Redistribution of income through government transfers
The extent of the redistribution in Switzerland is examined in the following analysis by comparing the change in income distribution and inequality before and after government transfers. The primary income is considered as income before government transfers, the disposable income as income after government transfers. In addition, the gross income represents an intermediate stage in this redistribution process in which part of the government transfers is already considered with the social benefits. The analyses are based on data from the Household Budget Survey (HBS).
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In 2019, the median disposable equivalised income is CHF 3929 per month, i.e. half of the Swiss resident population have an income above, while the other half have an income below this amount. It increased by 15% between 1998 and 2014. After a notable increase from 2008 to 2013, the median disposable equivalised income stagnated between 2015 and 2019.
The median primary equivalised income in 2019 was CHF 4518 and increased by 18% between 1998 and 2014. This income also stagnated between 2015 and 2019. As the largely parallel course of the two curves also shows, the redistribution from primary to disposable equivalised income remained constant during the observation period.
The Gini coefficient is a measure of inequality that takes into account the entire income distribution in the population. It shows the extent of inequality on a scale from 0 (perfect equality: everyone has the same income) to 1 (maximum inequality: one person has all the income).
The Gini coefficients of the different income components show that income before government transfers (primary equivalised income) is distributed clearly more unequally in the total population than income after transfers (disposable equivalised income). This illustrates that the unequal distribution of income earned on the (labour and capital) market is reduced by social transfers.
The development of the Gini coefficients from 1998 to 2014 shows no substantial change globally considered and taking into account the somewhat wide confidence intervals. Only a slight trend increase in inequality can be observed in disposable equivalised income in the years 2003 to 2007 and 2009 to 2013. No clear developments can be discerned between 2015 and 2019 either. The trends are similar for primary equivalised income.
Quintile share ratio S80/S20
The quintile ratio S80/S20 relates the income of the top 20% of the population to that of the bottom 20%. The greater this ratio deviates from 1, the greater the inequality of income distribution between these population groups.
The graph below depicts the quintile ratio for persons in working households and also shows a clear inequality reduction from the predominantly market-dependent primary equivalised incomes to the disposable equivalised incomes. No major variation in inequality has been observed here during the period under observation. The trends are consistent with those of the Gini coefficient, but are more pronounced for primary equivalised incomes. However, increases in inequality in these incomes have only a minor impact on disposable equivalised incomes due to state redistribution.