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Poverty in Andorra and household income

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On December 29 of last year, the Secretary of State for Economic Diversification and Innovation, Marc Galabert, and the director of the Department of Statistics, Joan Soler, presented the Survey of living conditions, a statistics that report personal income distribution and risk of poverty and social exclusion.

These data, which are collected, written and published annually, correspond to the year 2019 and have been obtained through a face-to-face survey with a arbitrary sample of 800 households from all over Andorra. In this article we will proceed to analyze the most relevant conclusions that can be drawn from said statistics.

Average household income rises

Galabert himself indicated that the survey reveals the fact that in 2019 the average income per consumption unit is 26,245 euros, which implies a 2.9% increase compared to 2018. Likewise, the median stands at 20,370 euros, thus being an increase of 1.9% compared to the previous year.

The distribution of income also presents differences by age groups. Those under 16 years of age are those with the lowest income per consumption unit, with a median of 18,733 euros and an average of 24,027 euros. The group between 16 and 64 years old has a median of 20,888 euros and an average of 26,268 euros, and people aged 65 and over have a median of 18,732 euros and an average of 28,742 euros.

The Gini index also increases

The population was also divided into income quintile bands (grouping the population into five bands) and it has been concluded that income has increased slightly in the top quintiles (in those with more income) and have remained stable in the lower ones. In fact, the upper quintiles (between 35,413 euros and 23,411 euros per year) have increased their income between 0.11 and 1.10 points. This increase implies that they have gone from assuming 42% of total revenues in 2018 to 43.1% in 2019, which translates into a growth of the Gini index (from 34 of 2018 to 35 of 2019).

The Gini index takes values between 0 and 100 to measure inequality in such a way that 0 indicates a perfectly equal income distribution, and 100 shows that the inequality in the distribution is maximum. In any case this It also reflects the success of Andorra in its quest to attract foreign capital and a high-income population from other countries.

Thus, the difference in income is not due to inequality between the better-off classes with respect to the less favored, but among the wealthiest and the middle classes. The Government has already approved several measures that aim to improve the purchasing power of citizens such as the increase in the minimum wage interprofessional hour for the year 2021 of a 3.5%.

In addition, the Council of Ministers approved the Draft law of urgent measures in the matter of leasing of urban properties and of improvement of the purchasing power. A text that also includes an increase of up to 3.5% in the pensions of the Andorran Social Security Fund (CASS) that have a gross amount lower than the minimum interprofessional wage and solidarity pensions.

Comparing these data with those of the European Union, it can be seen that the inequality indicators in Andorra are higher than the average, a fact typical of countries with higher income levels, like Luxembourg or Switzerland, as detailed by the Secretary of State.

The rent overhead

As we already discussed in our article about the cost of living in Andorra, the highest expense to consider as a resident is the rent of the home. And it is that a significant percentage of households with the lowest incomes persist that continue to have a overload caused by housing costs, which means they spend at least a 40% or more than they come in to meet these rental expenses.

Although the subjective perception of the situation of households has been improved, "a significant percentage of households in the first quintile persist with an overburden of housing costs," said Solé. In general terms, the population with housing cost overburden goes from 13.9% in 2018 to 14.3% of 2019.

Decreases severe and relative poverty

However, as Galabert recalled, an increase in inequality does not mean an increase in poverty, and that is precisely what happened in Andorra, where the poverty rate is much lower than that of the environment.

First, we can use the risk-of-poverty threshold, which, according to Eurostat criteria, corresponds to 60% of the median income per unit of consumption. In 2019 (with income data from 2018) the risk-of-poverty threshold for Andorra is 12,222 euros for households with one adult, and 25,666 euros for households with two adults and two children under 14 years of age, and lhe population at risk of poverty was 13%, lower than the European Union average of 17% but higher than the previous year (12.8%).

Although the median 60% is the official at-risk-of-poverty threshold, other thresholds are also calculated for the incidence of severe poverty (median 40%) or relative poverty (median 50%). In this sense, a decrease is observed in both metrics: the percentage of the population living in relative poverty decreased from 8.9% in 2018 to 7.2 in 2019. that of severe poverty went from 4.4% to 4.1%. In fact, severe poverty in Andorra is also below the European Union average.

Low severe material deprivation

Another metric of the Living Conditions Survey (LCA) is severe material deprivation, the proportion of which in Andorra is 5.7%, according to the new criteria introduced by Eurostat in the 2019 survey, which make it impossible to compare it with the 2018 survey (3, 5%) due to the difference in methodology. If the same criteria are taken into account between 2018 and 2019 there is a decrease, going from 4.7% of 2018 to 3% of 2019. This figure is also substantially lower than both the EU average (which is located above 10%) as well as that of neighboring countries.

The AROPE indicator

The AROPE indicator (At Risk Of Poverty and / or Exclusion) can be considered a combination of the indicators of risk of poverty, material deprivation and low work intensity. This indicator increases by two points, from 15.5% to 17.5%, although this is due to the increase in the scale of severe material deprivation due to the change in methodology used. In Andorra this indicator is lower than the rest of European countries, a fact that is partly explained by the low work intensity.

The Secretary of State highlighted the actions being taken by the Government to reinforce the purchasing power of the country's citizens. The actions and programs that have been carried out by the Executive regarding social affairs stand out. This is the case of public spending on social protection in the country, which stands at 208.7 million euros in 2019, an amount that represents an increase of 8.1% compared to 2018, when 193.1 were allocated million euros in this area.

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Household income and poverty in Andorra

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