GINI Country Report: Growing Inequalities and their Impacts in Spain

In contrast with many other European and OECD countries, Spain’s income inequality has decreased over the last 30 years. Nevertheless, Spain is still among the most unequal countries in the EU15, as it started from a fairly disadvantaged situation. Spain’s inequality indices are typically larger than those of countries such as Denmark, Norway, Finland, Sweden, Belgium, the Netherlands, France, and Germany and many East European countries. The overall picture is fairly clear: since 1985, and with the exception of two recession episodes, Spain has seen a pronounced income inequality reduction. During these two periods of economic downturn inequality increases, but this only partly offsets the previous reduction. Notwithstanding this, the current deep economic recession may change the picture for the coming years. An important source of this income inequality reduction has been earnings compression, partly due to falling upper secondary and tertiary education premium. In addition, Spanish changes in the tax system (increased progressivity and broader tax base) and the large increase in redistributive social expenditures (1980-1995) have also contributed to inequality reduction. Income maintenance (notably pensions and unemployment benefits) and health represent the largest share of social expenditures. Regional inequalities have also decreased over the years: although the convergence rate has not been constant, disparities have decreased over the period of interest. Nevertheless, some social inequalities, such as health, still have an important regional component.