Income poverty statistics Statistics Explained

Source : Statistics Explained (https://ec.europa.eu/eurostat/statisticsexplained/) - 06/07/2020 1

Data extracted in May 2020.Planned article update: June 2021.

This article analyses recent statistics on monetary poverty and income inequalities in the European Union (EU). Comparisons of standards of living between countries are frequently based on gross domestic product (GDP)per capita , which presents in monetary terms a basic measure of the overall size of an economy divided bythe number of people living there, used to measure national wealth and prosperity. However, this headlineindicator does not provide information on the distribution of income within a country and also fails to provideinformation in relation to non-monetary factors that may play a significant role in determining the well-beingof the population.

At-risk-of-poverty rate and thresholdThe at-risk-of-poverty rate (after social transfers) in the EU-27 increased between 2010 (start of the time series)and 2011, from 16.5 % to 16.9 %. This rate was relatively stable for the next two years, before increasing moresubstantially in 2014 to reach 17.3 %. Smaller increases were observed in 2015 and 2016 (up 0.1 percentagepoints each year). In 2017, the first notable decrease was observed, the rate dropped to 16.9 % which wasfollowed in 2018 by a further modest reduction of 0.1 points. As such, in the last two years for which data areavailable the EU-27’s at-risk-of-poverty rate had returned to a level similar to that observed between 2011 and2013.

The rate for the EU-27, calculated as a weighted average of national results, conceals considerable variationsacross the EU Member States (see Figure 1 ). In seven Member States, namely Romania (23.5 %), Latvia(23.3 %), Lithuania (22.9 %), Bulgaria (22.0 %), Estonia (21.9 %), Spain (21.5 %) and Italy (20.3 %), one fifthor more of the population was viewed as being at risk of poverty in 2018; this was also the case in Serbia (24.3%), Montenegro (23.6 %; 2017 data), Turkey ( 22.2 %; 2017 data) and North Macedonia (21.9 %). Among theMember States, the lowest proportions of persons at risk of poverty were observed in Czechia (9.6 %), Finland(12.0 %) and Slovakia (12.2 %), while Iceland (8.8 %; 2016 data) reported an even lower share of its populationas being at risk of poverty.

Figure 1: At-risk-of-poverty rate and threshold, 2018Source: Eurostat (ilc_li01) and (ilc_li02)

The at-risk-of-poverty threshold (also shown in Figure 1 ) is set at 60 % of national median equivalised dispos-able income. For cross-country comparisons, it is often expressed in purchasing power standards (PPS), in orderto take account of the differences in the cost of living across countries. The income values for this thresholdvaried considerably among the EU Member States in 2018, ranging from PPS 3 767 in Romania to PPS 13923 in Austria, with the threshold value in Luxembourg (PPS 19 295) clearly above the top of this range. Thepoverty threshold was also relatively low in Serbia (PPS 3 136), North Macedonia (PPS 3 298), Montenegro(PPS 3 906; 2017 data) and Turkey (PPS 3 916; 2017 data) and relatively high in Norway (PPS 15 780) andSwitzerland (PPS 16 240).

Different subpopulations are more or less affected by monetary poverty

In 2018, there was a small difference in the EU-27 at-risk-of-poverty rate (after social transfers) between thetwo sexes, with the latest rates for persons aged 16 years and over equivalent to 15.5 % for males, comparedwith a higher figure of 17.2 % for females. All of the EU Member States, the United Kingdom, the three EFTAcountries shown in Figure 2 and Turkey reported higher rates for females than for males among the populationaged 16 years and over. The largest gender differences in 2018 were observed in Lithuania (6.3 percentage pointshigher for females than for males), Latvia (6.1 percentage points), Estonia (5.5 percentage points) and Czechia(4.6 percentage points). Ireland, Malta and Bulgaria reported at-risk-of-poverty rates for females that were atleast 3.0 percentage points higher than for their male counterparts. The narrowest gender gap was in Francewhere the at-risk-of-poverty rate was marginally (0.2 percentage points) higher for females than for males. Bycontrast, in Montenegro the rate was 1.2 percentage points (2017 data) higher for males than for females, whilein North Macedonia the rate for males was also higher but only by 0.1 percentage points; in Serbia there wasno difference between the rates for the two sexes.

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Figure 2: At-risk-of-poverty rate after social transfers, persons aged 16 years and over,2018(%)Source: Eurostat (ilc_li02)

The differences in at-risk-of-poverty rates were wider when the population was classified accord-ing to activity status

Concerning the risk of poverty, the unemployed are a particularly vulnerable group (see Table 1 ): almosthalf (48.6 %) of all unemployed persons in the EU-27 were at risk of poverty in 2018, with by far the highestrate in Germany (69.4 %). A further 11 EU Member States (Lithuania, Malta, Latvia, Sweden, Bulgaria,Hungary, Czechia, Estonia, Slovakia, Spain and Belgium) reported that at least half of the unemployed were atrisk of poverty in 2018.

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Table 1: At-risk-of-poverty rate after social transfers by most frequent activity status, personsaged 18 years or over, 2018(%)Source: Eurostat (ilc_li04)

Around one in seven (14.4 %) retired persons in the EU-27 were at risk of poverty in 2018. In Estonia (53.6%), Latvia (48.9 %) and Lithuania (41.7 %), the risk of poverty among retired persons was relatively high,respectively some 3.7, 3.4 and 2.9 times as high as the EU-27 average, while the next highest rate was 28.5 %in Bulgaria.

People in employment were far less likely to be at risk of poverty: the average rate across the whole of theEU-27 in 2018 was 9.3 %. There was a relatively high proportion of employed persons at risk of poverty inRomania (15.3 %) and, to a lesser extent, in Luxembourg (13.5 %) and Spain (12.9 %), while Italy and Greecealso reported that more than 1 in 10 members of their respective employed workforce were at risk of poverty in2018. At-risk-of-poverty rates for employed persons were also at least 10.0 % in Serbia, the United Kingdomand Turkey (2017 data).

At-risk-of-poverty rates are not uniformly distributed between households with different com-positions of adults and dependent children

Among households without dependent children (see Figure 3 ), people living alone were most likely to beat risk of poverty, a situation faced by 26.1 % of single person households in the EU-27 in 2018. By contrast,the at-risk-of-poverty rate for households with two or more adults was less than half this rate, at 11.4 %, whichwas the same rate for two adult households where at least one person was aged 65 years or over.

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Figure 3: At-risk-of-poverty rate, analysed by household type for households without dependentchildren, 2018(%)Source: Eurostat (ilc_li03)

The vast majority of EU Member States reported a similar pattern: in 2018, single person households hadthe highest at-risk-of-poverty rates among households without dependent children in all EU Member Statesexcept in Cyprus, where two adult households where at least one person was aged 65 years or over had a higherrate (21.7 % compared with 21.1 % for single person households). A similar situation was observed in NorthMacedonia except that single person households reported the lowest rate (8.5 %) among the three types ofhouseholds analysed.

In 9 out of 27 EU Member States, the at-risk-of-poverty rate for two adult households with at least oneperson aged 65 years or over was lower than the rate for the broader category of all households with two ormore adults, most notably in Denmark where the difference was 6.2 percentage points. At the other extreme,in Latvia, the at-risk-of-poverty rate for two adult households where at least one person was aged 65 years orover was 13.3 percentage points higher than for all households with two or more adults, while the difference inMalta was 12.4 percentage points. In Spain the rate for both of these types of households was the same, whilein Italy the difference was just 0.1 percentage points (2017 data).

Among the households with dependent children, the highest at-risk-of-poverty rate in the EU-27was recorded for single persons with dependent children, at more than one third (34.2 %)

Looking at the rates for households with two adults, those with just one dependent child (12.1 %) had arisk of poverty that was just under half that recorded for households with three or more dependent children(24.5 %) — see Figure 4 .

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Figure 4: At-risk-of-poverty rate, analysed by household type for households with dependentchildren, 2018(%)Source: Eurostat (ilc_li03)

Among the three household types shown in Figure 4 , all EU Member States reported that households com-posed of two adults with one dependent child were the least likely to be at risk of poverty. Most EU MemberStates reported that the at-risk-of-poverty rate was highest for single persons with dependent children. Nev-ertheless, there were four exceptions: in Portugal the rate for households composed of a single person withdependent children was 3.3 percentage points lower than that for households with two adults and three or moredependent children, while in Romania and Bulgaria this difference was much larger, 11.8 and 21.2 percentagepoints respectively; in Slovakia the rate for households composed of a single person with dependent childrenwas the same as that for households with two adults and three or more dependent children. In all four ofthe candidate countries for which data are available the rate for households composed of a single person withdependent children was lower than that for households with two adults and three or more dependent children.

Social protection measures can be used as a means for reducing poverty and social exclusion

This may be achieved, for example, through the distribution of benefits. One way of evaluating the impactof social protection measures is to compare at-risk-of-poverty indicators before and after social transfers (seeFigure 5 ). In 2018, social transfers reduced the at-risk-of-poverty rate among the population of the EU-27from 25.0 % before transfers to 16.8 % after transfers, thereby lifting 8.2 % of the population above the povertythreshold. Without social transfers, these people would be at risk of poverty.

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Figure 5: At-risk-of-poverty rate before and after social transfers, 2018(%)Source: Eurostat(ilc_li02) and (ilc_li10)

Comparing at-risk-of-poverty rates before and after social transfers, the impact of social benefits was low —moving at most 6.0 % of people above the poverty threshold — in Czechia (6.0 %), Italy (5.6 %), Latvia,Slovakia (both 5.5 %), Portugal (5.4 %), Greece (4.7 %) and Romania (4.5 %). This was also the case in Serbia(5.3 %), North Macedonia (3.8 %) and Turkey (2.1 %; 2017 data).

Looking at the impact in relative terms, half or more of all persons who were at-risk-of-poverty in Finlandand Ireland moved above the threshold as a result of social transfers, as was also the case in Iceland (2016 data)and Norway.

Income inequalitiesGovernments, policymakers and society in general cannot combat poverty and social exclusion without analysinginequalities within society, whether they are economic or social in nature.

Figure 6 provides information on inequalities in the distribution of income in 2018: a population-weightedaverage of national figures for the individual EU Member States shows that the 20 % of the population with thehighest equivalised disposable income received 5.1 times as much income as the 20 % with the lowest equivaliseddisposable income in the EU-27. This ratio varied considerably across the Member States, from 3.0 in Slovakiato 6.0 or more in Spain, Italy and Latvia and more than 7.0 in Lithuania, Romania and Bulgaria, where itpeaked at 7.7. Among the non-member countries shown in Figure 6, North Macedonia (6.2) and Montenegro(7.6; 2017 data) reported similarly high ratios for the inequality of income distribution, while in Serbia (8.6)and Turkey (8.7; 2017 data) the ratios were higher than in any of the Member States.

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Figure 6: Inequality of income distribution — income quintile share ratio, 2018Source: Eurostat(ilc_di11)

There is policy interest in the inequalities for subpopulations. One group of particular interest is that of theelderly, in part reflecting the growing proportion of the EU’s population that is aged 65 years and over. Pensionsystems can play an important role in addressing poverty among the elderly. In this respect, it is revealing tocompare the incomes of the elderly with the rest of the population .

Across the EU-27 as a whole, people aged 65 years or over had a median income in 2018 whichwas equal to 91 % of the median income for the population under the age of 65 years

In four EU Member States (Luxembourg, France, Greece and Italy), the median income of people aged 65years and over was higher than the median income of persons under the age of 65 years (see Figure 7 ). Thiswas also the case in the four candidate countries shown in the figure. In Hungary, Spain, Austria, Poland,Portugal, Romania and Slovakia, the median income of people aged 65 years or more was 90 % to 100 % of thatrecorded for people under the age of 65 years. This was also the case in Iceland (2016 data) and Norway. Ratiosbelow 80 % were recorded in Croatia, Belgium, Denmark, Bulgaria, Czechia, Malta and the Baltic MemberStates ; the lowest rates were 64 %, 58 % and 57 % in Lithuania, Latvia and Estonia respectively. Relativelylow ratios may broadly reflect relatively low pension entitlements.

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Figure 7: Relative median income ratio, 2018Source: Eurostat (ilc_pnp2)

The depth of poverty, which helps to quantify just how poor the poor are, can be measured by the relativemedian at-risk-of-poverty gap . The median income of persons at risk of poverty in the EU-27 was, on average,24.5 % below the poverty threshold in 2018 (see Figure 8 ). This threshold is set at 60 % of the nationalmedian equivalised disposable income of all persons.

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Figure 8: Relative median at-risk-of-poverty gap, 2018(%)Source: Eurostat (ilc_li11)

Among the EU Member States, the median income of persons at risk of poverty was furthest below the povertythreshold in Romania (35.2 %). Gaps in excess of 25.0 % were also reported for Italy, Greece, Croatia, Spain,Lithuania, Latvia, Bulgaria and Slovakia. The gaps in North Macedonia (37.7 %) and Serbia (37.4 %) werehigher than in any of the Member States and the gaps were also relatively high in Montenegro (34.0 %) andTurkey (26.4 %; 2017 data). The lowest at-risk-of-poverty gap among the EU Member States was observed inFinland (14.2 %), followed by Czechia (15.0 %) and Ireland (15.3 %). The gap in Iceland was also at a similarlylow level (15.3 %; 2016 data).

Source data for tables and graphs• Income poverty statistics: tables and figures

Data sourcesThe data used in this article are primarily derived from micro data from EU statistics on income and livingconditions (EU-SILC) . EU-SILC data are compiled annually and are the main source of statistics that measureincome and living conditions in Europe; it is also the main source of information used to link different aspectsrelating to the quality of life of households and individuals. The reference population for the information pre-sented in this article is all private households and their current members residing in the territory of an EUMember State at the time of data collection; persons living in collective households and in institutions aregenerally excluded from the target population. The data for the EU and the euro area are population-weightedaverages of national data.

Household disposable income is established by summing up all monetary incomes received from any source

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by each member of the household (including income from work, investment and social benefits) — plus incomereceived at the household level — and deducting taxes and social contributions paid. In order to reflect dif-ferences in household size and composition, this total is divided by the number of ’equivalent adults’ using astandard (equivalence) scale, the so-called ’modified OECD’ scale, which attributes a weight of 1.0 to the firstadult in the household, a weight of 0.5 to each subsequent member of the household aged 14 and over, and aweight of 0.3 to household members aged less than 14. The resulting figure is called equivalised disposable in-come and is attributed to each member of the household. For the purpose of poverty indicators, the equivaliseddisposable income is calculated from the total disposable income of each household divided by the equivalisedhousehold size; consequently, each person in the household is considered to have the same equivalised income.

The income reference period is a fixed 12-month period (such as the previous calendar or tax year) for allcountries, except the United Kingdom for which the income reference period is the current year of the surveyand Ireland for which the survey is continuous and income is collected for the 12 months prior to the survey.

The at-risk-of-poverty rate is defined as the share of people with an equivalised disposable income that isbelow the at-risk-of-poverty threshold, set at 60 % of the national median equivalised disposable income. Inline with decisions of the European Council, the at-risk-of poverty rate is measured relative to the situationin each EU Member State, rather than applying a common threshold value. The at-risk-of-poverty rate maybe expressed before or after social transfers, with the difference measuring the hypothetical impact of nationalsocial transfers in reducing the risk of poverty. Retirement and survivors’ pensions are counted as income beforetransfers and not as social transfers. Various breakdowns of this indicator are available, for example: by age,sex, activity status, household type, or level of educational attainment. It should be noted that the indicatordoes not measure wealth but is instead a relative measure of low current income (in comparison with otherpeople in the same country).

Tables in this article use the following notation:

Value initalics data value is forecasted, provisional or estimated and is there-fore likely to change;

: not available, confidential or unreliable value.

ContextAt the Laeken European Council in December 2001, European heads of state and government endorsed a firstset of common statistical indicators for social exclusion and poverty that are subject to a continuing processof refinement by the indicators sub-group of the social protection committee. These indicators are an essentialelement in the open method of coordination to monitor the progress made by the EU’s Member States in alle-viating poverty and social exclusion.

EU-SILC is the reference source for EU statistics on income and living conditions and, in particular, for indi-cators concerning social inclusion. In the context of the EU 2020 strategy, the European Council adopted inJune 2010 a headline target for social inclusion that, by 2020, there should be at least 20 million fewer peoplein the EU at risk of poverty or social exclusion than there were in 2008. EU-SILC is the source used to monitorprogress towards this headline target, which is measured through an indicator that combines the at-risk-of-poverty rate, the severe material deprivation rate, and the proportion of people living in households with verylow work intensity — see the article on people at risk of poverty or social exclusion for more information.

Other articlesEU-2020 Strategy indicators

• Europe 2020 indicators — poverty and social exclusion

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Living conditions in Europe

• Living conditions in Europe — income distribution and income inequality

• Living conditions in Europe — poverty and social exclusion

Population sub-groups

• Being young in Europe today — living conditions for children

• Children at risk of poverty or social exclusion

• Disability statistics — poverty and income inequalities

Regional statistics

• Urban Europe — statistics on cities, towns and suburbs — poverty and social exclusion in cities

PublicationsStatistical books

• Ageing Europe — 2019 edition

• Living conditions in Europe — 2018 edition

• Monitoring social inclusion in Europe — 2017 edition

News releases

• Downward trend in the share of persons at risk of poverty or social exclusion in the EU

• Can you afford to heat your home?

• Young people in work and at risk of poverty

• 1 in 7 pensioners at risk of poverty in the EU

• Can you afford a car?

• EU — One in three people unable to face unexpected financial expenses

• How much do social transfers reduce poverty?

• At risk of poverty visualised

• Young people living with their parents

• 1 in 4 young people in overcrowded households

Main tables• At-risk-of-poverty thresholds - EU-SILC survey

• At-risk-of-poverty rate by poverty threshold, age and sex - EU-SILC survey

• At-risk-of-poverty rate by poverty threshold and most frequent activity in the previous year - EU-SILCsurvey

• At-risk-of-poverty rate before social transfers (pensions included in social transfers) by poverty threshold,age and sex - EU-SILC survey

• At-risk-of-poverty rate before social transfers (pensions excluded from social transfers) by poverty thresh-old, age and sex - EU-SILC survey

• Relative at risk of poverty gap by poverty threshold - EU-SILC survey

• S80/S20 income quintile share ratio by sex and selected age group - EU-SILC survey

• Relative median income ratio (65+) - EU-SILC survey

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Database• Income and living conditions (t_ilc)

Dedicated section• Income and living conditions

MethodologyGeneral methodological information

• EU statistics on income and living conditions (EU-SILC) methodology

• Income and living conditions (ESMS metadata file — ilc_esms)

• Income and living conditions dataset — description

Detailed papers

• Comparative EU Statistics on Income and Living Conditions: Issues and Challenges (Proceedings of theInternational Conference on EU Comparative Statistics on Income and Living Conditions, Helsinki, 6–8November 2006)

• How does attrition affect estimates of persistent poverty rates? The case of European Union statistics onincome and living conditions (EU-SILC)

• Individual employment, household employment and risk of poverty in the EU — A decomposition analysis— 2013 edition

• Statistical matching of EU-SILC and the Household Budget Survey to compare poverty estimates usingincome, expenditures and material deprivation — 2013 edition

• Using EUROMOD to nowcast poverty risk in the European Union — 2013 edition

Legislation• Regulation (EC) No 1177/2003 of 16 June 2003 concerning Community statistics on income and living

conditions (EU-SILC)

• Regulation (EC) No 1553/2005 of 7 September 2005 amending Regulation 1177/2003 concerning Com-munity statistics on income and living conditions (EU-SILC)

• Regulation 1589/2015 of 13 July 2015 laying down detailed rules for the application of Article 108 of theTreaty on the Functioning of the European Union

• Summaries of EU Legislation: EU statistics on income and living conditions

• Summaries of EU Legislation: State aid procedural rules

External linksEmployment and social analysis , see:

• European Commission — Directorate-General for Employment, Social Affairs & Inclusion — Employmentand Social Developments in Europe — Quarterly Review — December 2019

• European Commission — Directorate-General for Employment, Social Affairs & Inclusion — Employmentand Social Developments in Europe — Annual Review 2019

• OECD — Better Life Initiative: Measuring Well-being and Progress

• The European Social Survey

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