To measure income inequality, the Gini coefficient is used, a scale from 0, meaning everyone earns the same income, to 100, meaning one person holds all the income in the economy. In Spain, the Gini coefficient stood at 31.5 in 2023 (29.9 in Catalonia and 29.6 for the European Union as a whole), the lowest level since 2004, prior to the financial crisis. (Source: INE and Eurostat data)
What explains this decline in inequality? First, the economy has grown, creating a large number of jobs. Second, the rise in the minimum wage has played a significant role, as I will explain below. Third, there has been an expansion of redistributive policies during the last three crises — financial, COVID, and energy. Some of these measures include the Minimum Living Income, ERTE programs, inflation relief, and increasingly progressive tax policies. (Source: national policy reviews)
The evolution of wages, as published by the EPA, shows how the distribution of labor income has shifted in recent years. Nominally, before factoring in inflation, the average gross wage for wage earners in Spain rose by 16.9 percent between 2018 and 2023, reaching 2,273 euros per month in 2023. But the gains were not shared equally. Wages increased more for lower-income groups: women by 20.8 percent, under-24s by 27.1 percent, immigrants by 29 percent, part-time workers by 22.7 percent, and workers with primary education by 29.2 percent. All of these groups benefited from the rise in the minimum wage, which climbed 54 percent from 2018 to 2023. (Source: INE EPA data)
Undoubtedly, the minimum wage has contributed decisively to narrowing wage inequality, demonstrated by the falling gap between the average pay of the bottom decile and the top decile, from a ratio of 10 to 8.4. (Source: INE wage data)
Why, if inequality has fallen and the economy continues to grow, is public sentiment so negative? On one hand, inflation has risen, reducing the purchasing power of wages. This phenomenon does not necessarily show up in the Gini index, which measures income inequality, but it does affect living standards. Between 2018 and 2023, inflation rose by 16.1 percent while the average wage rose by 16.9 percent, meaning real wages were almost unchanged from five years earlier. On the other hand, rental costs have surged, dampening consumption and savings for households. In the 2018–2023 period, the average rent increased by 21 percent, and including 2024, the rise reaches 35 percent (Barcelona up to 45 percent), well ahead of real wage growth. Young people and immigrants are the hardest hit, as renting becomes more common than home ownership. The share of young people who own their homes fell from 69 percent in 2011 to 32 percent in 2022. (Source: inflation and rental market analyses)
In short, income inequality has declined, but this is only part of the problem. To sustain economic progress for society and future generations, it is essential to address the distribution of accumulated wealth, including housing and financial assets. There is often a positive link assumed between income inequality and wealth inequality, since higher earners can acquire more property and financial assets that generate further income. Yet this relationship has weakened in recent years, because lower-income groups face high rental costs that limit saving and wealth formation, while those who already hold wealth see rents and asset returns climb, widening the wealth gap. (Source: wealth distribution studies)
For this reason, it is crucial to pursue policies that reduce income inequality while implementing housing policies that enable workers to save and build wealth. This combination supports not only current living standards but also long-term prosperity for future generations, as has happened in the past and should continue to do so. (Policy synthesis)