THE STATE OF THE EUROPEAN UNION. Europe at the political crossroads

THE STATE OF THE EUROPEAN UNION

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The Gini coefficient, the classical indica-

tor of income distribution. It varies from

0 for equal distribution to 100 for com-

plete inequality.

– The S80/S20 ratio of the richest against

the poorest income quintile (no data be-

fore 2005 for EU-27/28).

Table 2

shows a growth in the average ine-

quality within EU countries. Actually, the wage

share recovery in 2009 is a consequence of the

crisis, which led to a profit fall in some countries

(i.e. Germany), while wages remained relatively

stable. The Member States’ average changed lit-

tle for the Gini and the quintile share ratio be-

tween 2005 and 2012, but finally clearly rose

(the newest data available correspond to 2014).

Amongst the European regions, the differ-

ences are even larger than those of the average

income per head in the Member States. The rich-

est region (at the NUTS-2 level

) is the City of

London, with an income per head (in PPP) of

over

€

80,000, compared to 7,200 in the

Romanian border region Northeast. This is be-

cause regional income differences within

Member States are high and very often increas-

ing, since the economic activity tends to concen-

trate in growth centres, often in the capital city.

In Great Britain, the ratio between the poorest

(Wales) and the richest region is approximately

1:5, similar to that of the total EU ratio.

NUTS (Nomenclature for Territorial Units for Statistics) is

the EU classification for the regions; NUTS 1 corresponds

to large regions like the German federal states; NUTS 2 are

smaller basic regions for regional policy measures.

For the EU as a whole, regional inequality

has increased with a temporary reduction dur-

ing the recession (cf. also Chart 3). In each

Member State, the growth of regional inequal-

ity was even higher. In the 22 countries of the

EU-28 that are still subdivided in NUTS2 regions

(all but the six small states Luxembourg, Malta,

Cyprus, Estonia, Latvia and Lithuania), the dis-

persion (standard deviation) grew an average of

106 % between 2000 and 2011; regional ine-

quality rose a great deal in the new Member

States of the CEE (over 300 % in the front run-

ner, Romania).

The personal income distribution shows a

different result if we take data for a longer pe-

riod of time (as of around 1985) and from an-

other source (OECD). In many EU countries, the

Gini coefficient has clearly increased.

Table 3

presents an overview. It’s worth pointing out the

strong growth of inequality in the Scandinavian

countries, Finland, Sweden and Denmark, but

also in Germany. Among the countries listed by

the OECD, the only country with a diminishing

inequality is Greece (this could have changed

after 2012, though).

If we choose the S80/S20 ratio as a measure,

in 2004 it was below four in Sweden, Finland,

the Netherlands and Belgium, but also in

Slovenia, Slovakia or the Czech Republic; over

six in Latvia, Lithuania, Estonia, Portugal,

Greece, Spain, Bulgaria and Romania, which

presented the highest inequality level with a

rate of 7.2. in 2014, the second highest inequal-

ity corresponded to Spain with a 6.8. The EU

inequality average grew slightly between 2005

Table 2.

The development of distribution indicators (average)

1999/2000

2005

2007

2009

2012

2014

Wage share (in %)

56.7

55.6

54.9

57.2

56.2

55.9

Gini (in %)

30.6

30.5

30.6

30.9

S80/S20

5.1

5.2

Sources:

Wage share: AMECO; Gini and S80/S20: Eurostat; author’s calculations.