Trends of Poverty and Income Inequality in Cross-National Comparison

Abstract

Comparative research on poverty, income inequality and the effectiveness of income transfer systems has flourished during the last two decades, largely owing to the contribution of the Luxembourg Income Study. So far, however, the majority of comparative analyses have been based on a single year. In this paper, we have analysed cross-national patterns of poverty and income inequality with special emphasis on their stability. We examine trends in poverty and income inequality between 1980 and 1995 in nine countries representing three different ideal types of social policy. The differences in poverty among the countries studied correspond with the respective models of social policy more clearly in the mid-1990s than they did 15 years earlier. Generally speaking, the poverty rate is slightly under 5 per cent in the Nordic countries, around 7.5 per cent in Central Europe, 10 per cent in Canada, 12.5 per cent in the UK, and as high as 17.5 per cent in the USA. In all countries included in the analysis, the primary distribution – based on market income – has become less equal than before. In each country, the proportion of the population able to achieve subsistence from the market alone has decreased continuously. This trend is more significant than the change in actual poverty, which means that the absolute poverty-alleviating impact of income redistribution systems became stronger in these countries during the period 1980–1995. The analysis of income inequality produced a similar picture. In comparison to poverty, however, the change is rather less extensive. The Nordic countries, in particular, have been able to respond to the rise in market income differences so that the income inequality for disposable incomes has hardly increased at all. Canada shows a parallel trend. The USA and, in particular, the UK reflect a movement in the opposite direction. Trends in poverty in various population groups are analysed. By 1995 poverty had turned into a risk for young adults in all the countries studied. The poverty rate increased for the 18–30 age-group in all countries, while an opposite trend was observed among the elderly, in particular those aged over 65. The poverty rate among the elderly is now below the average population rate in all the countries studied.