This should surprise no one – Greece, Spain & Portugal according to Paul Donovan at UBS.
Real disposable income grew the most between 2000 and 2010 in those peripheral countries.
Donovan and his team at UBS have looked at eleven of the larger eurozone countries, breaking down income levels in deciles to get an insight into how income inequality has changed over the decade within countries and between countries.
To do this more accurately, they sought to identify income-specific inflation rates because headline figures only offered average rates, reflecting average spending patterns. The latter are not much use if you’re trying to understand income growth across income levels as a country’s high-spenders have a disproportionate impact on its inflation rate:
This matters because the last two decades have seen a growth in inflation inequality. Essentially, it is more expensive to be poor, because the goods and services purchased by lower income households have tended to rise in price by more than the goods and services purchased by higher income households. Lower income households tend to have a higher concentration of food, energy and housing in their consumer baskets. This is not a Euro-specific phenomenon, but something that has been observed across industrialised countries since the mid 1990s.
the “peripheral” countries tended to have higher overall levels of income growth, and all sections of their society enjoyed growing incomes. So, everyone got richer. (The authors stress that the data set ends in 2010, so the impact of the more recent austerity measures is excluded.)
Germany, Ireland, most of Italy and the French middle class all experience a decline in their standards of living. In most of these countries, the highest income groups do relatively well.
What stand out are Greece, Portugal and Spain. These economies have benefited from increased standards of living under the Euro (at least, until 2010), as nominal incomes have overcome inflation pressures. There has also been a concentration on improving the lot of the lower income groups in these societies.
This chart shows Eurozone by country. The income classes start lowest to the left in each country’s section
