While it is ultimately disposable income inequality (ideally adjusted for publicly-provided in-kind services) that matters, labour income inequality is one of its major sources and thus warrants a distinct analysis. The focus on labour income implies that important population sub-groups (such as retirees) and income sources (such as capital income) are ignored in the discussion. Moreover, tax and transfer policies are only briefly touched upon in this paper, as a thorough elaboration of their inequality effects can be found in Joumard etal. ( The authors would like to thank Jprgen Elmeskov, Jean-Luc Schneider, Peter Hoeller, Romain Duval, Isabelle Joumard, Mauro Pisu and Kaja Fredriksen for their useful comments and suggestions and Susan Gascard for excellent editorial support.