April 24, 2017

Middle Class Fortunes in Western Europe

Appendix D: Income tiers defined using the U.S. median disposable household income

As an alternative to using a country’s own median household income to define the boundaries of income tiers, it is possible to apply a common income standard in all countries. This appendix shows the shares of adults who are in the lower-, middle- and upper-income tiers in all countries using the U.S. median disposable household income to define the boundaries of each tier. Incomes in each country are first expressed in 2011 purchasing power parity dollars to adjust for cost of living differences across countries. As usual, incomes are also adjusted for household size.

In 2010, the median disposable household income in the U.S. was considerably higher than the median in the selected countries from Western Europe, except for Luxembourg and Norway. Thus, the shares of adults who are lower income in many countries in Western Europe is much greater when the U.S. median is used as the standard instead of the nation’s own median income, and the middle-income and upper-income shares decrease. In Germany, for example, using the U.S. median income as the standard instead of the German median income raises the lower-income share from 18% to 33%, decreases the middle-income share from 72% to 63%, and reduces the upper-income share from 10% to 4%.