Household Mateiral Welfare and Income Distribution

The aim of this article is to compare Taiwan with other advanced OECD economies in terms of household material welfare, representing the general living standards of individuals in Taiwan. Therefore, median income and income distribution are crucial indicators. The most recent household income survey data for most OECD countries refer to the year 2022. However, because Japan conducts such surveys only once every three years, the latest available data is from 2021. Thus, this article uses 2021 data for consistency.

The findings are surprising: Taiwan exhibits both a high level of material welfare and a low degree of income inequality. In addition, Taiwan shows some characteristics typical of the Continental European model, such as a low employment rate and a low poverty rate.

§ Links:
…… Table 1. OECD member countries
…… Table 2. Taiwan (in Mandarin)
…… The original artical in Mandarin


To account for the disproportionate relationship between household size and consumption needs, household income should be compared in terms of income per equivalised household unit—a method adopted by both the OECD and Eurostat, albeit in slightly different ways. The OECD uses the square root scale, while Eurostat applies the so-called "modified OECD scale." The square root scale calculates equivalised household size as the square root of the number of household members. The modified OECD scale assigns weights as follows: 1.0 for the first adult, 0.5 for the second and each subsequent person aged 14 or older, and 0.3 for each child under 14.

The Taiwanese government adopts the square root scale in its household income surveys, consistent with the approach used in New Zealand. Equivalised household income is ranked at the individual level, and the relative poverty threshold is defined as 50% or 60% of the median income. Although the Taiwanese government does not publish the exact median, it provides the mean income of the third quintile group, which closely approximates the median. Therefore, this article uses the third quintile group's mean income as a proxy for the median in Taiwan. However, the relative poverty threshold is based on the true median, which is not publicly disclosed.

Figure 1 illustrates median household equivalised disposable income and the Gini index based on this measure. Income is converted to US dollars using current purchasing power parities (PPPs) for private consumption. All OECD data are sourced from the OECD.

Figure 1

The most recent data for Australia is from 2020. Therefore, its value is adjusted to 2021 prices using the national Consumer Price Index (CPI), and then converted to US dollars using 2021 PPPs. Because Iceland, Denmark, and Germany do not have data for 2021, extrapolation is applied based on the assumption that changes follow the same pattern as those published by Eurostat. (For Iceland, data is sourced from its national statistics office rather than Eurostat.) The Gini index for Iceland is also estimated using the same method. The Gini indices for Australia and Germany are from 2020, and for Denmark, from 2019. (See the raw data in Table 1 for more details.) Country code: See the Eurostat Website.


The household material welfare level is measured by the median household equivalised disposable income, adjusted for social transfers in kind from the government (which is equal to individual consumption expenditure of the general government and calculated here per person). This value is converted to US dollars using PPPs for actual individual consumption (AIC). To better account for extremely wealthy households—often excluded from household income surveys—the average household income is more accurately reflected in national account statistics. The figure used here is household net-adjusted disposable income per capita, converted to US dollars using the same PPPs as mentioned earlier. Household net-adjusted disposable income refers to the net disposable income of households and non-profit institutions serving households, adjusted for social transfers in kind from the government.

Luxembourg and Norway rank highest in household material welfare levels. Canada, Denmark, the Netherlands, and Iceland have levels comparable to that of the United States. Taiwan falls between Belgium and Sweden. In terms of average income, the United States stands significantly above other advanced economies. (See Figure 2)

Figure 2

Country code: See the Eurostat Website.


Figure 3 presents both poverty rates and employment rates, highlighting the characteristics of different social models. The poverty rate reflects the proportion of people whose equivalised disposable income falls below the relative poverty threshold, which is set at 50% of the median household equivalised disposable income. The employment rate refers to the percentage of employed individuals aged 15 to 64 relative to the total comparable population (see SSDI 2024 for more details). In this analysis, a poverty rate exceeding 10% is considered high. An employment rate higher than that of the European Union (69.8% in 2022) is also classified as high.

The poverty rate used by Eurostat is referred to as the at-risk-of-poverty rate. The key differences lie in the relative poverty threshold, which is set at 60% of the median income, as well as the use of a different equivalisation scale. This indicator is more suitable for comparing European countries and is traditionally used to analyze European welfare models. However, since this article compares advanced economies outside of Europe, OECD data is used instead. In addition, the Taiwanese government only publishes the poverty rate using a 50% of median income threshold and the square root equivalisation scale.

Figure 3

The poverty rate is calculated as the geometric mean of the rates for 2021 and 2022. For Iceland, the poverty rate is estimated using the same method as in Figure 1, assuming that its change follows the same trend as the at-risk-of-poerty rate, which defines the poverty threshold as 60% of the median disposable income. The poverty rate for Australia is from 2020, for Denmark from 2019, for Germany from 2019 and 2020, for Japan from 2021, and for Switzerland from 2020 and 2021. Country code: See the Eurostat Website.


The Nordic model is characterized by high employment rates and low poverty rates. In addition to the Nordic countries, nations with similar economic structures and material welfare levels include the Netherlands, Switzerland, Austria, and Ireland. However, only the Netherlands has comparable levels to the Nordic countries in terms of the per capita volume of social benefits in kind provided to households by the government. (See Table 1. Indicator: Individual consumption expenditure of general government per capita)

The Continental European model, on the other hand, is characterized by low employment rates and low poverty rates. France and Belgium are the only two economies that meet these criteria, while Luxembourg meets the low employment rate criterion in 2023 and 2024. Interestingly, Taiwan, despite being an East Asian country, shares similar characteristics and material welfare levels. Japan and South Korea, however, follow entirely different patterns. Japan aligns with the Anglo-Saxon model, which features high employment rates and high poverty rates. In contrast, South Korea reflects the Mediterranean model, characterized by low employment rates and high poverty rates.

Taiwan's low employment rate is largely due to structural disadvantages for women in balancing work and childbirth, as well as early retirement practices—not due to a lack of labor market flexibility. Taiwan's low poverty rate, on the other hand, is partly the result of its progressive income tax system. Therefore, Taiwan's similarity to France and Belgium in terms of poverty and employment rates is more coincidental than structural. Nevertheless, policies aimed at improving women's rights in the labor market are steering Taiwan toward characteristics of the Nordic model. In 2024, Taiwan's employment rate increased to 70.3%, almost reaching the threshold of a high employment rate and closely approaching the European Union's 70.8%. Taiwan is an advanced economy with a relatively large government. Although government expenditure as a percentage of GDP is relatively low, the per-capita volume of social benefits in kind provided to households by the government is comparatively high, with universal healthcare accounting for a large proportion of this. (See Table 2.) This indicates that universal welfare is a societal priority.