SlovaKia MacroData

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Income and Expenditure: SlovakiaEuromonitor International07 March 2013


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Slovakia posted robust GDP gains on the back of European Union accession in 2004 and euro adoption in 2009, inits Tatra Tiger period, underpinning decent hikes in income and spending. Outlay is supported across incomegroups by Slovakias status as the second most equal country in the world. Accounting for over half the population,social class D is the countrys largest, supporting demand for businesses such as private labels and discounters.

EXECUTIVE SUMMARY

Slovakia's per capita annual disposable income and consumer expenditure posted hikes of 15.7% and 9.4% in

real terms over the 2006-2011 period, to reach 7,910 (US$10,998) and 7,225 (US$10,046) respectively in2011, as the Slovakian GDP advanced by 19.7% in real terms over the period;

Slovak individuals in their fifties had the highest average gross income, with the 55-59 demographic earning14,346 (US$19,947), followed closely by the 50-54 age group on 14,330 (US$19,925) and the 45-49 cohorton 14,097 (US$19,602). Elderly Slovaks aged 65 and over are dominant among the country's richest citizens,accounting for 27.4% of the population in receipt of a gross income over US$150,000 (constant terms) in 2011;

In 2011, social class D was the biggest class, making up 50.1% of the total population aged 15+, or 2.3 millionpeople, followed by social class E, accounting for 20.0% of the population aged 15+ or 914,300 people. Withsocial classes D and E combined accounting for 70.1% of the total population aged 15+, this suggests that mid-to low-priced products and services would find a sizeable potential customer base;

Slovakia has a significant middle classdefined as households with between 75.0% and 125% of median

incomeof slightly above 1.0 million households or 45.6% of the total number of Slovakian households in2011. This cohort advanced by 3.9% between 2006 and 2011 and is a great target for marketers and plannersfrom across all industries, such as restaurants, kitchenware, home furnishings and air travel;

Over the 2013-2020 period, total consumer expenditure is forecast to grow by 30.1% in real terms, on the backof the increase in annual disposable income, which is poised to advance by 29.5% in real terms during the same

period. The fastest growing categories in consumer expenditure are set to be household goods and services(44.6%), education (38.7%) and miscellaneous goods and services (35.3%);

In 2011, the highest earning 10.0% of Slovakian households (decile 10) spent 4.1 times more than the poorest10.0% of households (decile 1) while their annual disposable income was 5.5 times higher, revealing the highequality generated by Slovakias welfare system, allowing marketers and planners to draw a more generalconsumer profile formed from higher as well as lower income households that share similar spending habits.

Chart 1 Per Capita Disposable Income in Eastern Europe: 2011


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Source: Euromonitor International from national statistics

DISPOSABLE INCOME, EXPENDITURE AND SAVINGS

Third highest per capita income in Eastern Europe underpins expenditureSlovakia's per capita annual disposable income and consumer expenditure posted hikes of 15.7% and 9.4% in realterms over the 2006-2011 period, to reach 7,910 (US$10,998) and 7,225 (US$10,046) respectively in 2011, as theSlovakian GDP expanded by 19.7% in real terms over the period, despite a real decline of 4.9% year-on-year in 2009as a result of the global economic crisis of 2008-2009. After growing strongly by 8.9% and 4.8% year-on-year in realterms in 2007 and 2008 respectively, per capita annual disposable income posted a small real decline of 0.4% in2009, while in 2010 improving economic conditions brought an advance of 3.4% year-on-year in real terms. In 2011,as a result of the fallout of the eurozone sovereign debt crisis, per capita annual disposable income fell by 1.5% year-on-year in real terms. Per capita consumer expenditure registered a slightly different pattern. After growing strongly

by 6.5% and 5.8% year-on-year in real terms in 2007 and 2008 respectively, the indicator posted declines for thenext three consecutive years, falling by 1.8%, 0.5% and 0.7% in 2009, 2010 and 2011, all year-on-year in real termsrespectively, as the 2008-2009 global financial crisis and the 2011 eurozone sovereign debt crisis made Slovakianconsumers warier.Slovakians saved less during the period of economic boom and started saving more when facing economicuncertainties. In 2011, the savings ratio stood at 8.7% of disposable income, advancing strongly from 3.6%registered in 2006, explaining the three consecutive years decline in consumer expenditure over the 2009-2011

period. This pro-cyclical behaviour of Slovakians, which tends to exaggerate the economic swings, suggests thatmarketers and planners should prepare for higher expenditure levels in boom periods and an increasing savings ratioand lower consumer spending in recessionary or turbulent times. Slovakias savings ratio in 2011 was belowregional peers like Ukraine (18.8%), Russia (17.2%) and Belarus (12.5%) but higher than Latvia (-3.1%), Bosnia-Herzegovina (-4.1%) and Romania (-6.8%). By 2020, Slovakia's savings ratio will ease to 7.9% of disposableincome, boding well for the overall consumer expenditure levels.

In 2011, Slovakia had the third highest per capita annual disposable income in Eastern Europe, after Slovenia and theCzech Republic, providing enough room for discretionary spending. In 2011, 57.5% of total consumer expenditure


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was spent on discretionary items (all items except food, non-alcoholic beverages and housing), up slightly from56.4% in 2006, due to the economic advance that Slovakia witnessed over the period, leading to an increase in livingstandards.In the short term, per capita annual disposable income is poised to register small declines, falling by 0.8% in 2012and another 0.8% in 2013, while per capita consumer expenditure is forecast to dip by 0.3% in 2012 and a further0.6% in 2013 all year-on-year in real terms, as the entire eurozone, of which Slovakia is part, grapples with austeritymeasures in response to the sovereign debt crisis, which dents income and expenditure levels. Over the 2013-2020

period, per capita annual disposable income and consumer expenditure will register an average annual real growth of3.6% and 3.7% respectively, stronger, but slightly lower than the respective 3.7% and 4.5% annual real growth

posted in the 2000-2007 period. These still impressively strong rates of growth for an advanced Eastern Europeaneconomy like Slovakias bode well for companies across sectors, allowing them to gain market share and increasetheir customer base, while newcomers to the Slovakian consumer market will find a propitious environment for

business growth underpinned by the rising levels of income and expenditure, as well as by the common currency.

Chart 2 Per Capita Annual Disposable Income, Spending and Savings Ratio: 2006-2020

US$ per capita; % of disposable income

Source: Euromonitor International from national statistics/trade sources/OECD/EurostatNote: Per capita disposable income and consumer spending are expressed in constant 2011 prices, fixed 2011 US$

exchange rate. Data for 2012-2020 are forecasts.

GROSS INCOME BY AGE

Fifty-something Slovakians are the big earnersIn 2011, Slovak individuals in their fifties had the highest average gross income, with the 55-59 demographicearning 14,346 (US$19,947), followed closely by the 50 -54 age group on 14,330 (US$19,925) and the 45-49cohort on 14,097 (US$19,602). Members of these age groups are often at the peak of well-established andsuccessful careers, many of them in top management or executive positions in the public sector or privatecompanies. High-quality suits and footwear, as well as grooming and personal care products, are common purchases

by these cohorts. Comfort and family life are very important to them, and they accordingly devote sums to familycars, home entertainment electronics, holidays abroad as well as their childrens education. By 2020, there will not

be any change at the top of the average gross income rankings, allowing marketers and planners to devise businessplans for the same type of consumer segment at least for the medium term. The 55-59 cohort will still enjoy thehighest average gross income in 2020 at 18,582 (US$23,876), followed by the 50-54 demographic on 18,556(US$23,843) and the 45-49 age group on 18,316 (US$23,534).Elderly Slovaks aged 65 and over are dominant among the country's richest citizens, accounting for 27.4% of the

population in receipt of a gross income over US$150,000 (constant terms) in 2011, followed at quite a distance bythe 60-64 age group at 11.8% of Slovaks making US$150,000+ (constant terms). Regionally, most of the WesternEuropean nations and half the Eastern European countries have the same age group (65+) dominating the mostaffluent consumers. This bodes well for marketers and planners aiming at this consumer segment who are seeking toincrease their regional presence. Businesses from medical services such as mobility aids to cultural venues like operaand classical music concerts should, therefore, find a wide audience.By 2020, the 65+ age group will remain the prominent demographic among the very top earners, representing 31.0%

of those making over US$150,000 (in constant terms). In second place, at a big distance, will still be the 60-64demographic on 12.4%. The ongoing high numbers of mature consumers among the uppermost earning bracket isindicative of lasting commercial potential for companies whose products and services target the affluent elderly,


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such as cruise companies, luxury travel and resorts, medical services and mobility aids, such as adapted vehicles andstair lifts, and cultural venues. This underscores the potential of mature consumer segments.

Chart 3 Selected Income Bands by Age: 2011

% of total


Slovakia's total gross income map for 2011 contains two "hot spots" the red areas that indicate the highest totalincome. The first hot spot, which is the larger, outlines an age range of about 15-40, with a corresponding annualgross income span of approximately US$8,000-US$18,000 per capita. This hot spot represents young to adultSlovakians and is owing to their high prevalence in the population. In 2011, 38.9% of all Slovakians were in the 15-39 age group. At the younger end of the spectrum are individuals finishing their studies and just entering the labourforce. Most of them are still living with their parents so they can devote most of their income to discretionarycategories like communication devices (smartphones, tablets, laptops), branded clothing and footwear, cultivatingtheir hobbies through purchasing sport equipment and travel, as well as towards personal care items. Towards themiddle and the end of the hot spot are young adults enjoying a decent standard of living, most of them with families and a successful professional career. Their spending typically includes family cars and holidays abroad,household appliances and home furnishings, as well as dining out with their family and friends.The second hot spot, which is slightly smaller, represents mature Slovakians from 44 to 58 years old in receipt of

an annual gross income of about US$14,000-US$17,000 per capita. This hot spot is formed of individuals who arereaping the benefits of a successful professional career, most of them with children at or approaching university age,while towards the older end of the spectrum are Slovakians approaching retirement. These Slovaks will take atraditional approach to spending, devoting funds to safeguarding their health, their family comfort and theirchildrens education with expenditure on medical services, family holidays and private tuition.

Chart 4 Total Gross Income Map: 2011


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Source: Euromonitor International from national statisticsNote: The horizontal axis depicts the age of individuals and the vertical axis the distribution of per capita income by annual

gross income brackets. The shading refers to the total income in thousand US$. The closer to red, the larger theamount of total income in that age and income range.

SOCIAL CLASS BY AGE

Elderly Slovakians dominate top classSlovakia's social system is based disproportionately on low earners. In 2011, social class D was the biggest class,making up 50.1% of the total population aged 15+, or 2.3 million people, followed by social class E, accounting for20.0% of the population aged 15+ or 914,300 people. With social classes D and E combined accounting for 70.1% of

the total population aged 15+ in 2011, mid- to low-priced products and services would find a sizeable potentialcustomer base in the Slovakian market.Social class A consisted of 310,600 people in 2011, or 6.8% of the Slovakian population aged 15+. By 2020, thiscategory will have grown to encompass 316,600 individuals and will represent 6.9% of the total Slovakian

population aged 15 and above. In 2011, the 65+ demographic was the most prominent in social class A at 16.3%,followed by the 55-59 age group at 11.3%. Across Eastern Europe, the 65+ demographic is the largest age bracket insocial class A in Bosnia-Herzegovina, Croatia, the Czech Republic, Georgia, Hungary, Poland, Russia, Serbia andSlovenia while the rest of the countries of the region had a lower age bracket dominating social class A in 2011.Business models that are built on a sizeable contingent of affluent elderly could, therefore, enjoy success in manyregional markets, following some linguistic and cultural tailoring.Marketers and planners will be able to draw up long-term business plans aimed at elderly consumers, as this agegroup is set to increase. Due to the ageing of the population, the 65+ demographic will grow in size by 2020 to makeup 20.6% of social class A, followed by the 40-44 cohort on 11.8%. This is further evidence of the rising might of

the grey euro.


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Chart 5 Age Composition of Social Classes ABCDE: 2011

%


HOUSEHOLD INCOME DISTRIBUTION

Second most equal country in the worldSlovakia's Gini index was 26.2% in 2011, ranking it 2nd out of 85 countries for income equality. Slovakia is one ofthe most equal nations in the world, due to its socialist legacy and progressive welfare policies. A score of zero onthe Gini index suggests perfect equality and a score of 100% indicates total inequality. Compared to its regional

peers, Slovakia ranked behind the Czech Republic (1st), but ahead of Hungary (4th), Slovenia (8th) and Romania(12th) in the same year.Slovakia's Gini index advanced only fractionally from 26.0% in 2006, as its strong socialist policies prevented ahigher increase. In the short term, income inequality is set to rise incrementally, to reach 26.3% in 2013, capped bythe approved rise in taxation for rich Slovakians, while by 2020 Slovakia's Gini index will advance slowly to 26.5%,making it the most equal country in the world, as the Czech's Republic score is set to increase faster to reach 27.1%

in 2020, from 25.9% in 2011.In 2011, the richest 10.0% of households (decile 10) commanded 21.9% of total annual disposable income,compared to 4.0% for the poorest 10.0% of households (decile 1). Between 2006 and 2011, the greater gains inincome were netted by the lower-income groups. For example, households in decile 1 posted a 17.1% increase inannual disposable income in real terms over the 2006-2011 period, households in decile 5 saw a 14.9% advance,while decile 10 households had a 4.3% increase, attributable to Slovakia's welfare provision, which supports theincome of the less affluent.Slovakias mean household income stood at US$25,907 in 2011, although around 61.5% of households were inreceipt of less than this figure. The median household incomethe figure that divides the household incomedistribution into two equal groups, half having disposable income above that amount and half having income belowitof US$23,017 is more reflective of realities on the ground and would be a more useful benchmark for marketersand planners.In line with the country's high levels of income equality, Slovakia has a significant middle classdefined as

households with between 75.0% and 125% of median incomeof slightly above 1.0 million households or 45.6% ofthe total number of Slovakian households in 2011. Slovakia's middle class has a relatively high purchasing power

judged by Eastern European standards. This middle class advanced by 3.9% between 2006 and 2011 and is a greattarget for marketers and planners from industries, such as restaurants, kitchenware, home furnishings, flights,apparel, gadgets, shopping centres entertainment and sports equipment.In 2011, the household income bracket of US$15,000-US$25,000 (in constant terms) included the most Slovakianhouseholds at 975,400 or 42.6% of the total number of Slovakian households, followed by the US$25,000-US$35,000 (in constant terms) accounting for 524,900 households or 22.9% of total households. These mid-earningSlovakian households typically devote funds to categories like household appliances, home electronics such as SmartTVs, Blu-ray players and high-end sound systems, family cars and foreign holidays.By 2020, the household income bracket of US$15,000-US$25,000 (in constant terms) will still encompass the mostSlovakian households, although it will have shrunk to stand at 864,000 or 36.3% of the total number of households,as the adjacent income bracket will see a higher number of households. The income bracket of US$25,000-

US$35,000 (in constant terms) will grow to encompass 662,500 households or 27.8% of the total Slovakianhouseholds in 2020. However, the greatest expansion will come higher up the income spectrum, with the income


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bracket of US$55,000-US$75,000 (in constant terms) posting the strongest growth of 62.8% between 2013 and2020, followed closely by the US$45,000-US$55,000 (in constant terms) income bracket with a 57.8% projectedadvance for the same period. This outlines the growing commercial potential of middle- to high-earning householdswhose purchasing power is similar to that of their Western European counterparts, opening up a market for premium

products and services, such as foreign travel, designer clothing and footwear, new cars and jewellery.

Chart 6 Household Income Distribution: 2011

%


CONSUMER EXPENDITURE

Household goods and services and education to drive growthSlovakian consumers allocated 42.5% of total consumer expenditure to non-discretionary items, such as food, non-alcoholic beverages and housing, in 2011 and the remaining 57.5% to discretionary spending, such as miscellaneousgoods and services which includes the luxury goods category, leisure and recreation, transport and household goodsand services.Total Slovakian consumer expenditure advanced by 10.0% in real terms between 2006 and 2011. The most dynamicgrowth category during this period was health goods and medical services, which climbed by 33.3% in real terms,due to the increasing number of older consumers who are generating demand for items, such as medical supplies,vitamins and exercise equipment, leading to a sharp rise in spending on pharmaceuticals. It was followed byhousehold goods and services with a 25.8% period gain in real terms, as the increase in disposable income over the

period, coupled with a strong property market, allowed Slovakians to increase their expenditure on this category,with most of the gains coming in 2007 and 2008. Spending on leisure and recreation saw the third highest growthover the 2006-2011 period, advancing by 24.5% in real terms, as the developing market included a greater variety ofways to spend on entertainment. Only one category posted a decline over the 2006-2011 period, hotels and catering,which plunged by 16.9% in real terms, mostly due to a real 13.5% year-on-year drop registered in 2009 due to theglobal economic downturn.After a strong advanced of 6.6% in 2007 and 5.9% in 2008, year-on-year in real terms, total consumer expendituredeclined marginally for three consecutive years between 2009 and 2011, due to the 2008-2009 global financial crisisand the 2011 eurozone sovereign debt crisis. Slovakias annual disposable income and consumer expenditure havetended to move in synchronisation, diverging slightly in 2009 when an increased tendency to save pegged backgrowth in consumer expenditure. In the short term, consumer expenditure is expected to marginally decline, with a0.2% drop in 2012 and another 0.4% fall in 2013 year-on-year in real terms, as annual disposable income is forecastto decline by 0.6% in 2012 and another 0.7% in 2013 year-on-year in real terms, due to low foreign demand forSlovakian exports, as the main European trading partners have instated austerity measures in response to theeurozone sovereign debt crisis and due to the Slovakian government spending cuts and tax hikes.


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Over the 2013-2020 period, total consumer expenditure is forecast to grow by 30.1% in real terms, on the back of theincrease in annual disposable income, which is poised to advance by 29.5% in real terms over the same period. Thefastest growing categories during this period will be household goods and services with a projected growth of 44.6%in real terms, followed by education with a 38.7% hike in real terms and miscellaneous goods and services with a35.3% advance in real terms on the back of a general increase in living standards, which will support discretionaryspending.The average annual real growth in Slovakias total consumer expenditure is projected to stand at 3.8% during the2013-2020 period, still solid, but weaker than the 4.5% posted over the 2000-2007 period. This implies thatmarketers and planners will find a propitious environment for increasing revenues, market share and customer base,

while newcomers will find favourable grounds to enter the Slovakian consumer market.

Chart 7 Real Growth Index of Consumer Expenditure by Selected Category: 2006-2020

2006=100

Source: Euromonitor International from national statistical offices/OECD/EurostatNote: Data for 2012-2020 are forecasts.

CONSUMER EXPENDITURE BY REGION

Relative uniformity in expenditure patterns across regionsRegionally, Slovakia sees only small differences in total consumer spending. In 2011, the top-ranking region fortotal consumer expenditure was Bratislava at US$8.1 billion, or 14.9% of total consumer spending nationwide. Thisregion encompasses the capital Bratislava, the largest city in Slovakia and the countrys political and economiccentre. It has the advantage of bordering Austria and the Czech Republic, thus benefiting from a slew of cross-bordertrade and investment. This was followed by the region of Nitra and Kosice, making up US$7.2 billion and US$7.1

billion (or 13.2% each of the total consumer expenditure nationwide), while the region of Trencin posted the

smallest consumer expenditure, at US$5.8 billion or 10.6% of the total consumer spending in Slovakia in 2011.In 2007 and 2008, the region of Bratislava saw big year-on-year gains in consumer expenditure of 24.7% and 15.4%respectively in nominal US$ terms, as the overall economy was growing rapidly. The global financial crisis of 2008-2009 had its first effect on regional spending in 2009 when spending in Bratislava declined by 6.4% year-on-year inUS$ nominal terms, followed by another smaller decline of 3.9% year-on-year in US$ nominal terms in 2010. In2011, however, the indicator posted a strong rebound with an annual gain of 8.9% in US$ nominal terms.The region of Bratislava also had the highest regional consumer expenditure on a per household basis, at US$28,086in 2011, as the capital city generates the highest paying white-collar jobs. During the same year, the lowest regionalconsumer expenditure per household was registered in Ban Bystrica at US$21,076, in part due to sparsedemographics.On a per household basis, consumer expenditure does not differ too much across regions, owing to the fact thatSlovakia enjoys high levels of income and spending equality. For example, in 2011, spending on non-discretionarycategories, such as housing and food and non-alcoholic beverages, ran from 39.5% registered by the region of

Bratislava to 44.8% in the region of Kosice. Some small differences exist between the regions. For example, in 2011,the leisure and recreation category saw a 12.7% chunk of household spending in the region of Bratislava while the


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lowest proportional spending on this category was registered in the region of Trencin at 7.7%, as the capital is hometo more wealthy Slovakians who can devote funds to this category. Most of the other discretionary categories seeapproximately the same pattern of consumer expenditure across regions.The relative uniformity between expenditure patterns in Slovakias regions, combined with the countrys significantand expanding middle class, recommends considering the entire country for investment. The capital Bratislavashould be a starting point for marketers, as it is the main hub for the country's financial sector and service industries.Over the 2013-2020 period, per household spending in all regions is forecast to expand by around 33.0% in US$nominal terms.

Chart 8 Household Expenditure by Region: 2011

US$ per household


EXPENDITURE BY INCOME LEVEL

Wealthy Slovakians dominate education and transport spendingIn 2011, the highest earning 10.0% of Slovakian households (decile 10) spent 4.1 times more than the poorest 10.0%of households (decile 1) while their annual disposable income was 5.5 times higher, revealing the high equalitygenerated by Slovakias welfare system. Overall spending patterns vary to some extent across incomes but mosthouseholds spend heavily on categories like housing and food and non-alcoholic beverages. In 2011, decile 1

households apportioned 57.2% of their total expenditure to the non-discretionary categories of housing and food andnon-alcoholic beverages, compared with 46.1% of total spending by households in decile 5 and 31.7% in decile 10.In 2011, the poorest 10.0% of households spent most on housing (33.9% of their total spending outlay), food andnon-alcoholic beverages (23.4%) and alcoholic beverages and tobacco (8.6%). Middle earning households (decile 5)spent most on housing (27.7%), food and non-alcoholic beverages (18.4%) and miscellaneous goods and services(9.7%) while the highest earning households (decile 10) spent most on housing (19.3%), leisure and recreation(13.5%) and food and non-alcoholic beverages (12.4%). During the same year, the miscellaneous goods and servicescategory, which includes luxury goods, accounted for 7.2% of total spending by decile 1 households, 9.7% by decile5 households and 11.5% by decile 10 households, revealing that even the poorer households devote important fundsto this category.Consumer spending patterns up and down the income ladder were not greatly affected by the 2008-2009 globaleconomic downturn, with all deciles increasing their expenditure on discretionary categories over the 2006-2011

period. In 2012 and 2013, all deciles will decrease slightly their allocation towards non-discretional categories, and

towards 2020 the trend will continue with an increasing proportion of household funds going on discretionary


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categories, as the Slovakian economy is poised to register solid growth rates, with real GDP forecast to post averageannual growth of 2.7% between 2013 and 2020, which will help boost consumer confidence and expenditure levels.

Chart 9 Household Expenditure of Deciles 1, 5 and 10 by Category: 2011

% of total consumer expenditure of each decile

Source: Euromonitor International from national statistical offices/OECD/EurostatNote: A: Food and non-alcoholic beverages; B: Alcoholic beverages and tobacco; C: Clothing and footwear; D:

Housing; E: Household goods and services; F: Health goods and medical services; G: Transport;H: Communications; I: Leisure and recreation; J: Education; K: Hotels and catering; L: Miscellaneous goods and services. The figure in brackets refers to the average disposable income ofhouseholds in each decile.

Slovakias most discretional category, where spending varies significantly according to income, is education, towhich decile 10 households contributed 31.8% of category spending in 2011, compared to just 1.3% by decile 1, asrich Slovakians are more likely to send their children to private schools whereas their less affluent counterparts willmake use of public schools. Transport was the second most discretionary category in 2011, with 30.9% of totalcategory spending coming from decile 10 compared to 1.4% from decile 1, as wealthy Slovakians tend to live a moremobile life, often travelling abroad for business and in ownership of more than one vehicle. In the same year, decile8-10 accounted for over 60.0% of total spending on both categories.The least discretionary category, where spending is more resistant to change as income rises, is alcoholic beverages

and tobacco. In 2011, decile 1 accounted for 7.8% of total category spending compared to 11.3% for decile 10, dueto the natural ceiling on this category, meaning that richer households cannot dominate expenditure by a very highmargin. This was followed by spending on health goods and medical services, where decile 1 accounted for 5.7% oftotal expenditure compared to 14.6% by decile 10 in 2011, as the socialist principles of healthcare funding shift the

burden of payment away from the individual, keeping outlay low.

Chart 10 Proportion of Total Spending on Selected Categories by Decile: 2011


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% of total consumer expenditure

Source: Euromonitor International from national statistical offices/OECD/Eurostat

DEFINITIONSDeciles: Deciles are calculated by ranking all of the households in a country by disposable income level, from thelowest earning to the highest earning. The ranking is then split into 10 equal sized groups of households. Decile 1refers to the lowest earning 10.0%, through to Decile 10, which refers to the highest earning 10.0% of households.Disposable income: This is gross income minus social security contributions and income taxes.Gini index: A standard economic measure of income inequality, based on a Lorenz Curve. A society that scores 0%on the Gini index has perfect equality, where every inhabitant has the same income. The higher the number over 0%,the higher the inequality, and a score of 100% indicates total inequality, where only one person receives all theincome. In reality, countries tend to fall between 25.0% and 60.0%.

Gross income: Annual gross income refers to income before taxes and social security contributions from all sourcesincluding earnings from employment, investments, benefits and other sources such as remittances.Median income: The median income is the amount which divides the household income distribution into two equalgroups, half having disposable income above that amount and half having income below that amount.Middle class: The middle class is defined as the number of households with between 75.0% and 125% of medianincome.Savings ratio: Savings ratio is the proportion of household disposable income, which is saved. The savings ratio isdependent on: the proportion of older people (as they have less motivation and capability to save); the tax system (itcan encourage or discourage saving); the rate of inflation (expectations of rising prices encourage people to spendnow).Social class A: Social Class A presents data referring to the number of individuals with a gross income over 200% ofan average gross income of all individuals aged 15+.Social class B: Social Class B presents data referring to the number of individuals with a gross income between

150% and 200% of an average gross income of all individuals aged 15+.Social class C: Social Class C presents data referring to the number of individuals with a gross income between100% and 150% of an average gross income of all individuals aged 15+.Social class D: Social Class D presents data referring to the number of individuals with a gross income between50.0% and 100% of an average gross income of all individuals aged 15+.Social class E: Social Class E presents data referring to the number of individuals with a gross income less than50.0% of an average gross income of all individuals aged 15+.

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