Distribution of income in Denmark

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The income distribution in Denmark considered the personal and functional distribution of income in Denmark . When analyzing the distribution of income, a distinction is generally made between the functional and the personal income distribution discussed here. Personal income distribution looks at how the income of an economy is distributed among individuals or groups (e.g. private households ), regardless of the source of income from which it originates. In order to represent the personal income distribution , unequal distribution measures and several statistical concepts (median, mean value etc.) are used. In 2017, the median disposable income in Denmark was 29,063 euros and the Gini coefficient according to the OECD was 0.26, which equates to fourth place in the European Union.

Income distribution in Denmark overview
year Gini Median Average 80/20 ratio
2017 0.276 € 29,383 € 32,792 4.1
2016 0.277 € 28,665 € 32,141 4.1
2015 0.274 € 28,364 € 31,518 4.1
2014 0.277 € 27,861 € 31,108 4.1
2013 0.268 € 27,444 € 30,082 4th
2012 0.265 € 27,184 € 29,690 3.9
2011 0.266 € 26,944 € 29,347 4th
2010 0.269 € 25,668 € 26,915 4.4
2009 0.269 € 25,029 € 25,897 4.6
2008 0.251 € 24,161 € 26,030 3.6

Distribution indicators - methods of representation

Mean and median income in Denmark 2003-2017, adjusted using the HICP (2015 = 100)

When interpreting statistical data, it is important to note which income concept (gross income, disposable income, etc.) is used. Unless otherwise stated, the equivalised disposable income is referred to below as income.

Average and median income

In the observation period from 2003 to 2017, the nominal average income rose from 22,515 euros to 32,792 euros, i.e. by 45.7%. However, an increase in average income does not show which parts of the population benefited from this increase and accordingly does not allow any conclusions to be drawn about the distribution of income. It should also be noted that this measure can be prone to statistical biases (very high incomes bias the mean income upwards).

The median income is more suitable for analyzing income distribution, which in 2017 was 29,383 euros in Denmark. In 2017, half of the population earned more and the other half less than 29,383 euros. Overall, the median income in Denmark rose by 40.4% in the observed period, slightly less than the average income.

The real values ​​(adjusted for the HICP ) are above the average or median income up to 2012, as income growth is higher than inflation. Adjusted and non-adjusted values ​​have been at a similar level since 2012.

The comparison of average and median provides information about the skewness of a distribution. If the average is above the median (as is usual with income distributions), one speaks of a right-skewed distribution. This means that low incomes (below average) are observed more often than high incomes (above average). The fact that the difference between the mean and the median has increased means that a larger proportion of the population has low incomes today than in 2003. This can be interpreted as an increase in inequality.

Gini coefficient

Gini coefficient based on OECD assessment in Denmark, comparison of market income and disposable income in the period 2005–2015

The Gini coefficient is a distribution measure for determining inequality , which can assume values ​​between 0 (low inequality) and 1 (high inequality). In the period from 2003 to 2015, inequality, measured by the Gini coefficient, increased both for income before social benefits and for income after social benefits (from 0.45 to 0.49 and from 0.23 to 0.26, respectively). Furthermore, the Gini coefficient for income before social benefits is significantly higher than that of income after social benefits. It can be seen from this that the Danish state effects a large redistribution of income through taxes and social benefits. In the EU-28 comparison, Denmark is in 4th place according to the OECD survey, only the Czech Republic, Slovenia and Slovakia have a lower Gini coefficient in 2015.

S80 / S20 quantile ratio

Another indicator of income distribution is the S80 / S20 quantile ratio. A quantile can be understood as a threshold below which a certain proportion of income lies. The median represents a special case, namely the 50% quantile. The 80% quantile is the value below which 80% of incomes are. This is equivalent to the value above which 20% of incomes are. Similarly, the 20% quantile is the value below which 20% of incomes are. Consequently, the sum of incomes above the 80% quantile corresponds to the sum of the incomes of the highest-earning 20% ​​of the population.

The S80 / S20 quantile ratio in Denmark was 3.6 in 2003 and peaked at 4.6 in 2009. Including small fractions, it fell continuously over the observation period and reached a value of 4.1 in 2017. This means that the sum of the highest incomes is around four times the sum of the lowest incomes. This puts Denmark well below the EU average of 5.1.

Top 10% share

Share of the upper decile in national equivalised income, comparison Denmark and EU27 in the period 2003–2018

The top 10% share denotes the share of the top decile in national equivalised income. In Denmark this figure increased from 21.0% in 2003 to 23.2% in 2018. This means that in 2018 the 10% of the population with the highest income received 23.2% of total income. Denmark is also below the EU average, which is 23.9%.

At-risk-of-poverty rate

The at- risk-of-poverty rate shows the proportion of those who are at risk of poverty and social exclusion due to their relatively low income. According to the EU standard, this rate corresponds to the proportion of people whose equivalent income is less than 60% of the median of the population's equivalent income. This shows that the at-risk-of-poverty rate can only be viewed relatively and often (not compulsively) indicates a low standard of living of those affected.

Overall, the at-risk-of-poverty rate in Denmark rose from 10.2% to 14.6% over the observation period from 2003 to 2018, which means that this proportion of the population has less than 60% of median income. The EU average at-risk-of-poverty rate was 16.9% in 2017, meaning that fewer people in Denmark are at risk of poverty than in the EU.

Complete overview of the indicators

The following table shows various indicators for the distribution of equivalised disposable income in Denmark from 2003 to 2017. All values ​​are taken from the Eurostat database. Real income (inflation-adjusted income) is calculated as follows: Real income = nominal income * HICP / 100.

Table: Complete overview of the indicators
year Average

income

Median income Average income,

HICP adjusted

Median income,

HICP adjusted

Gini coefficient

before social benefits

Gini coefficient

after social benefits

S80 / S20 Top 10% share At-risk-of-poverty rate
2003 € 22,515 € 20,923 € 27,225 € 25,300 46.4 24.8 3.6 21.0 10.2%
2004 € 22,754 € 21,225 € 27,250 € 25,419 44.7 23.9 3.4 20.3 9.4%
2005 € 23,294 € 22,124 € 27,405 € 26,028 44.5 23.9 3.5 19.7 10.9%
2006 € 24,013 € 22,663 € 27,761 € 26,200 44.2 23.7 3.4 19.9 10.6%
2007 € 25,113 € 23,341 € 28,538 € 26,524 45.2 25.2 3.7 21.0 10.7%
2008 € 26,030 € 24,161 € 28,542 € 26,492 46.4 25.1 3.6 21.1 10.8%
2009 € 25,897 € 25,029 € 28,118 € 27,176 58.8 26.9 4.6 20.4 11.8%
2010 € 26,915 € 25,668 € 28,603 € 27,277 51.3 26.9 4.4 20.8 12.7%
2011 € 29,347 € 26,944 € 30,380 € 27,892 50.8 26.6 4.0 21.7 11.8%
2012 € 29,690 € 27,184 € 30,020 € 27,486 51.2 26.5 3.9 21.8 12.1%
2013 € 30,082 € 27,444 € 30,264 € 27,610 51.4 26.8 4.0 22.0 13.1%
2014 € 31,108 € 27,861 € 31,170 € 27,917 53.1 27.7 4.1 22.9 13.3%
2015 € 31,518 € 28,364 € 31,518 € 28,364 51.7 27.4 4.1 22.6 13.6%
2016 € 32,141 € 28,665 € 32,141 € 28,665 50.7 27.7 4.1 23.1 13.4%
2017 € 32,792 € 29,383 € 32,435 € 29,063 49.9 27.6 4.1 22.9 14.0%

Gender income inequality

S80 / S20 income quintile ratio by gender

Income quintile ratio by gender in Denmark, S80 / S20 ratio in the period 2003–2018

The S80 / S20 income quintile ratio gives the ratio of the total income of the 20% of the population with the highest income (top quintile ) to the total income of the 20% of the population with the lowest income (bottom quintile). In addition to the consideration for the entire population, it is also possible to differentiate between sexes. In 2017 the ratio in Denmark was 4 for women and 4.3 for men.

The attached graphic shows the effects of the global financial crisis on the Danish labor market. A strong increase in the income quintile ratio was observed for both women and men in 2009 (from 3.5 to 4 for women and from 3.8 to 5.5 for men). One possible reason for this increase is the sharp rise in unemployment, especially among men (the unemployment rate was 3.2% in 2008 and rose to 8.4% in 2010). This is due to the fact that workers can be laid off quickly due to the loose labor protection laws in Denmark and, especially at the beginning of the crisis, many workers were laid off because of the uncertain economic situation.

Gender pay gap

Unadjusted gender wage gap in Denmark, percentage difference in income between men and women in the period 2007–2017

The gender wage gap is the difference in average earnings between men and women. It is defined as the difference between the average gross hourly earnings of male and female employees, expressed as a percentage of the average gross hourly earnings of male employees. The attached graph shows the unadjusted gender wage gap of the NACE-2 activity industry, construction and services (excluding public administration, defense and social security) in Denmark compared to the EU-27. Thus, the difference between the average gross earnings of women and men is shown here.

The gender wage gap in the private sector is declining in Denmark (from 17.7 percent in 2007 to 14.7 percent in 2017) and is below the EU average. In the public sector, the gender pay gap increased slightly from 5 percent to 6 percent between 2008 and 2017. Despite this increase, the gender wage gap is smaller in the public sector, mainly due to a performance-based recruitment process and an institutional environment that promotes the transparency of wages vis-à-vis the private sector. Possible reasons for the existence of the gender wage gap are on the one hand that it is more difficult for women to use individual qualities such as their level of education in order to close the wage gap and on the other hand that more women work part-time than men (a total of 26.9 percent of all women of working age worked part-time in 2018 compared to 13 percent of men.)

Regional inequality

Disposable household income at NUTS-2 level in Denmark in 2017

Disposable household income

Household disposable income is the balance of primary income (income from work, received property income, paid property income is attracted) as well as the redistribution of income in the form of cash benefits (monetary social benefits, paid income and wealth taxes, other current transfers). In order to illustrate the regional inequality of household incomes, Denmark is divided using the NUTS system , with the division of the regions at different levels.

The highest disposable household income in 2017 was observed in the Hovedstaden region of 17,300 euros, which includes the north-east of Zealand with the capital Copenhagen and the island of Bornholm . In return, the regions of Syddanmark and Nordjylland have the lowest average income with 15,700 euros each. Apart from Hovedstaden, however, there is little difference in disposable household incomes in the other regions.

At risk of poverty at NUTS-2 level in Denmark in 2018

Poverty and social exclusion

Eurostat defines the population at risk of poverty and social exclusion as the percentage of the total population who are at risk of poverty , suffer from material deprivation or live in households with very low employment . Material deprivation includes, on the one hand, the economic burden and, on the other hand, the lack of durable consumer goods; it is defined as the involuntary inability to pay for certain expenses. People living in households with low employment are considered to be those who live in households in which adults (18–59 years) worked less than 20% in the previous year.

The share of the population at risk of poverty is highest in the northernmost region Nordjylland with 20.7% and lowest in Syddanmark with 15.7%. In the Hovedstaden region with Copenhagen the proportion is 19.9%, in Midtjylland it is 15.8% and in Sjælland it is 16.3%. In the period from 2007 to 2018, apart from Sjælland, every region had the highest proportion of people at risk of poverty for at least one year.

Background to the development

Denmark is one of the more equal countries within the OECD . In direct comparison, inequality in Denmark has risen faster since the 1990s, but it is at a very low level. This slight increase in income inequality is the result of various social and political changes.

Part of the rise in income inequality can be attributed to demographic changes . In general, income inequality increases when the proportion of a subgroup of the population with an average high or low income increases. The aging of the population , which is taking place in Denmark and in large parts of Europe, increases income inequality through two channels: on the one hand, the variation in income increases with age and, on the other hand, pensions are usually below the average income. The same can be said about the increase in single households, the increased number of students and the increased proportion of people with a migration background . The incomes of singles, students and immigrants also vary more widely and are below the population average. If their share of the total population increases, as has been the case in Denmark in previous years, income inequality also increases.

The impact of these demographic changes primarily affects wage income , but developments in capital income have also contributed to increases in income inequality in the recent past. Although capital income has grown in recent years, there has been less redistribution. The reason for this is that the Danish income tax system has become less progressive over the past 20 years due to a number of tax reforms . In addition, the redistributive effect of taxes and social transfers has decreased as a result of various reforms. The number of recipients of unemployment benefit has fallen due to stricter regulations and state pensions have been partially replaced by private and company pensions, which means that social transfers have generally become less important.

At the same time, however, there were also developments that weakened the trend towards more inequality. First and foremost, it should be mentioned that the incomes of men and women have equalized since the 1980s. This is due to the higher participation of women in the Danish labor market and the increase in the hours worked by women, as well as a reduction in the gender pay gap . The decline in the gender pay gap can in turn be explained by the fact that gender differences in terms of level of education, choice of occupation and industry, and work experience have decreased.

Particularities of the Danish labor market

Overall, Denmark spends around 1.8% of GDP on active labor market policy, making it the leader among the OECD countries on this point . Denmark's labor market policy follows the so-called flexicurity principle. Flexicurity is a combination of flexibility and security and is characterized on the one hand by relaxed labor protection laws and generous unemployment insurance schemes and on the other hand by an active labor market policy. So-called activating measures are a characteristic of flexicurity policy. For example, the unemployed have to work with the authorities to draw up an action plan for returning to work within three months. In addition, further training programs and the acceptance of placed jobs, with the consequence of a reduction or even cancellation of unemployment benefit in the event of refusal, can be prescribed. The aim of these strict measures is to reduce the duration of unemployment and to ensure that the recipients are ready to participate in the labor market. In addition to the reforms already mentioned, generous parental leave models have been launched in an international comparison. As part of the flexicurity principle, attempts are therefore made on the one hand to ensure the flexibility of labor market institutions and at the same time to keep income inequality low through welfare state interventions.

bibliography

  • Atkinson, Jakob Egholt, Anthony B and Søgaard. 2016. "The long-run history of income inequality in Denmark". The Scandinavian Journal of Economics 118 (2). Wiley Online Library: 264-91.
  • Andersen, Torben M, Bosch, Nicole, Deelen, Anja and Euwals, Rob. 2011. "The Danish flexicurity model in the Great Recession". in Vox.eu
  • Björklund, Anders. 2000. “Going different ways: Labor market policy in Denmark and Sweden”. Why deregulate labor markets, 148-80.
  • Causa, Orsetta, Mikkel Hermansen, Nicolas Ruiz, Caroline Klein, and Zuzana Smidova. 2016. "Inequality in Denmark through the Looking Glass", No. 1341.
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  • Gallen, Rune V and Vejlin, Yana and Lesner. 2019. “The labor market gender gap in denmark: Sorting out the past 30 years”. Labor Economics 56. Elsevier: 58-67.
  • Grönlund, Anne, Halldén, Karin, Magnusson, Charlotta. 2016. "A Scandinavian success story? Women's labor market outcomes in Denmark, Finland, Norway and Sweden." In: Acta Sociologica. Volume 60, No. 2, pp. 97-119.
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  • Stritch, Justin M., Villadsen, Anders Ryom. 2018. "The gender wage gap and the moderaring effect of education in public and private sector employment". Public administration. Volume 96, No. 4. pp. 690-706.

Web links

Individual proof

  1. ↑ Definition: personal income distribution. Retrieved August 19, 2019 .
  2. ↑ a b eurostat: Gini coefficient of equivalised disposable income. Retrieved May 5, 2019 .
  3. ↑ a b c d e eurostat: Average and median income by age and gender. Retrieved May 5, 2019 .
  4. ↑ a b c eurostat: Income quintile share ratio (S80 / S20) by sex.Retrieved on May 6, 2019 (English).
  5. ^ OECD: Income Distribution and Poverty: by country. Retrieved May 6, 2019 .
  6. ^ OECD: Income inequality. Retrieved May 6, 2019 .
  7. ↑ a b Glossary: ​​Income quintile share ratio - Statistics Explained. Retrieved January 26, 2019 .
  8. ↑ a b c eurostat: Income distribution according to quantiles. June 5, 2019, accessed May 6, 2019 .
  9. ↑ Eurostat Statistics Explained: Glossary: ​​At-risk-of-poverty rate. Retrieved January 19, 2019 .
  10. ↑ a b c eurostat: Rate of people at risk of poverty by at-risk-of-poverty threshold and employment in the previous year. Retrieved May 6, 2019 .
  11. ↑ eurostat database - income and living conditions. Retrieved May 6, 2019 .
  12. ↑ eurostat: Gini coefficient of equivalized disposable income before social transfers. Retrieved May 6, 2019 .
  13. ↑ a b S80 / S20 income quintile ratio by gender and by age group. Retrieved May 7, 2019 .
  14. ↑ eurostat: unemployment data by gender and age - annual averages. Retrieved May 7, 2019 .
  15. ↑ Torben M. Andersen, Nicole Bosch, Anja Deelen, Rob Euwals: The Danish flexicurity model in the Great Recession. In: VoxEU.org. April 8, 2011, accessed May 7, 2019 .
  16. ↑ a b Eurostat: Gender-specific earnings gap, without adjustments, according to NACE Rev. 2 activity. Retrieved May 7, 2019 .
  17. ↑ Glossary: ​​Gender pay gap. Retrieved May 7, 2019 .
  18. ^ A b Justin M. Stritch, Anders Ryom Villadsen: The gender wage gap and the moderating effect of education in public and private sector employment . In: Public Administration . tape 96 , no. 4 , 2018, ISSN  1467-9299 , p. 690-706 , doi : 10.1111 / padm.12533 ( wiley.com [accessed May 7, 2019]).
  19. ↑ Eurostat: Part-time employment as percentage of the total employment, by sex, age and country of birth. Retrieved May 8, 2019 .
  20. ^ Anne Grönlund, Karin Halldén, Charlotta Magnusson: A Scandinavian success story? Women's labor market outcomes in Denmark, Finland, Norway and Sweden . In: Acta Sociologica . tape 60 , no. 2 , September 26, 2016, ISSN  0001-6993 , p. 97-119 , doi : 10.1177 / 0001699316660595 .
  21. ↑ a b c Eurostat: Disposable income of private households, by NUTS 2 regions. Retrieved May 8, 2019 .
  22. ↑ a b c d Eurostat: Population at risk of poverty or social exclusion by NUTS 2 regions. Retrieved May 8, 2019 .
  23. ↑ Glossary: ​​Material Deprivation - Statistics Explained. Retrieved May 8, 2019 .
  24. ↑ Atkinson, Jacob Egholt, Anthony B and Søgaard .: The long-run history of income inequality in Denmark . Ed .: The Scandinavian Journal of Economics. No. 118 (2) . Wiley Online Library, 2016, pp. 264-91 .
  25. ↑ OECD: Denmark 2019 OECD economic survey. (PDF) Accessed in 2019 .
  26. ^ Pareliussen, J. and P. Robling: Demographic Change and Inequality Trends in the Nordic Countries . Ed .: Nordic Economic Policy Review. 2018, p. 147-177 .
  27. ^ Danish Economic Council: Danish Economy. Fall 2016. English Summary. (PDF) Retrieved on February 24, 2019 .
  28. ^ Yana Gallen, Rune V. Lesner, Rune Vejlina: The labor market gender gap in Denmark: Sorting out the past 30 years . Ed .: Labor Economics. Volume 56, January 2019, p. 58-67 .
  29. ↑ OECD: OECD Economic Surveys: Denmark 2016 . 2016.
  30. ↑ Anders Björklund: Going different ways: Labor market policy in Denmark and Sweden. Why deregulate labor markets, 148-180 . 2000.
  31. ↑ Björklund, Anders .: Going different ways: Labor market policy in Denmark and Sweden. Why deregulate labor markets . 2000, p. 148-80 .
  32. ↑ Gaard, Mads, Sflren and Kieler .: Two decades of structural reform in Denmark: a review. Ed .: Danish Ministry of Finance Working Paper. No. 16, 2005.
  33. ↑ Gaard Sflren, Mads Kieler: "Two decades of structural reform in Denmark: a review". Danish Ministry of Finance Working Paper . 2005.