The cost of incompressible expenditure accentuates inequalities
In the 37th issue of the series Social Change in Switzerland, Oliver Hümbelin and his colleagues show, on the basis of tax data for 3 million people, that taking into account the cost of living accentuates inequalities in Switzerland. The main reason for this is the high cost of housing, health insurance premiums and everyday consumer goods, which weigh much more heavily on poor households than on the better-off.
Studies of economic inequality generally focus on differences in the distribution of income and wealth. The cost of living is then often neglected, even though economic well-being depends first and foremost on the ability to consume. This is why a new study, based on tax data from 3 million people, examines how the distribution of income in Switzerland changes when spending on everyday consumer goods, housing costs, health insurance premiums and direct taxes are taken into account.
The study shows that the poorest decile of the population uses 82% of its household income to cover incompressible expenses (living expenses, housing, health insurance and taxes) - compared with 31% for the richest decile. Health insurance premiums weigh particularly heavily in the balance. While the richest decile spends just 3% of household income on health insurance, the poorest decile spends 21%, of which only a third is offset by premium reductions.
As a result, when incompressible expenses are taken into account, inequalities in disposable income increase considerably. It is spending on everyday consumer goods and housing in particular that accentuates inequality. Direct taxes and premium reductions only very partially offset this increase. Despite premium reductions, health insurance premiums are also exacerbating inequalities, and increasingly so over time. Since 1997, the average health insurance premium has risen by 140% in real terms, while the relief provided by premium reductions has increased by only 41%.
>> Hümbelin, Oliver, Farys, Rudolf & Jann, Ben (2024). Comment le coût de la vie aggrave les inégalités. Social Change in Switzerland, N°37, www.socialchangeswitzerland.ch
Contact:
- Prof. Oliver Hümbelin, Haute école spécialisée bernoise BFH, +41 (0)31 848 36 97, oliver.huembelin@bfh.ch
The series Social Change in Switzerland continuously documents the evolution of the social structure in Switzerland. It is published jointly by the Swiss Competence Centre for Social Sciences FORS and the LIVES Centre - The Swiss Competence Centre for Research on Life Courses and Vulnerabilities. The aim is to trace changes in employment, family, income, mobility, voting or gender in Switzerland. Based on state-of-the-art empirical research, it is aimed at a wider audience than just specialists.