Growing apart? Debate on inequalities in Europe

Written by Andrej Stuchlik

What accounts for diverging income and wage disparities in Europe? How do we interlace these disparities in the discussion reducing poverty and social exclusion? Finally, how can we translate developments within and between EU Member States into political action? In this broad and multi-dimensional context, inequalities are an increasingly profound policy challenge for the European Union.

On 15 September 2015, the European Federation of Academies of Sciences and Humanities (ALLEA), the European Science Foundation (ESF) and the European Parliamentary Research Service (EPRS) organised an expert panel debate to address these issues. With income inequality on the rise in many EU countries and with some potential remedies at hand (e.g. social investment), the participants concluded that, so far, the political will to engage in social redistribution at EU level remains limited.

This second joint event organised by EPRS and ALLEA brought together some 60 people, including MEPs, policy analysts from the EP and the European Commission, and experts from the think tank community, in the European Parliament’s Library Reading Room. This combination of different institutions and different academic disciplines appeared truly necessary, given the complexity of the topic, as remarked by ALLEA President, Professor Günter Stock in his introduction.

In his keynote address, Brian Nolan, Director of Employment, Equity and Growth at Oxford University’s Institute for New Economic Thinking firstly sketched out the growing relevance of inequality from the perspective of the social sciences, in part made possible by the availability of more and more reliable data during the last decade. The second reason for the growing interest in research on inequality seems to be driven by the economic and financial crisis and the looming debate on the stark divide between the top one per cent of income earners and the rest of the population. At the same time, he noted, it is very ‘tempting to simplify’, to overlook and to underestimate varieties in national patterns. Although income inequality has increased in many EU Member States, it has been rather episodic and with very distinct differences across countries. Being a statistical outlier on most accounts, the United States was another example to cautiously infer from country comparisons. The professor concluded with two thought-provoking caveats: First, the risk of ‘overselling social investment’ as a panacea. Secondly, he noted that ‘some redistribution’ will be necessary to tackle inequality.

EPRS policy analyst Andrej Stuchlik focused on three elements of income inequality. Firstly, he illustrated the causal link between income and well-being research. On the one hand empirical studies indicate that absolute poverty (in the sense of material deprivation) is detrimental to health; yet on the other, ‘it proves quite tricky to link the observed individual income-happiness relationship to inequality’. While income seems to increase or decrease individual well-being, Stuchlik underlined that, ‘increasingly unequal societies are not automatically worse in terms of social outcomes’.

Presenting recent data for the euro area, Stuchlik pointed out that it is particularly troubling that the global economic and financial crisis has impacted harder on individuals at the very bottom of the income distribution. OECD data for 2007-2011 indicate that the average income of the bottom ten per cent in Spain, Greece, Estonia, and Ireland fell by five per cent or more per year. Interestingly, according to an EP study, only five Member States witnessed deteriorating wage levels as well as income inequality: Spain, France, Slovenia, Cyprus, and Austria.

During the discussion moderated by Sir Roderick Floud, Chair of European Science Foundation’s Social Science Review Group, most comments dealt with educational aspects and the need for redistributive policies. Professors Duncan Gallie (Sociology, Oxford University) and Dominique Joye (Political Science, Lausanne University) argued that education remained the key driver for social mobility and thus, possibly, the answer to societal segmentation. In a similar vein, Professor Anton Hemerijck (Economics and Political Science, Amsterdam University) sketched out the positive multiplier effects of education over the course of life.

Professors Bea Cantillon (Social Policy, Antwerp University) and Bruno Cousin (Sociology, Lille University) both urged for redistributive measures, including some practical ideas. For instance, Cousin suggested a multinational tax regime for the super-rich, to reduce their tax avoidance possibilities.

On a more general note, Professor John Bell (Law, Cambridge University) reminded the audience that EU policies are intended ‘if not to improve things, at least not to make them worse’. Hence, he argued in favour of including inequality considerations in the European Commissions’ impact assessments.