Income and Expenditure: Slovakia

Euromonitor International 07 March 2013

Slovakia posted robust GDP gains on the back of European Union accession in 2004 and euro adoption in 2009, in its Tatra Tiger period, underpinning decent hikes in income and spending. Outlay is supported across income groups by Slovakias status as the second most equal country in the world. Accounting for over half the population, social class D is the countrys largest, supporting demand for businesses such as private labels and discounters.

EXECUTIVE SUMMARY
Slovakia's per capita annual disposable income and consumer expenditure posted hikes of 15.7% and 9.4% in real terms over the 2006-2011 period, to reach 7,910 (US$10,998) and 7,225 (US$10,046) respectively in 2011, as the Slovakian GDP advanced by 19.7% in real terms over the period; Slovak individuals in their fifties had the highest average gross income, with the 55-59 demographic earning 14,346 (US$19,947), followed closely by the 50 -54 age group on 14,330 (US$19,925) and the 45 -49 cohort on 14,097 (US$19,602). Elderly Slovaks aged 65 and over are dominant among the country's richest citizens, accounting for 27.4% of the population in receipt of a gross income over US$150,000 (constant terms) in 2011; In 2011, social class D was the biggest class, making up 50.1% of the total population aged 15+, or 2.3 million people, followed by social class E, accounting for 20.0% of the population aged 15+ or 914,300 people. With social classes D and E combined accounting for 70.1% of the total population aged 15+, this suggests that midto low-priced products and services would find a sizeable potential customer base; Slovakia has a significant middle class defined as households with between 75.0% and 125% of median income of slightly above 1.0 million households or 45.6% of the total number of Slovakian households in 2011. This cohort advanced by 3.9% between 2006 and 2011 and is a great target for marketers and planners from across all industries, such as restaurants, kitchenware, home furnishings and air travel; Over the 2013-2020 period, total consumer expenditure is forecast to grow by 30.1% in real terms, on the back of the increase in annual disposable income, which is poised to advance by 29.5% in real terms during the same period. The fastest growing categories in consumer expenditure are set to be household goods and services (44.6%), education (38.7%) and miscellaneous goods and services (35.3%); In 2011, the highest earning 10.0% of Slovakian households (decile 10) spent 4.1 times more than the poorest 10.0% of households (decile 1) while their annual disposable income was 5.5 times higher, revealing the high equality generated by Slovakias welfare system, allowing marketers and planners to draw a more general consumer profile formed from higher as well as lower income households that share similar spending habits.
Chart 1 Per Capita Disposable Income in Eastern Europe: 2011

Source:

Euromonitor International from national statistics

DISPOSABLE INCOME, EXPENDITURE AND SAVINGS

Third highest per capita income in Eastern Europe underpins expenditure
Slovakia's per capita annual disposable income and consumer expenditure posted hikes of 15.7% and 9.4% in real terms over the 2006-2011 period, to reach 7,910 (US$10,998) and 7,225 (US$10,046) respectively in 2011, as the Slovakian GDP expanded by 19.7% in real terms over the period, despite a real decline of 4.9% year-on-year in 2009 as a result of the global economic crisis of 2008-2009. After growing strongly by 8.9% and 4.8% year-on-year in real terms in 2007 and 2008 respectively, per capita annual disposable income posted a small real decline of 0.4% in 2009, while in 2010 improving economic conditions brought an advance of 3.4% year-on-year in real terms. In 2011, as a result of the fallout of the eurozone sovereign debt crisis, per capita annual disposable income fell by 1.5% yearon-year in real terms. Per capita consumer expenditure registered a slightly different pattern. After growing strongly by 6.5% and 5.8% year-on-year in real terms in 2007 and 2008 respectively, the indicator posted declines for the next three consecutive years, falling by 1.8%, 0.5% and 0.7% in 2009, 2010 and 2011, all year-on-year in real terms respectively, as the 2008-2009 global financial crisis and the 2011 eurozone sovereign debt crisis made Slovakian consumers warier. Slovakians saved less during the period of economic boom and started saving more when facing economic uncertainties. In 2011, the savings ratio stood at 8.7% of disposable income, advancing strongly from 3.6% registered in 2006, explaining the three consecutive years decline in consumer expenditure over the 2009 -2011 period. This pro-cyclical behaviour of Slovakians, which tends to exaggerate the economic swings, suggests that marketers and planners should prepare for higher expenditure levels in boom periods and an increasing savings ratio and lower consumer spending in recessionary or turbulent times. Slovakias savings ratio in 2011 was below regional peers like Ukraine (18.8%), Russia (17.2%) and Belarus (12.5%) but higher than Latvia (-3.1%), BosniaHerzegovina (-4.1%) and Romania (-6.8%). By 2020, Slovakia's savings ratio will ease to 7.9% of disposable income, boding well for the overall consumer expenditure levels. In 2011, Slovakia had the third highest per capita annual disposable income in Eastern Europe, after Slovenia and the Czech Republic, providing enough room for discretionary spending. In 2011, 57.5% of total consumer expenditure

was spent on discretionary items (all items except food, non-alcoholic beverages and housing), up slightly from 56.4% in 2006, due to the economic advance that Slovakia witnessed over the period, leading to an increase in living standards. In the short term, per capita annual disposable income is poised to register small declines, falling by 0.8% in 2012 and another 0.8% in 2013, while per capita consumer expenditure is forecast to dip by 0.3% in 2012 and a further 0.6% in 2013 all year-on-year in real terms, as the entire eurozone, of which Slovakia is part, grapples with austerity measures in response to the sovereign debt crisis, which dents income and expenditure levels. Over the 2013-2020 period, per capita annual disposable income and consumer expenditure will register an average annual real growth of 3.6% and 3.7% respectively, stronger, but slightly lower than the respective 3.7% and 4.5% annual real growth posted in the 2000-2007 period. These still impressively strong rates of growth for an advanced Eastern European economy like Slovakias bode well for companies across sectors, allowing them to gain market share and increase their customer base, while newcomers to the Slovakian consumer market will find a propitious environment for business growth underpinned by the rising levels of income and expenditure, as well as by the common currency.
Chart 2 Per Capita Annual Disposable Income, Spending and Savings Ratio: 2006-2020

US$ per capita; % of disposable income

Source: Note:

Euromonitor International from national statistics/trade sources/OECD/Eurostat Per capita disposable income and consumer spending are expressed in constant 2011 prices, fixed 2011 US$ exchange rate. Data for 2012-2020 are forecasts.

GROSS INCOME BY AGE

Fifty-something Slovakians are the big earners
In 2011, Slovak individuals in their fifties had the highest average gross income, with the 55-59 demographic earning 14,346 (US$19,947), followed closely by the 50 -54 age group on 14,330 (US$19,925) and the 45 -49 cohort on 14,097 (US$19,602). Members of these age groups are often at the peak of well -established and successful careers, many of them in top management or executive positions in the public sector or private companies. High-quality suits and footwear, as well as grooming and personal care products, are common purchases by these cohorts. Comfort and family life are very important to them, and they accordingly devote sums to family cars, home entertainment electronics, holidays abroad as well as their childrens education. By 2020, there will not be any change at the top of the average gross income rankings, allowing marketers and planners to devise business plans for the same type of consumer segment at least for the medium term. The 55-59 cohort will still enjoy the highest average gross income in 2020 at 18,582 (US$23,876), followed by the 50-54 demographic on 18,556 (US$23,843) and the 45-49 age group on 18,316 (US$23,534). Elderly Slovaks aged 65 and over are dominant among the country's richest citizens, accounting for 27.4% of the population in receipt of a gross income over US$150,000 (constant terms) in 2011, followed at quite a distance by the 60-64 age group at 11.8% of Slovaks making US$150,000+ (constant terms). Regionally, most of the Western European nations and half the Eastern European countries have the same age group (65+) dominating the most affluent consumers. This bodes well for marketers and planners aiming at this consumer segment who are seeking to increase their regional presence. Businesses from medical services such as mobility aids to cultural venues like opera and classical music concerts should, therefore, find a wide audience. By 2020, the 65+ age group will remain the prominent demographic among the very top earners, representing 31.0% of those making over US$150,000 (in constant terms). In second place, at a big distance, will still be the 60-64 demographic on 12.4%. The ongoing high numbers of mature consumers among the uppermost earning bracket is indicative of lasting commercial potential for companies whose products and services target the affluent elderly,

such as cruise companies, luxury travel and resorts, medical services and mobility aids, such as adapted vehicles and stair lifts, and cultural venues. This underscores the potential of mature consumer segments.
Chart 3 % of total Selected Income Bands by Age: 2011

Source:

Euromonitor International from national statistics

Slovakia's total gross income map for 2011 contains two "hot spots" the red areas that indicate the highest total income. The first hot spot, which is the larger, outlines an age range of about 15 -40, with a corresponding annual gross income span of approximately US$8,000-US$18,000 per capita. This hot spot represents young to adult Slovakians and is owing to their high prevalence in the population. In 2011, 38.9% of all Slovakians were in the 1539 age group. At the younger end of the spectrum are individuals finishing their studies and just entering the labour force. Most of them are still living with their parents so they can devote most of their income to discretionary categories like communication devices (smartphones, tablets, laptops), branded clothing and footwear, cultivating their hobbies through purchasing sport equipment and travel, as well as towards personal care items. Towards the middle and the end of the hot spot are young adults enjoying a decent standard of living, most of them with families and a successful professional career. Their spending typically includes family cars and holidays abroad, household appliances and home furnishings, as well as dining out with their family and friends. The second hot spot, which is slightly smaller, represents mature Slovakians from 44 to 58 years old in receipt of an annual gross income of about US$14,000-US$17,000 per capita. This hot spot is formed of individuals who are reaping the benefits of a successful professional career, most of them with children at or approaching university age, while towards the older end of the spectrum are Slovakians approaching retirement. These Slovaks will take a traditional approach to spending, devoting funds to safeguarding their health, their family comfort and their childrens education with expenditure on medical services, family holidays and private tuition.
Chart 4 Total Gross Income Map: 2011

Source: Note:

Euromonitor International from national statistics The horizontal axis depicts the age of individuals and the vertical axis the distribution of per capita income by annual gross income brackets. The shading refers to the total income in thousand US$. The closer to red, the larger the amount of total income in that age and income range.

SOCIAL CLASS BY AGE

Elderly Slovakians dominate top class
Slovakia's social system is based disproportionately on low earners. In 2011, social class D was the biggest class, making up 50.1% of the total population aged 15+, or 2.3 million people, followed by social class E, accounting for 20.0% of the population aged 15+ or 914,300 people. With social classes D and E combined accounting for 70.1% of the total population aged 15+ in 2011, mid- to low-priced products and services would find a sizeable potential customer base in the Slovakian market. Social class A consisted of 310,600 people in 2011, or 6.8% of the Slovakian population aged 15+. By 2020, this category will have grown to encompass 316,600 individuals and will represent 6.9% of the total Slovakian population aged 15 and above. In 2011, the 65+ demographic was the most prominent in social class A at 16.3%, followed by the 55-59 age group at 11.3%. Across Eastern Europe, the 65+ demographic is the largest age bracket in social class A in Bosnia-Herzegovina, Croatia, the Czech Republic, Georgia, Hungary, Poland, Russia, Serbia and Slovenia while the rest of the countries of the region had a lower age bracket dominating social class A in 2011. Business models that are built on a sizeable contingent of affluent elderly could, therefore, enjoy success in many regional markets, following some linguistic and cultural tailoring. Marketers and planners will be able to draw up long-term business plans aimed at elderly consumers, as this age group is set to increase. Due to the ageing of the population, the 65+ demographic will grow in size by 2020 to make up 20.6% of social class A, followed by the 40-44 cohort on 11.8%. This is further evidence of the rising might of the grey euro.

Chart 5 %

Age Composition of Social Classes ABCDE: 2011

Source:

Euromonitor International from national statistics

HOUSEHOLD INCOME DISTRIBUTION

Second most equal country in the world
Slovakia's Gini index was 26.2% in 2011, ranking it 2nd out of 85 countries for income equality. Slovakia is one of the most equal nations in the world, due to its socialist legacy and progressive welfare policies. A score of zero on the Gini index suggests perfect equality and a score of 100% indicates total inequality. Compared to its regional peers, Slovakia ranked behind the Czech Republic (1st), but ahead of Hungary (4th), Slovenia (8th) and Romania (12th) in the same year. Slovakia's Gini index advanced only fractionally from 26.0% in 2006, as its strong socialist policies prevented a higher increase. In the short term, income inequality is set to rise incrementally, to reach 26.3% in 2013, capped by the approved rise in taxation for rich Slovakians, while by 2020 Slovakia's Gini index will advance slowly to 26.5%, making it the most equal country in the world, as the Czech's Republic score is set to increase faster to reach 27.1% in 2020, from 25.9% in 2011. In 2011, the richest 10.0% of households (decile 10) commanded 21.9% of total annual disposable income, compared to 4.0% for the poorest 10.0% of households (decile 1). Between 2006 and 2011, the greater gains in income were netted by the lower-income groups. For example, households in decile 1 posted a 17.1% increase in annual disposable income in real terms over the 2006-2011 period, households in decile 5 saw a 14.9% advance, while decile 10 households had a 4.3% increase, attributable to Slovakia's welfare provision, which supports the income of the less affluent. Slovakias mean household income stood at US$25,907 in 2011, although around 61.5% of households were in receipt of less than this figure. The median household income the figure that divides the household income distribution into two equal groups, half having disposable income above that amount and half having income below it of US$23,017 is more reflective of realities on the ground and would be a more useful benchmark for marketers and planners. In line with the country's high levels of income equality, Slovakia has a significant middle class defined as households with between 75.0% and 125% of median income of slightly above 1.0 million households or 45.6% of the total number of Slovakian households in 2011. Slovakia's middle class has a relatively high purchasing power judged by Eastern European standards. This middle class advanced by 3.9% between 2006 and 2011 and is a great target for marketers and planners from industries, such as restaurants, kitchenware, home furnishings, flights, apparel, gadgets, shopping centres entertainment and sports equipment. In 2011, the household income bracket of US$15,000-US$25,000 (in constant terms) included the most Slovakian households at 975,400 or 42.6% of the total number of Slovakian households, followed by the US$25,000US$35,000 (in constant terms) accounting for 524,900 households or 22.9% of total households. These mid-earning Slovakian households typically devote funds to categories like household appliances, home electronics such as Smart TVs, Blu-ray players and high-end sound systems, family cars and foreign holidays. By 2020, the household income bracket of US$15,000-US$25,000 (in constant terms) will still encompass the most Slovakian households, although it will have shrunk to stand at 864,000 or 36.3% of the total number of households, as the adjacent income bracket will see a higher number of households. The income bracket of US$25,000US$35,000 (in constant terms) will grow to encompass 662,500 households or 27.8% of the total Slovakian households in 2020. However, the greatest expansion will come higher up the income spectrum, with the income

bracket of US$55,000-US$75,000 (in constant terms) posting the strongest growth of 62.8% between 2013 and 2020, followed closely by the US$45,000-US$55,000 (in constant terms) income bracket with a 57.8% projected advance for the same period. This outlines the growing commercial potential of middle- to high-earning households whose purchasing power is similar to that of their Western European counterparts, opening up a market for premium products and services, such as foreign travel, designer clothing and footwear, new cars and jewellery.
Chart 6 % Household Income Distribution: 2011

Source:

Euromonitor International from national statistics

CONSUMER EXPENDITURE
Household goods and services and education to drive growth
Slovakian consumers allocated 42.5% of total consumer expenditure to non-discretionary items, such as food, nonalcoholic beverages and housing, in 2011 and the remaining 57.5% to discretionary spending, such as miscellaneous goods and services which includes the luxury goods category, leisure and recreation, transport and household goods and services. Total Slovakian consumer expenditure advanced by 10.0% in real terms between 2006 and 2011. The most dynamic growth category during this period was health goods and medical services, which climbed by 33.3% in real terms, due to the increasing number of older consumers who are generating demand for items, such as medical supplies, vitamins and exercise equipment, leading to a sharp rise in spending on pharmaceuticals. It was followed by household goods and services with a 25.8% period gain in real terms, as the increase in disposable income over the period, coupled with a strong property market, allowed Slovakians to increase their expenditure on this category, with most of the gains coming in 2007 and 2008. Spending on leisure and recreation saw the third highest growth over the 2006-2011 period, advancing by 24.5% in real terms, as the developing market included a greater variety of ways to spend on entertainment. Only one category posted a decline over the 2006-2011 period, hotels and catering, which plunged by 16.9% in real terms, mostly due to a real 13.5% year-on-year drop registered in 2009 due to the global economic downturn. After a strong advanced of 6.6% in 2007 and 5.9% in 2008, year-on-year in real terms, total consumer expenditure declined marginally for three consecutive years between 2009 and 2011, due to the 2008-2009 global financial crisis and the 2011 eurozone sovereign debt crisis. Slovakias annual disposable income and consumer expenditure have tended to move in synchronisation, diverging slightly in 2009 when an increased tendency to save pegged back growth in consumer expenditure. In the short term, consumer expenditure is expected to marginally decline, with a 0.2% drop in 2012 and another 0.4% fall in 2013 year-on-year in real terms, as annual disposable income is forecast to decline by 0.6% in 2012 and another 0.7% in 2013 year-on-year in real terms, due to low foreign demand for Slovakian exports, as the main European trading partners have instated austerity measures in response to the eurozone sovereign debt crisis and due to the Slovakian government spending cuts and tax hikes.

Over the 2013-2020 period, total consumer expenditure is forecast to grow by 30.1% in real terms, on the back of the increase in annual disposable income, which is poised to advance by 29.5% in real terms over the same period. The fastest growing categories during this period will be household goods and services with a projected growth of 44.6% in real terms, followed by education with a 38.7% hike in real terms and miscellaneous goods and services with a 35.3% advance in real terms on the back of a general increase in living standards, which will support discretionary spending. The average annual real growth in Slovakias total consumer expenditure is projected to stand at 3.8% during the 2013-2020 period, still solid, but weaker than the 4.5% posted over the 2000-2007 period. This implies that marketers and planners will find a propitious environment for increasing revenues, market share and customer base, while newcomers will find favourable grounds to enter the Slovakian consumer market.
Chart 7 2006=100 Real Growth Index of Consumer Expenditure by Selected Category: 2006-2020

Source: Note:

Euromonitor International from national statistical offices/OECD/Eurostat Data for 2012-2020 are forecasts.

CONSUMER EXPENDITURE BY REGION

Relative uniformity in expenditure patterns across regions
Regionally, Slovakia sees only small differences in total consumer spending. In 2011, the top-ranking region for total consumer expenditure was Bratislava at US$8.1 billion, or 14.9% of total consumer spending nationwide. This region encompasses the capital Bratislava, the largest city in Slovakia and the countrys political and economic centre. It has the advantage of bordering Austria and the Czech Republic, thus benefiting from a slew of cross-border trade and investment. This was followed by the region of Nitra and Kosice, making up US$7.2 billion and US$7.1 billion (or 13.2% each of the total consumer expenditure nationwide), while the region of Trencin posted the smallest consumer expenditure, at US$5.8 billion or 10.6% of the total consumer spending in Slovakia in 2011. In 2007 and 2008, the region of Bratislava saw big year-on-year gains in consumer expenditure of 24.7% and 15.4% respectively in nominal US$ terms, as the overall economy was growing rapidly. The global financial crisis of 20082009 had its first effect on regional spending in 2009 when spending in Bratislava declined by 6.4% year-on-year in US$ nominal terms, followed by another smaller decline of 3.9% year-on-year in US$ nominal terms in 2010. In 2011, however, the indicator posted a strong rebound with an annual gain of 8.9% in US$ nominal terms. The region of Bratislava also had the highest regional consumer expenditure on a per household basis, at US$28,086 in 2011, as the capital city generates the highest paying white-collar jobs. During the same year, the lowest regional consumer expenditure per household was registered in Ban Bystrica at US$21,076, in part due to sparse demographics. On a per household basis, consumer expenditure does not differ too much across regions, owing to the fact that Slovakia enjoys high levels of income and spending equality. For example, in 2011, spending on non-discretionary categories, such as housing and food and non-alcoholic beverages, ran from 39.5% registered by the region of Bratislava to 44.8% in the region of Kosice. Some small differences exist between the regions. For example, in 2011, the leisure and recreation category saw a 12.7% chunk of household spending in the region of Bratislava while the

lowest proportional spending on this category was registered in the region of Trencin at 7.7%, as the capital is home to more wealthy Slovakians who can devote funds to this category. Most of the other discretionary categories see approximately the same pattern of consumer expenditure across regions. The relative uniformity between expenditure patterns in Slovakias regions, combined with the countrys significant and expanding middle class, recommends considering the entire country for investment. The capital Bratislava should be a starting point for marketers, as it is the main hub for the country's financial sector and service industries. Over the 2013-2020 period, per household spending in all regions is forecast to expand by around 33.0% in US$ nominal terms.
Chart 8 Household Expenditure by Region: 2011

US$ per household

Source:

Euromonitor International from national statistics

EXPENDITURE BY INCOME LEVEL

Wealthy Slovakians dominate education and transport spending
In 2011, the highest earning 10.0% of Slovakian households (decile 10) spent 4.1 times more than the poorest 10.0% of households (decile 1) while their annual disposable income was 5.5 times higher, revealing the high equality generated by Slovakias welfare system. Overall spending patterns vary to some extent across incomes but most households spend heavily on categories like housing and food and non-alcoholic beverages. In 2011, decile 1 households apportioned 57.2% of their total expenditure to the non-discretionary categories of housing and food and non-alcoholic beverages, compared with 46.1% of total spending by households in decile 5 and 31.7% in decile 10. In 2011, the poorest 10.0% of households spent most on housing (33.9% of their total spending outlay), food and non-alcoholic beverages (23.4%) and alcoholic beverages and tobacco (8.6%). Middle earning households (decile 5) spent most on housing (27.7%), food and non-alcoholic beverages (18.4%) and miscellaneous goods and services (9.7%) while the highest earning households (decile 10) spent most on housing (19.3%), leisure and recreation (13.5%) and food and non-alcoholic beverages (12.4%). During the same year, the miscellaneous goods and services category, which includes luxury goods, accounted for 7.2% of total spending by decile 1 households, 9.7% by decile 5 households and 11.5% by decile 10 households, revealing that even the poorer households devote important funds to this category. Consumer spending patterns up and down the income ladder were not greatly affected by the 2008-2009 global economic downturn, with all deciles increasing their expenditure on discretionary categories over the 2006-2011 period. In 2012 and 2013, all deciles will decrease slightly their allocation towards non-discretional categories, and towards 2020 the trend will continue with an increasing proportion of household funds going on discretionary

categories, as the Slovakian economy is poised to register solid growth rates, with real GDP forecast to post average annual growth of 2.7% between 2013 and 2020, which will help boost consumer confidence and expenditure levels.
Chart 9 Household Expenditure of Deciles 1, 5 and 10 by Category: 2011

% of total consumer expenditure of each decile

Source: Note:

Euromonitor International from national statistical offices/OECD/Eurostat A: Food and non-alcoholic beverages; B: Alcoholic beverages and tobacco; C: Clothing and footwear; D: Housing; E: Household goods and services; F: Health goods and medical services; G: Transport; H: Communications; I: Leisure and recreation; J: Education; K: Hotels and catering; L: Miscellaneous goods and services. The figure in brackets refers to the average disposable income of households in each decile.

Slovakias most discretional category, where spending varies significantly according to income, is education, to which decile 10 households contributed 31.8% of category spending in 2011, compared to just 1.3% by decile 1, as rich Slovakians are more likely to send their children to private schools whereas their less affluent counterparts will make use of public schools. Transport was the second most discretionary category in 2011, with 30.9% of total category spending coming from decile 10 compared to 1.4% from decile 1, as wealthy Slovakians tend to live a more mobile life, often travelling abroad for business and in ownership of more than one vehicle. In the same year, decile 8-10 accounted for over 60.0% of total spending on both categories. The least discretionary category, where spending is more resistant to change as income rises, is alcoholic beverages and tobacco. In 2011, decile 1 accounted for 7.8% of total category spending compared to 11.3% for decile 10, due to the natural ceiling on this category, meaning that richer households cannot dominate expenditure by a very high margin. This was followed by spending on health goods and medical services, where decile 1 accounted for 5.7% of total expenditure compared to 14.6% by decile 10 in 2011, as the socialist principles of healthcare funding shift the burden of payment away from the individual, keeping outlay low.
Chart 10 Proportion of Total Spending on Selected Categories by Decile: 2011

% of total consumer expenditure

Source:

Euromonitor International from national statistical offices/OECD/Eurostat

DEFINITIONS
Deciles: Deciles are calculated by ranking all of the households in a country by disposable income level, from the lowest earning to the highest earning. The ranking is then split into 10 equal sized groups of households. Decile 1 refers to the lowest earning 10.0%, through to Decile 10, which refers to the highest earning 10.0% of households. Disposable income: This is gross income minus social security contributions and income taxes. Gini index: A standard economic measure of income inequality, based on a Lorenz Curve. A society that scores 0% on the Gini index has perfect equality, where every inhabitant has the same income. The higher the number over 0%, the higher the inequality, and a score of 100% indicates total inequality, where only one person receives all the income. In reality, countries tend to fall between 25.0% and 60.0%. Gross income: Annual gross income refers to income before taxes and social security contributions from all sources including earnings from employment, investments, benefits and other sources such as remittances. Median income: The median income is the amount which divides the household income distribution into two equal groups, half having disposable income above that amount and half having income below that amount. Middle class: The middle class is defined as the number of households with between 75.0% and 125% of median income. Savings ratio: Savings ratio is the proportion of household disposable income, which is saved. The savings ratio is dependent on: the proportion of older people (as they have less motivation and capability to save); the tax system (it can encourage or discourage saving); the rate of inflation (expectations of rising prices encourage people to spend now). Social class A: Social Class A presents data referring to the number of individuals with a gross income over 200% of an average gross income of all individuals aged 15+. Social class B: Social Class B presents data referring to the number of individuals with a gross income between 150% and 200% of an average gross income of all individuals aged 15+. Social class C: Social Class C presents data referring to the number of individuals with a gross income between 100% and 150% of an average gross income of all individuals aged 15+. Social class D: Social Class D presents data referring to the number of individuals with a gross income between 50.0% and 100% of an average gross income of all individuals aged 15+. Social class E: Social Class E presents data referring to the number of individuals with a gross income less than 50.0% of an average gross income of all individuals aged 15+.