Poverty-stricken, in relative terms
published in the Institute of Economic Affairs (IEA) blog, January 2009
There is a country in Europe where it is estimated that 20% of households have to live on less than half the average income. Among the working population, the bottom 30% receives just 7% of total earned income and minimum wage laws do not exist.
The upper fifth, in contrast, receive about 45% of total earned income. Moreover, the gender pay gap is 20%, and the unemployment rate for women is 50% higher than for men.
Describing the situation using absolute values, it reads rather differently: median monthly gross wages amount to £3,500, with figures of £3,100 for women and £3,800 for men. A person at the 25th income percentile (at the top end of the bottom quarter of the income distribution) earns £2,700 per month. The unemployment rate is 3% for women and 2% for men.
The country in question is Liechtenstein, which is a success story on just about every measure other than equality. But does that matter?
In 1958, John Kenneth Galbraith wrote that ‘people are poverty-stricken when their income, even if adequate for survival, falls markedly behind that of the community.’ That definition clearly applies to many citizens of Liechtenstein. But in most of the world, and even in the rest of Europe, quite a few people would gladly change places with a poverty-stricken Liechtensteiner.