Europe has a huge income inequality. Western and Nordic states have higher disposable incomes on average compared to many southern and eastern countries.
AdvertisingAccording to the 2023 Legatum Prosperity Index, two-thirds of the world's most prosperous countries are in Europe, although income inequality remains widespread across the old continent.
Average household income allocated to spending and saving varies significantly not only between EU member states, but also between other European countries.
There appears to be a clear geographic divide: the highest levels of average disposable income are recorded in Western and Nordic countries, while levels are lowest in most Southern and Eastern states.
Access to goods and services in a country largely depends on the distribution of income, which varies widely, resulting in inequality.
Accurately comparing disposable income levels across countries can be difficult due to different tax rules and price levels.
However, one way to measure and compare the differences is to look at the average equivalent disposable income per citizen in each country's purchasing power standard (PPS), which gives an idea of the standard of living.
Household consumption income is the income households have to spend and save after taxes and transfers, as defined by Eurostat, the EU's statistical office. These incomes are 'equalised' – according to household size and composition – to make them comparable across all households.
BPS meanwhile helps compare prices between countries. It is a type of synthetic currency that eliminates price level differences and creates a PPS for buying the same good or service in any country.
With that in mind, which countries in Europe have the highest and lowest disposable incomes? How high is income inequality?
In 2022, the average disposable income for EU residents ranged from 9,671 PPS in Bulgaria to 33,214 PPS in Luxembourg. The EU average was 18,706 PPS per citizen.
When including European Free Trade Area (EFTA) and EU candidate countries, Luxembourg is followed by Norway (27,090 PPS) and Switzerland (26,389 PPS). This figure was slightly higher than 25,000 PPS in the Netherlands and Austria.
The Nordic countries are above the EU average but fail to take the top spot
Average disposable income per citizen in five Nordic countries was higher than the EU average.
Although Norway is second, no one else makes the top five.
Finland (20,941 bps) ranks 10th and Sweden (20,573 bps) ranks 13th out of 35 countries on the list.
Iceland and Denmark ranked 7th and 8th respectively.
Division among the Big Four
Looking at the four most populous EU countries, average disposable income was higher than the EU average in Germany (23,197 PPS) and France (20,575 PPS), whereas it was lower in Italy (18,472 PPS) and Spain (17,254 PPS).
Croatia, the last country to join the EU, had the highest average disposable income of all six EU countries.
As seen in the graph above, Western and Nordic European countries reported the highest levels of average disposable income, whereas most Southern and Eastern states had the lowest levels.
AdvertisingCandidate countries had very low incomes
EU candidate countries had the lowest average disposable income on the list.
Albania (4,385 bps) came in at the bottom, followed by North Macedonia (5,988 bps) and Turkey (6,210 bps).
Income inequality deepens
When income is considered in euro as opposed to PPS, the levels of income inequality across Europe appear particularly stark.
Average disposable income per citizen varies from €5,378 in Bulgaria to €45,310 in Luxembourg in the EU in 2022. The average disposable income for the EU as a whole is €19,083.
Apart from Luxembourg, the figure was more than €35,000 in five countries: Switzerland (€44,753), Iceland (€39,918), Norway (€39,206) and the UK (€37,934).
AdvertisingIt was €25,000 in Germany and €23,053 in France.
Perhaps unsurprisingly, average disposable income in euros was significantly lower in the EU candidate countries: €3,000 in Albania, Turkey and North Macedonia.
How has disposable income changed over the past five years?
Looking at the percentage increase, many countries have significantly increased their average disposable income per citizen in euros over the past five years.
It has risen by more than 40% in nine EU member states and two candidate countries between 2017 and 2022, or the most recent five years of data available. The change is 17% for the EU as a whole.
Romania recorded a 101% increase, followed by Serbia (68%) and Lithuania (66%).
AdvertisingThe percentage change in countries where average disposable income was above the EU average saw the least movement, with 1% in Switzerland, 2% in Norway and 5% in France and Sweden.
Average disposable income fell only in Turkey
Turkey was the only country to see its average disposable income fall – notably by 27% or €1,000.
Without looking at changes in euro as a percentage, Luxembourg (€8,995) recorded the largest increase, followed by Ireland (€6,181) and the Netherlands (€5,976).
The average increase in the EU was €2,802, rising to €3,080 in Germany and €1,093 in France.