Income distibution
02. Oct 2024
Little change in income inequality
Income statistics have been updated in the statbank up to and including 2022. Statistics on income distribution have been updated and published anew using a revised methodology. This has resulted in subtle changes to the statistics and retrospective measurements. For more details, please refer to the bottom of this article.
The Gini coefficient and the income quintile ratio are two of the most common metrics used for describing a nation’s income distribution.
Income inequality statistics are based on the equivalent income https://hagstova.fo/en/economy/wages-and-income-distribution/equivalent-income, also known as ‘equivalised disposable income’, which is an equivalised household income figure covering a full year, adjusted for different household compositions.
Little change in the Gini coefficient
The Gini coefficient is used as a measure of income inequality. If all citizens in a country have the same income, the country’s income Gini coefficient would be 0. If one household earns all of the country’s income, the income Gini coefficient would be 100.
In 2022, the Gini coefficient was 22.2, compared with 21.5 in 2021. The Gini coefficient has mostly been ranging between 21 and 23 in the past decade.
[px-graph-3]
Top 20% out-earn bottom 20% by 3x
The same pattern emerges when we look at the income quintile ratio, which is another measure of income inequality. The income quintile ratio (also known as the ‘S80/S20 ratio’) divides the population into five equally large groups (quintiles) and compares the total income of the 20% of the population with the highest income (top quintile) to that of the 20% with the lowest income (bottom quintile).
In 2022, the top quintile had an income 3 times higher than the bottom quintile. The figure for 2021 was 2.9.
[px-graph-4]
Less income inequality than in other countries
The Faroes have a lower Gini coefficient than the neighbouring countries. The Gini coefficientfor Denmark is 28, and the combined figure for EU countries is 30. Greenland’s figure is 35, while Norway and Sweden’s is 28. The Faroes thus have less income inequality than their neighbouring countries.
[px-graph-4]
Graphs, etc. regarding income distribution are available here https://hagstova.fo/en/economy/wages-and-income-distribution/income-distibution.
Revised methodology
Statistics on income distribution have been updated and published anew using a revised methodology. The figures are now based on the same data source used for monthly household statistics. Certain income types, previously omitted, are now included. Changes in personal tax reports for previous years are also included in this update. This has resulted in subtle changes to the statistics and retrospective measurements.
