2016


Economic Overview

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Inequality not the same as poverty

Oxfam Intermón has issued a report at the beginning of 2016 on the problem of inequality where it denounces Spain as the country member of the OECD with the highest increase in inequality since the start of the economic crisis.

In a response, the Instituto Juan de Mariana reports that Spain does not have such a high economic inequality as claimed. In fact, based on the three main pillars of wealth, income and consumption and adding a forth perspective, the social mobility, the data concluded that the country´s inequality can be classified as middle-low when placed in the European context.

First of all, in terms of wealth, and as measured by the Gini index, the most common ratio used to measure inequality where a value of 0 indicates perfect equality and a value of 1 indicates perfect inequality, Spain ranked as follows:

Country Gini Index
Belgium 0.63
Spain 0.67
Italy 0.67
Germany 0.78
Sweden 0.81
Denmark 0.89

 

At the same time, the institute highlights that the bulk of assets in Spain is real estate property and much of the Spanish families own their homes which demonstrates that the assets are more equally dispersed than other countries in Europe and members of the OECD.

Secondly, in terms of income inequality, the main reason lies behind the high rate of unemployment Spain faces that is one of the highest in the world, where a profound liberalization of the labor market could be a solution to effectively reduce income inequality, ensures the study. They also argue that contrary to the claim stating that the wealthiest 20% have earned 6.3 times more than the poorest 20% in 2013, and thus ranking Spain among the most unequal countries, when taking into consideration other key incomes such as imputed rent (owning a house and living in it) the Spanish inequality fell to an intermediate level comparable to that of Germany, Italy and France. Furthermore, if taking into account healthcare, education, housing and social welfare, the inequality is even 20% lower.

In terms of consumption, Spain ranked among the countries with the lowest inequality where the wealthiest 20% consume 3.3 times more than the poorest 20%, in line with the European average of 3.5 times and lower than that of Luxembourg, Portugal or Germany.

Finally, the institute concludes that the crisis has indeed generated a big drop in the quality of life of the population, but the real concern should not be focused on combatting inequality and reducing the gap between rich and poor, but instead, to allow everyone to enjoy the highest possible level of welfare.

 

 

 

 

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