April 24, 2017

Middle Class Fortunes in Western Europe

Appendix C: Shares of adults who are lower, middle or upper income based on their gross household income

This appendix shows the shares of adults in a country who are in the lower-, middle- and upper-income tiers using either disposable (after-tax) or gross (pretax) household income to define the boundaries of the income tiers. Middle-income households have incomes that are two-thirds to double the national median income, after incomes have been adjusted for household size. Lower-income households have incomes of less than two-thirds of the median, and upper-income households have incomes that are more than double the median. The estimates are for 2010 and encompass the 10 countries for which data on both gross and disposable household incomes is available.

Because gross incomes do not reflect the redistributive effects of income taxes, differences in gross incomes across households are more acute than differences in disposable incomes. Thus, when gross income is used to define income tiers, the result is that higher shares of adults are estimated to be lower income or upper income, and smaller shares of adults are estimated to be middle income. In Denmark, for example, the lower-income share in 2010 is 14% under the disposable income standard and 19% under the gross income standard. The middle-income share is reduced from 80% to 72% when gross income is used instead of disposable income, and the upper-income share is increased from 7% to 10%.