denmark came in 7th and 8th place respectively.
Split between the big four
Looking at the EU’s four most populous countries, median disposable income was above the EU average in Germany (23,197 PPS) and France (20,575 PPS), but also above the EU average in Italy (18,472 PPS) and Spain (17,254 PPS). PPS) was low.
Croatia, the last country to join the EU, had a higher median disposable income than the six EU countries.
As seen in the map above, Western European and Nordic countries reported the highest levels of median disposable income, while most states in the South and East had lower levels.
advertisementCandidate countries had the lowest incomes
EU candidate countries had the lowest median disposable income on the list.
Albania (4,385PPS) was at the bottom, followed by North Macedonia (5,988PPS) and Turkey (6,210PPS).
Income inequality deepens
The level of income inequality across Europe looks particularly striking when incomes are considered in euros rather than PPS.
Median disposable income per inhabitant ranged from EUR 5,378 in Bulgaria to EUR 45,310 in Luxembourg in the EU in 2022. Median disposable income across the EU was €19,083.
In addition to Luxembourg, this figure represents 35,000 euros in five other countries: Switzerland (44,753 euros), Iceland (39,918 euros), Norway (39,206 euros) and the United Kingdom (37,934 euros). exceeded.
advertisementIn Germany it was 25,000 euros and in France it was 23,053 euros.
Perhaps unsurprisingly, the median disposable income in euros was much lower in the EU candidate countries: 3,000 euros in Albania, Turkey and North Macedonia.
How has your disposable income changed over the past five years?
In terms of growth rates, several countries have significantly increased their median disposable income per inhabitant in euros over the past five years.
Between 2017 and 2022, the latest available data for the last five years, it increased by more than 40% in nine EU member states and two candidate countries. Across the EU, the change was 17%.
Romania recorded the highest rate of increase at 101%, followed by Serbia (68%) and Lithuania (66%).
advertisementCountries with median disposable incomes above the EU average saw little change: 1% in Switzerland, 2% in Norway, and 5% in France and Sweden.
Only Turkey saw a decline in median disposable income.
Turkey was the only country where median disposable income decreased, specifically by 27%, or 1,000 euros.
Looking at changes in euros rather than percentages, Luxembourg (€8,995) recorded the highest increase, followed by Ireland (€6,181) and the Netherlands (€5,976).
The average increase in the EU was €2,802, while in Germany it increased by €3,080 and in France by €1,093.
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