Thursday, February 18, 2021

Distribution and Participation

Figures from the World Inequality Database show that the top one percent share of pre-tax fiscal income rose from around six per cent the mid-1980s to around 12 per cent in the mid-2010s.

Top One Percent Income Share 1983-2015

Figures from Eurostat show that the share of the population in non-agricultural employment rose from around 25 per cent in the mid-1980s to 45 per cent in 2019.

Non Agri Employment as Share of Population 1983-2019

The distribution of fiscal income is a useful indicator but the data is based on a sub-sample of the population that is always change: only those who have fiscal income, i.e. those with tax returns filed either by themselves or there employer.  The income shares across the population have to be estimated and it is assumed that those people who are not included in the data have no income – or, at least, have no pre-tax fiscal income.  

Changes in participation could have an effect on how the distribution of pre-tax fiscal income should be interpreted.  Changes in the distribution of pre-tax fiscal income among recipients may not necessarily reflect changes in the distribution of that income across the full population – even with the assumption of zero income for those with no pre-tax fiscal income.

Top One Percent Income Share and Employment 1983-2015 2

From the EU-SILC we do have a top one per cent share for disposable income, albeit for a shorter time period.  Of course, there may be issues with the use of a survey to measure incomes at the extreme of the distribution (super-high incomes may be under-represented in the sample) but to the extent that this is a consistent problem with income surveys the trends in incomes shares towards the top of the distribution may be relatively unaffected.

Top One Percent Share of Disposable Income 2005-2019

The top 1 per cent share of disposable income in the SILC fell from around seven per cent in 2005 and 2006 and dropped under five per cent after 2010. In recent years it has risen but at 5.5 per cent of so remains below the levels of the mid-2000s.

For what it’s worth, the bottom cut-off for the top one per cent in 2019 was an equivalised disposable income of just over €100,000 or €210,000 for a household of 2 adults and 2 children.  The SILC suggests there are close to 50,000 people living in such households.

The work of Kennedy et al (2019) gives income shares for both gross and disposable income in the fiscal data from tax returns.

Top One Percent Shares Gross and Disposable Income 2006-2015

This is different to measure of disposable income in the SILC but the pattern is roughly the same.  In the table we can see that the top 1 per cent share of disposable income fell from 2006 t0 2012 and rose thereafter but remained below the 2006 level.

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