Research Paper 4: Income Inequality: Development and Perception

Income distribution and inequality play a prominent role in the public and political debate. Income differences are often portrayed as being too large and constantly growing. However, a look at the statistical data shows that income distribution in Austria, as in Germany, has remained largely constant in recent years. State redistribution is also having an effect. The Gini coefficient, the common measure of income distribution, is significantly lower in both countries after taxes and social transfers than before taxes and social transfers. Even if other measures of income distribution are used, the picture of largely constant and even slightly declining inequality over the last ten years is confirmed. "The redistribution system in Austria works," says Tobias Thomas, Director of the economic research institute EcoAustria. "In an international comparison, taxes and transfers reduce inequality considerably," says Thomas.

Despite no significant change in income distribution, the proportion of media coverage on inequality and related topics has been increasing for years. This can have an impact on citizens' perceptions. A recent study by EcoAustria and the Cologne Institute for Economic Research shows that, despite stable income distribution, more intensive reporting on the topic of inequality can increase the population's concerns, at least in the short term. In the long term, however, economic concerns are determined by other factors. For example, the positive development of the German labor market over the last ten years has significantly reduced Germans' concerns about the general economic situation. For the analysis, scientists from EcoAustria and IW Cologne evaluated 303,100 interviews from the German Socio-Economic Panel (SOEP) between 2001 and 2015 and 645,000 reports from the German media, 3,870 of which dealt with the topic of inequality. The results of the study published today will also be presented at the annual conference of the Verein für Socialpolitik, the largest economists' association in Germany, Austria and Switzerland, which will take place at the University of Vienna from September 3 to 6, 2017.