Did Belgium withstand the storm of rising inequalities? Income inequality in Belgium, 1985–2020

Abstract

Belgium exhibits a rather constant level of income inequality during the last decades, contrary to Germany, the United States and some Nordic countries, which have all faced substantial increases in inequality. We use the available income surveys from 1985 to 2020 to describe the evolution of income inequality by means of the Gini index. Earnings inequality has slightly decreased in the last two decades, at least if one takes into account the impact of the substantial increase in employment of, especially, older people and women. Though the education gap in earnings is widening, the rapid increase in (mostly female) education may have a dampening effect on earnings inequality. The income surveys largely underestimate financial capital incomes. Moreover, by definition, these do not cover undistributed profits of the corporate sector. When correcting for this, it turns out that pre-tax factor income inequality increased substantially between 2009 and 2016. The redistributive role of the welfare state through taxes has increased, while redistribution through the social security system exhibited a more irregular course. While there has been an increase in assortative matching in the last two decades, its impact on the evolution of income inequality is unclear.