„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. Continue reading