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THE STATE OF THE EUROPEAN UNION
82
treated with caution. A lower share can also
stem from lower social needs (lower unemploy-
ment or a more convenient demographical
structure of the population). In this sense, the
social protection ratio, that is, the share of social
expenditure in the GDP, strongly increased in
the huge 2009 recession to subsequently de-
scend again (cf.
Table 6
).
Within the Member States, inequality has
grown mainly in the last twenty years. It could
most clearly be observed in the new Member
States: they had equitable income distributions
before the political change which became clear-
ly unequal during their transformation towards
the market economy. Nevertheless, the societies
of some CEE countries are still the least une-
qual. Some countries were able to slow down
this process and slightly reverse it. Still, inequal-
ity is even higher if we take market income into
consideration, since the tax system and the wel-
fare state redistribute income so that inequality
of disposable income stays much lower. The
most important redistribution mechanism is the
pension system, which causes the size of redis-
tribution to stay lower in countries with funded
pensions (i.e. the Netherlands) (where pensions
are regarded as market income).
Market income inequality rises mainly
through globalisation, technological progress
and the weakening of trade unions. Both a de-
creasing wage share and a higher wage gap
(strongly and disproportionally increasing in-
comes for top managers and bankers) intensify
inequality. The growing importance of wealth
(in relation with the GDP) and its increasing con-
centration are other important causes (Piketty
2013). The increasing inequality of the dispos-
able income is caused by the ‘reforms’ in the tax
system and the welfare state. Top tax rates and
the taxation of wealth and inheritance were
lowered in many countries, while pensions and
other transfer incomes were reduced or not
adapted to the development of prices and in-
come.
The development of Europe-wide inequality
The to-date existing inequality data doesn’t say
much about the EU as a whole, because the
Table 6.
Development of the social protection ratio 2000-2011
2000
2002
2004
2006
2007
2008
2009
2010
2011
Standard deviation
5
.
5
5
.
8
6
.
1
6
.
0
5
.
9
5
.
6
5
.
7
5
.
6
6
.
0
Minimun
13
.
0
12
.
7
12
.
8
12
.
1
11
.
3
12
.
7
16
.
9
17
.
6
15
.
1
Maximun
29
.
9
31
.
3
31
.
6
31
.
2
30
.
9
31
.
3
34
.
7
34
.
3
34
.
2
Max/min
2
.
3
2
.
5
2
.
5
2
.
6
2
.
7
2
.
5
2
.
1
1
.
9
2
.
3
Source:
Eurostat and author’s calculations.
Table 7.
Development of the poverty rate 2005-2014
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Maximun
46.3
61.3
60.7
44.8
46.2
49.2
49.1
49.3
48
40,2
Minimun
9.6
12.3
12.1
8.7
9.0
9.4
9.3
9.3
9.0
7,4
Max/min
4.8
5.0
5.0
5.2
5.2
5.2
5.3
5.3
5.3
5,4
Standard deviation 8.8
10.3
10.2
7.8
8.1
8.3
8.3
8.4
8.1
7,0
Source:
Eurostat and author’s calculations.