Horacio Levy, OCDE;
European social welfare systems differ considerably across countries in size, structure and their impact on income inequality. Spain’s system is smaller, more centred on cash contributory benefits and less redistributive than those in other EU members. Structural reforms focusing on the most vulnerable groups (including households with children, young people and women) could contribute to reducing income inequality in Spain – currently one of the highest in Western Europe. The covid-19 crisis increased job insecurity and could have led to a surge in unemployment. In most European countries, including Spain, unprecedented measures – extending access to and the generosity of social programmes – have been taken to avoid a rise in income inequality in the short run. The regressive effects of the crisis on the labour market may persevere in the long run if adequate follow-up measures are not put in place.
Key points
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1Public social spending in Spain makes up 23% of GDP, one of the lowest levels in Western Europe. Furthermore, it is more focused on cash contributory benefits (e.g. pensions and unemployment benefits), which make up 64% of total spending in Spain compared to 52% in the EU-27.
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2In Spain, a larger proportion of cash social benefits goes to higher income than to lower-income households, in contrast to most EU members. While the distribution of benefits across income groups is quite even in the EU, in Spain a household in the top quintile receives 1.6 times more than a household in the bottom quintile.
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3Spain is one of the most unequal countries in Western Europe, as the distribution of market incomes is uneven and tax-benefit redistribution is not very strong.
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4Structural reforms would be needed to effectively reduce inequality, since small tax-benefit increases would have limited effect on income redistribution.
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5Relative to disposable income, social spending in Spain is lower than the EU average for children (by 38%), for young people (by 45%) and for women (by 16%).
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6Policies introduced to alleviate the economic consequences of the covid-19 pandemic have been effective to fight income inequality in the short run. The regressive effects of the crisis on the labour market may persevere in the long run if adequate follow-up measures are not put in place.
Share of total social cash benefits received by quintiles of household disposable income in 2018 (%)
In Spain, cash social benefits favour higher-income households. In Europe, the
distribution is more even, as contributory benefits are less skewed and complemented with means-tested and universal benefits.
