Capital losses reduce inequality

Huge capital losses within households at the top of the income distribution contracted income differentials.

2008 was once again a year of substantial rises in household income. The median equivalent income rose by 3.9 percent in fixed prices. The corresponding figure for 2007 was 7.5 percent.

Weaker growth in top incomes

People at the top of the income distribution had a slightly weaker growth in household income compared to the median. The income of the highest income class (the 90th percentile) grew for instance by 3.5 percent in 2008. For people at the very highest part of the income distribution, for instance the 95th and 99th percentile, the rise in household income was even smaller. The financial situation of households at the top of the income distribution is strongly influenced by changes in the financial markets. In the wake of the finance crisis, many shareholders sold off shares that had fallen in value. These capital losses led to a weaker growth in household income for those at the top of the income distribution compared to people in the middle of the distribution. The share of total household income received by the top decile was reduced from 21.4 percent in 2007 to 20.8 percent in 2008.

Even people at the bottom of the income distribution experienced a weaker income growth than the median in 2008. The lowest income class (10th percentile) had an increase in household equivalent income of 3.3 percent in 2008. Many of the people that constitute the lowest income classes are newly-arrived immigrants. The number of immigrants coming to Norway in 2008 was the highest ever.

Source: Statistics Norway

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