„Austria, Island of the Blessed“? Social Inequality and Wealth Distribution in Austria

Since 2008 the European Union has been in its, deepest economic and social crisis so far. There is a return of mass-unemployment and poverty; especially in Southern and Eastern Europe. Generally, social inequality is on the rise all over the member states. In this severe economic and social environment Austria is often presented as an exception, as one of the countries with the lowest unemployment rate in the EU (Eurostat calculation: 5%, national rate: 10%). Moreover, income inequality is much less pronounced than in other OECD countries and collective bargaining still covers about 90% of employees. While the relative success of the “Austrian Model” (Hermann/Atzmüller 2009) thus seems evident by international comparison, the outlined data tend to give an incomplete picture. Overarching indicators obscure an increasingly segmented and divided social structure. Therefore, a closer look at the social situation in Austria is necessary.

Economic development and trends on the labor market

The relative success of the “Austrian Model” in relation to its labor market performance, structures of social inequality and poverty rates are closely linked to the country’s economic position within the European Union and its severe economic imbalances which contributed to the crisis developments since 2008. Austria is – similarly to Germany – among the most export-oriented countries within the EU. But the viability of an export-oriented strategy is mostly based on a rather restrained development of wages and labor costs – especially if compared to other European countries –, negotiated under the Austrian system of social partnership.

Wage growth and productivity in Austria
OECD 2014: Wage growth and productivity in Austria

In Austria – again similarly to Germany – the effect of wage moderation to foster exports was a considerable reduction of the wage share of GDP (by 15% to 20%, leaving a net wage share of the GDP of less than 60% since the early 1990s). The ratio between wage growth and productivity became more unequal in the last decades: Thus, since 1980 labor productivity increased far quicker than real wage rates. Eurostat data from 2013 shows that Austria is ranked on place 4 in terms of productivity within the EU countries.

Over the last decades real wage rates even stagnated. The average increase of real wages per year was 1% between 1990-2000, this was less than the average inflation rate. Statistik Austria Data even shows that yearly gross wages (after inflation) for the lowest three or four deciles decreased between 2002 and 2010, while remaining rather flat for the other deciles.

Notwithstanding the fact that the unemployment level in Austria is relatively low by international comparison, the unemployment rate has more or less increased continuously since the beginning of the crisis in 2008 – reaching an “all-time record” for the post-war period in 2015: Over 350.000 people are currently unemployed (5.6% according to Eurostat) plus over 60.000 people are currently in training and activation measures. This represents an increase of about 50% (in absolute numbers) since the onset of the financial crisis in 2008. Unemployment is highly concentrated among low-skilled people (below apprenticeship level). Their unemployment rate amounts to 25% nationally, almost 40% for low-skilled men in cities such as Vienna. Altogether, the low-skilled people amount for 45% of all unemployed.

Income inequality and wealth distribution

Compared to international developments, the income inequality levels are seemingly still rather moderate in Austria. Nevertheless a slow, but continuous rise in income inequality among Austrian households could be observed over the last two decades: The Gini coefficient rose between 1993 and 1999 from 23.8 to 25.2; between 2004 and 2010 it rose again from 25.3 to 25.6. When self-employed households are included in the analysis the Gini coefficient was 26.1 in 2010. In the 1990ies especially the poorest segments in society lost ground; since the 2000s also the middle classes lose ground relative to the top: Between 1990 and 2011 the income share of the poorest 20% declined by 47% while the income share of the top 20% increased by 8%. The income share of the top 1% even rose by 16%. (www.verteilung.at; data: Statistik Austria).

Gender Pay Gap
Gender pay gap (OECD 2013: 22)

These, still comparably moderate, levels of income inequality also obscure considerable inequalities between different social groups and strata (such as men and women or Austrian nationals and people with a migrant background). By taking these differences into account a rather segmented and increasingly polarized social structure in Austria can be revealed: According to OECD data, the gender pay gap in Austria is very high compared to international standards. This is linked to a conservative and familialistic welfare state model which fosters traditional gender divisions of labor through reliance cash transfers. A lack of child care places and the prevalence of traditional family norms put the burden to reconcile work and family life on women. This is reflected in lower labor market participation rates of women and relatively high rates of part-time employment (>45%). As the Austrian welfare system is employment-centered, this means that women face considerable problems in building up adequate social rights (e.g. for retirement).

The Gini coefficient also obscures the ethnic stratification in Austria: About 16% of the Austrian workforce is non-national. Their share among low-skilled employees is 25% with many foreign workers having experienced processes of disqualification. Consequently, they are confronted with a considerably higher rate of unemployment than Austrian nationals. (Absolute) unemployment figures of non-nationals have increased by more than 100% since 2008. Against the backdrop of these labor market problems for migrants it comes as no surprise that they also reveal higher rates of poverty than Austrian nationals.

Poverty rate (after social transfers) Gap
Austrian nationals 12% 19%
Austrian nationals with migrant background 18% 18%
Non-nationals 33% 29%

SILC 2014: Poverty rates

Another indication that some aspects of social inequality in Austria are obscured in the overall picture was recently shown by the HFCS survey (Household, Finance and Consumption Survey) of the European Central Bank: Austria is one of the countries with the highest inequality in the distribution of wealth and property. The Gini coefficient for gross financial assets was 0.66 in 2004. The data from the HFCS (2012) now even reveals a Gini coefficient for the distribution of wealth above 75% in Austria. It also shows how unequal the wealth distribution in Austria is: The top 1% owns around 40% of the gross assets in Austria; the poorer half (50%) owns only 2%. We can further see a high social closure in the distribution of wealth in Austria: Only 5% of the employed in Austria earn money through revenues from rents, interest rates or share-holds. Moreover, most of the time wealth and property is inherited: only 10% of the poorest households, but over 75% of the richest households expect inheritance.

Summary

Even though the social situation in Austria seems rather stable and less unequal or polarized by international comparison, our rather incomplete analysis raises some doubts about the future viability of the “Austrian model”. The social structures in Austria are increasingly polarized and segmented along gender and ethnic divisions. This reveals that even in countries which seemed to be less affected by the crisis or even gaining from it, certain social groups tend to lose out.

For further information and references on social inequality in Austria see: https://sozialeungleichheit.wordpress.com/ (only in German)


Roland Atzmueller

Roland Atzmüller is an assistant professor at the Institute of Sociology at the Johannes Kepler University Linz (JKU). He works on theories of capitalism, welfare states and active labor market policies.

Julia Hofmann

Julia Hofmann studied sociology at the University of Vienna. Currently she is a PhD student and university assistant at the Institute of Sociology at the Johannes Kepler University Linz. Her research interests are social inequality, social protests and trade unions.

 

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