Have you heard? 1 percent rich 17 percent national income. The richest 1% in Spain concentrates 17% of the national income, more than the poorest 50%.
Rich gets richer, classes humble transitioning from blow to blow, higher levels of income inequality and the crisis of 2008 as a turning point are some of the key highlights a new report, which measures the redistribution of income in Spain in the last 2 decades.
The study, published this Wednesday 22 by the EsadeEcPol ideas laboratory, collects that the 1% of the people who earn the most money in Spain have increased their share of national income from 13% in 2007, before the fiscal crisis, to 16.9% in 2019.
Meanwhile, the poorest sectors have travelled the path opposite; 17% then to 14.2% in 2019, says research (Income Inequality and Redistribution in Spain: New Evidence from the Methodology of the World Inequality Lab), based on tax data, surveys and the National Accounts Distributive, developed among others by the French economist Thomas Piketty.
1 percent rich 17 percent national income
"In Spain, the real estate boom prior to the 2008 crisis slightly reduced income inequality," with an increase in the participation of the poorest 50% and a drop in the concentration of income for the richest 10% and 1%, he begins by describing.
However, with the bursting of the real estate bubble, the increase in unemployment and the cut in wages, the poorest 40% and especially the 50% experienced a greater drop in their income in relative terms than the richest 10% and 1%, he contrasts.
In the last five years analysed (2014-2019), "Spain entered a period of recovery and job growth, which improved in relative terms the incomes of the poorest 50%, but without recovering the levels prior to the real estate crisis of 2008," the authors clarify.
"The outbreak of the COVID-19 pandemic slowed down this recovery process and the most recent evidence points to an increase in income inequality, due to a higher incidence of unemployment and loss of wage income among the poorest income groups," conclude the three researchers, from the World Inequality Lab and from Carlos III University, Imperial College London, and Paris School of Economics.
The study also highlights that "the levels of income inequality are higher" than those obtained in previous studies based on surveys and tax data, and warns of the fall of the progressivity of the tax system: "The tax gained importance with respect to the income TAX during the real estate boom, but with the advent of the financial crisis, his weight dropped dramatically".
1 percent rich 17 percent national income inequality
The increase in inequality is explained because the rich get richer with the crises (they have more financial assets) and because the humblest segments are the hardest hit, since recessions cause more unemployment and wage cuts, analyses co-author Clara Martínez-Toledano, from Imperial College London to El País.
Finally, to address this inequality, the researchers recommend different approaches and policies, such as improving educational policies to close the gap and move towards reducing high unemployment and temporality, hand in hand with "a new productive model that generates new jobs and greater added value" in sectors in which the country has a comparative advantage.
1 percent rich 17 percent national income education
In addition, in the face of the brick-based productive model, "financial education policies, incentives for wealth diversification and the shareholding of workers in their companies are needed," they affirm.
Finally, they point to the fiscal field: "it is key to increase the redistributive nature of the system", with a reform of the Corporate Tax as the "most urgent measure", as well as the search for a harmonization of patrimonial taxation, especially property taxes (IBI, Wealth Tax and Inheritance and Donations).
