Disposable household income provides an indication of the goods and services families can purchase on the market. It is thus an objective indication of material quality of life, and it is used to measure poverty and inequality. Converting national currencies into US dollars using the purchasing power parity allows for a meaningful comparison across countries.
In 2016, the median disposable household income in Luxembourg was eight times higher than in Mexico and about two times higher than in Spain ( 4.1). Countries with low levels of median household income include Chile, Mexico, Turkey and many Eastern and Southern European countries. Luxembourg, Norway and Switzerland are the top-3 countries with the highest median disposable household income. Median incomes are generally lower in emerging economies than in OECD countries.
In most OECD countries for which long-term data are available, median income has been growing faster than income at the bottom of the distribution and slower than at the top since the 1980s ( 4.2). Income growth has been considerably slower across the distribution since the 2008 global financial crisis than in previous decades, despite the redistributive effect of public cash transfers and personal income taxes during this period. These general trends hide strong differences across countries. For instance, as a result of the financial crisis, median income in Greece was still 10% lower in 2016 than in 1985. By contrast during the same period, median income increased significantly in Israel, Luxembourg, Norway, Sweden and the United Kingdom.
The middle class plays an essential role for the economy as well as for social and political stability. On average 61% of the population across the OECD lives in the middle-income class, defined here as households earning between 75% and two times the median national income ( 4.3). This share ranges from around half in Chile, Israel, Mexico and the United States to around 70% in Nordic and some Continental European countries. On average across the OECD, the lower income group makes up to 30% of the population and the upper income group accounts for 9% of the population. In emerging economies except the Russian Federation, the upper income group accounts for 20-25% of the population.
