20.02.2023

BULGARIA WITH A GAP BETWEEN THE POOR AND THE RICH

In Bulgaria, the difference between the incomes of the richest and poorest people is the largest compared to other EU countries. In our country, the incomes of the richest 20% of the population are 7.5 times higher than the incomes of the poorest 20% of the population, announced the European statistical service Eurostat.

Eurostat does not indicate the reasons for the differences between the incomes of the richest and the poorest. But we can assume that factors such as the amount of pensions and social payments, the amount of the minimum wage and taxes on labor income and dividends have an influence on this difference.

In all EU member states, the 20% of the population with the highest incomes receive more than 30% of the total income in the respective country, Eurostat announced. But Bulgaria is in first place according to this indicator, with the wealthiest 20% of people in the country receiving 46.3% of all income. On average for EU countries, the 20% of the population with the highest incomes receive 38.2% of the income in the respective country.

The closest to us in terms of this indicator are Lithuania and Latvia, where the richest 20 percent take 42.8% and 42.2% of income, respectively. In fourth place is Portugal with 40.7%. In all other EU countries, this percentage is below 40 percent, with Italy in fifth place with 39.9%.

In all EU countries, the 20 percent of the population with the lowest incomes receive less than 10.5% of all income in the country concerned. The poor in Romania receive the least - only 5.6% of all income. In second place is Bulgaria, where the poorest 20% of the population take 6.2% of all income in the country. The third place is shared by Latvia and Spain with 6.4% each. On average for EU countries, the poorest receive 7.9% of all income.

The poorest receive less than 7% of all income in Bulgaria, Romania, Spain, Latvia, Italy and Greece. Only in the Czech Republic, Slovenia, Slovakia and Finland is the share of disposable income received by the poorest above 10%, and close to this level are Belgium (9.9%) and Ireland (9.5%).

Although in Romania the poorest receive a smaller share of income than in Bulgaria, the difference between the poor and the rich is significantly greater in our country.

The reason for this is that in Romania the top 20 percent of people with the highest incomes receive only 39.8% of all income. Thus, the difference between the incomes of the richest 20 percent and the poorest 20 percent in Romania is 7.1 times.

Bulgaria is a record holder in this indicator as well, with a difference between the incomes between the richest and the poorest in the amount of 7.5 times.

Apart from Bulgaria and Romania, in only three other EU countries this difference is over 6 times. These are Latvia (6.1 times), Lithuania (6.6 times) and Spain (6.2 times).

High values of this coefficient indicate significant differences in the distribution of income between groups with higher and lower incomes, according to Eurostat. On average for EU countries, the difference between the incomes of the richest 20 percent and the poorest 20 percent is 4.8 times.

The big difference between the incomes of the richest and the poorest in Bulgaria leads to facts such as the fact that our country is in first place in the EU in terms of new car sales growth, but the average age of cars in the country is the highest compared to others member states.

In addition, deposits in banks are growing, but the biggest growth is in the largest deposits, and people with low incomes are withdrawing money from their deposits to patch up the family budget. Some people have not changed their shopping habits since high inflation, but for others, buying food is already becoming a big problem.

The difference between the incomes of the richest and the poorest is the smallest in Slovakia - only three times. There, the richest 20% take only 31.2% of all income, and the poorest receive 10.3%. The situation is similar in Slovenia, where the difference between the incomes of the poor and the rich is 3.2 times.

Gini coefficient

We are #1 in the ranking of EU countries

Most often, to show the difference between the incomes of the poor and the rich, the Gini coefficient is used. A Gini value of 100% means that only one person receives all the income in the country, while a Gini value of 0% means that the income is distributed equally among the entire population.

The average Gini coefficient for EU countries is 30.1%, Eurostat announced. And Bulgaria is in first place in the EU according to this indicator.

The largest differences in income among EU Member States (with a Gini coefficient of at least 35%) are reported in Bulgaria (39.7%), Latvia (35.7%) and Lithuania (35.4%). Eurostat data show. The second group of Member States with a Gini coefficient above the EU average of 30.1% (ranging from 30.6% to 34.3%) includes Estonia, Germany, Malta, Greece, Italy, Spain, Portugal and Romania. At the other end of the ranking are the countries where income is more evenly distributed - Slovakia, Slovenia, Belgium and the Czech Republic, where the Gini coefficient is less than 25%.

They are best in Luxembourg

Our standard is half that of Italy and France

We overtook Romania

Our standard of living is half that of countries like Italy and France. Eurostat calculates purchasing power standards (PPS), which show the level of income, but also take into account the differences between prices in different member states.

On average for the EU countries, the annual disposable income per person is 18,019 PPS, Eurostat announced. The highest standard of living is in Luxembourg, where, despite high prices, the average annual income per person is 32,132 PPS. Bulgaria overtakes Romania in purchasing power of income. In our country, the average income per person is 9375 PPS, and in Romania it is 8703 PPS.

The highest levels of average annual disposable income are registered in the western and northern EU member states, according to Eurostat. The average disposable income per person is over 20 thousand PPS in Luxembourg, the Netherlands, Austria, Germany, Denmark, Belgium, Sweden, Ireland, Finland and France. Incomes are significantly lower in most southern and eastern Member States. The average disposable income per person is less than 10,000 PPS in Hungary, Greece, Bulgaria and Romania.

Among EU countries, there are significant differences in the contribution of social payments to people's disposable income. The largest social payments are in Luxembourg, Austria and France. In Bulgaria, pensions and other social payments per capita are exactly half of the average level for EU countries.

For people over 65, the inequality is smaller

Pensions among the lowest

Social payments are crucial

The purchasing power of pensions and social payments in Bulgaria is among the lowest in the EU countries, according to Eurostat data. However, among people over the age of 65, income inequality in Bulgaria is less than among the rest of the population.

There are several reasons for this. On the one hand, there is a maximum insurance income in Bulgaria. This means that even if a person receives very high incomes, he pays insurance up to the ceiling, which is currently BGN 3,400, and accordingly has a ceiling on the amount of pensions. In addition, pensions in Bulgaria are extremely low and nearly half of pensioners receive the minimum pension for the country. And there are not many people who receive high pensions.

Despite all this, Bulgaria is among the countries with the largest difference between the incomes of the richest 20 percent and the poorest 20 percent, and among people over the age of 65. In our country, the difference between the incomes of the richest and the poorest people over 65 is 5.2 times, Eurostat data show. According to this indicator, only Latvia (5.7 times), Portugal (5.7 times) and Italy (5.3 times) are ahead of us, and we share the fourth place with Spain, where the difference is also 5.2 times.

For EU countries, people aged over 65 have less income inequality, with the ratio of the incomes of the richest 20 per cent to the poorest 20 per cent averaging 4.2 times. The only exception is Cyprus, where there is greater income inequality among people over 65. And in Portugal, Ireland and Slovenia, there is no difference in income inequality between the over-65s and the rest of the population.

Pensions and other social payments significantly reduce the gap between the incomes of the poorest and the richest. Social payments include all benefits provided by central or local institutions and include, for example, unemployment benefits, sickness and disability benefits, housing benefits, pensions, social assistance and tax credits. Social payments reduce income inequality. On average for EU countries, the Gini coefficient before social payments is 52.2%, and after them it decreases to 30.1%, according to Eurostat data.

The impact of pensions and other social payments on income inequality is particularly large in Germany, the Netherlands and France - where the Gini coefficient decreased by between 25.1 and 29.5 percentage points, and in Sweden, where the coefficient decreased by 30.1 percentage points - from 56.9% to 26.8%. Among EU member states, the lowest impact of pensions and other social payments on income inequality was registered in Latvia (12.5 percentage points). In Bulgaria, social payments also do not have a very large effect on inequality - the Gini coefficient decreases from 54% before social payments to 39.7% after receiving pensions and social assistance amounts.