The latest data on Actual Individual Consumption (AIC) per capita, expressed in Purchasing Power Standards (PPS), reveals significant disparities in material welfare across Europe. This key indicator, which measures household access to goods and services, underscores the varying living standards within the European Union, European Free Trade Association (EFTA) nations, and EU candidate countries.

Luxembourg Tops EU Rankings, Bulgaria and Hungary Trail

In 2023, AIC per capita in the EU ranged from 70% of the average in Bulgaria and Hungary to 136% in Luxembourg, which outperformed all other member states. Nine countries exceeded the EU average of 100%, including Germany and the Netherlands (both 119%), Austria (114%), and Belgium (113%).

Among the EU’s major economies, Germany led with an AIC 19% above the average. France followed at 106%, while Italy matched the EU average. Spain recorded 91%, making it the lowest among the bloc’s “Big Four.”

Conversely, several Central and Eastern European countries, including Latvia, Estonia, and Croatia, reported AIC levels more than 20% below the EU average, reflecting regional economic disparities.

EFTA Nations Outpace EU Average, Candidate Countries Lag

All three EFTA countries—Norway, Switzerland, and Iceland—outperformed the EU average. Norway led the group with a 24% surplus over the EU benchmark, while Switzerland was 16% higher.

In contrast, AIC per capita in EU candidate countries remained below the EU average. Among these nations, Turkey stood out with household material welfare at 84% of the EU average, surpassing nine EU member states, including Poland (83%) and Greece (80%). Other candidate countries, such as North Macedonia and Albania, reported figures below 50%, highlighting stark differences in living standards.

Trends Over the Past Five Years

The past five years have seen both gains and declines in AIC across Europe. Denmark experienced the steepest drop among EU members, falling from 120% in 2020 to 108% in 2023. Other notable declines occurred in Czechia and Finland.

Conversely, Ireland and Bulgaria showed significant improvements, with Ireland rising from 87% to 99% of the EU average. Among candidate countries, Turkey recorded the largest increase, climbing from 64% to 84% during this period.

Understanding AIC as a Welfare Indicator

AIC captures household access to goods and services, including food, housing, healthcare, and leisure, whether provided directly by households, the government, or non-profit organizations. Expressed in PPS, the metric adjusts for price-level differences, offering a standardized comparison of material welfare across countries.

While AIC provides valuable insights into economic well-being, the data underscores persistent regional disparities, with Nordic and Western European nations achieving higher levels of material welfare compared to their Central, Eastern, and candidate counterparts.

Efforts to raise the retirement age in Europe have ignited political backlash despite economic arguments supporting the move. As populations age and life expectancy increases, governments face mounting pressure to balance state budgets while addressing disparities among workers.

Raising the pension age has been positioned as a necessary measure to mitigate the growing ratio of retirees to active workers. However, critics argue that a universal approach is impractical and unfair, disproportionately impacting low-income earners, individuals in poor health, and those with physically demanding jobs.

In many countries, such as France, Italy, and Spain, exemptions exist for hazardous or arduous professions, allowing workers in such fields to retire earlier. For example, French workers exposed to extreme temperatures or night shifts can access their pensions sooner than others. Yet, these measures often fall short of addressing broader concerns over equity and worker wellbeing.

Health as a Determining Factor
Health remains a significant reason many workers retire before reaching the statutory pension age. Blue-collar workers, whose jobs are often physically demanding, are particularly affected, explained Arthur Seibold, an economics professor at the University of Mannheim. In contrast, white-collar workers tend to stay employed longer due to less physically taxing roles.

Investing in healthcare and creating age-friendly workplaces are vital strategies to keep workers engaged longer. Notably, studies suggest that postponing retirement can reduce cognitive decline, although the impact varies by profession and individual circumstances.

Financial Incentives and Flexibility
Financial considerations also influence retirement decisions. Wealthier individuals, often with additional savings or property assets, can afford early retirement. Barret Kupelian, chief economist at PwC, noted that rising house prices in the UK, for instance, encourage older workers to retire early, as they feel financially secure.

Governments have implemented incentives to retain older workers, such as tax breaks and flexible working arrangements. Belgium’s “flexi-job” system, which allows retirees to work tax-free, exemplifies this approach. Such measures, combined with a positive work environment, can motivate older employees to remain in the workforce.

Professional Fulfillment and Ageism
Many older workers cite professional satisfaction as a reason for staying employed. Edward, a retired accountant, described how returning to work gave him a renewed sense of purpose. Similarly, Janie, a self-employed luxury sales professional, emphasized the personal and financial rewards of working beyond retirement age.

While ageism in the workplace remains a concern, legal protections often favor older employees, making it harder to dismiss them. However, re-employment challenges persist, particularly due to higher wage expectations and skill gaps, such as technological proficiency.

As Europe grapples with labor shortages and aging populations, policymakers must balance economic demands with fairness and inclusivity. The debate over retirement will only intensify in the years ahead.