Income inequality declines in Switzerland

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In 2016, before the effects of taxes and welfare, the highest earning 20% of Swiss households made on average 40.8 times what an average household in the bottom 20 percent made, an inequality measure known as the S80/S20.

However, after taxes and welfare, including low income support, health insurance subsidies, pensions and disability benefits, the same income ratio fell to 4.4.

Switzerland scores relatively well on income equality. The average S80/S20 ratio across the EU in 2016 was 5.2 and ranged from 7.7 (Bulgaria) to 3.4 (Czech Republic).

The most unequal EU countries in 2016 were Bulgaria (7.7) Romania (7.2) and Lithuania (7.1). The most equal were Czech Republic (3.4), Finland (3.6) and Slovakia (3.6).

Germany (4.6), France (4.3) and Austria (4.1) were all similar to Switzerland, however Italy was significantly more unequal (6.3).

Over time, inequality after taxes and welfare in Switzerland has remained stable. The S80/S20 ratio after taxes and welfare was 4.6 in 2006. After peaking at 4.9 in 2013, it has declined by 10% over three years to 4.4 in 2016.

In 2016, before taxes and welfare, low earners made a median CHF 1,475 a month and high earners a median of CHF 11,045. After taxes and welfare low earners ended up with a median CHF 2,112 per month and higher earners CHF 8,190 – low earners here are those earning less than 70% of the overall median and high earners are those making more than 150% of the median.

It’s worth noting that the ultra rich are not included in the sample – there are so few of these people and their incomes are so extreme they would distort the results. However, the very rich, those earning several million francs a year are included.