Industrial Relations and Inequality in the EU

This chapter begins with a summary, based on a number of key indicators, of the evolution of industrial relations in Europe. The fundamental importance for the primary distribution of income of minimum wages and collective agreements is explained. The example of the interactions between minimum and collectively agreed wages is used to develop a typology of the various wage-setting ‘architectures’ in the EU. In a monetary union the debate on the appropriate wage policy cannot be conducted on a country by country basis. Wage moderation or expansive wage increases can have both positive and negative effects on other countries. Finally, the interventions by nation states and the Troika in collective bargaining systems will be investigated.

Economic Growth, Income Distribution, and Social Exclusion in Turkey

This chapter examines the degree of income and institutional convergence between Turkey and European Union (EU) as well as trends in inequality and poverty by taking a long-term perspective as changes in polices an institutions impact on economic and social outcomes, often with considerable lags. The authors’ findings reveal that Turkey has successfully transformed its inward-looking and largely agricultural economy in the past 35 years into an export-oriented and urban-based economy. The transformation has been achieved mostly in periods of dramatic reform embedded in business and political cycles. Nevertheless, in the most recent era, there have been significant setbacks for certain groups in terms of regulatory environment, equality of opportunity, and access to markets and resources. Although there has been progress in the overall distribution of income and other aspects of social inclusion, convergence to EU standards is not easy to observe in these indicators.

From Social Protection to Social Investment

Globalization, technological change, and migration form three major challenges for European welfare states in the 21st century. These challenges are regarded as important sources of inequality on the labour market. Whereas the existing literature has mainly been focused on the sectors and occupations affected by globalization and technological change, the authors of this chapter argue that, via job polarization, these phenomena also affect the type of contract that workers have. They hypothesize that increased competition for low-paying jobs is associated with labour market flexibilization. Another major trend that they analyse is the free movement of labour. New data illustrate that labour migration from Central and Eastern European countries to Western European countries has grown slowly but substantially following recent enlargements of the Union. It has been considered a challenge for welfare states as it might contribute to feelings of economic insecurity and might erode solidarity, which forms the basis for the provision of social policy. Subsequently, the authors analyse how European welfare states have evolved over the past decades. They show that in spite of budgetary pressure stemming from globalization and migration, most countries have increased social expenditure. Furthermore, they analyse to what extent the focus has shifted from classical social protection to social investment policies to enable workers to adapt themselves to new labour market transformations. They contribute to the existing literature by covering years after the financial crisis for all EU member states and by demonstrating a novel way of correcting social expenditures for the number of recipients.

Education, Income, and Inequality in the European Union

Education and skills are increasingly important determinants of life outcomes in Europe. On the positive side, populations across Europe are upgrading their educational attainment, and educational attainment is less strongly linked to parental background than it was for previous generations. On the negative side, important gaps remain in educational attainment and foundation skills. Furthermore, while lifelong learning is becoming increasingly important in today’s fast changing economy, those individuals who need it most may not always have access to adequate opportunities to upskill or reskill. Finally, there is substantial variation across countries in Europe at the level of education and labour outcomes, reflecting factors such as the structure of national education systems, the institutional and sectoral setup of the economy, and so on.

Income and Labour Market Developments and Social Outcomes in Germany and France

This chapter focuses on France and Germany, the two largest economies of the European Union, comparing recent economic and social developments. It finds that the two economies rely on different growth models, with important social implications. Germany’s postwar economic growth model was strongly based on exports and typically proved more volatile, while gross domestic product (GDP) growth in France was more focused on domestic demand and is usually more stable while on average generating a somewhat lower growth. The flexible German labour market allowed unemployment to decrease, albeit at the expense of higher income poverty and a larger low-wage sector. In France, instead, lower income poverty and a smaller low-wage sector were accompanied by a relatively higher unemployment rate. Recently, the gap between the two growth models and the resulting differences in social outcomes has appeared to be narrowing, reflecting the slowdown in the global cycle and more institutional focus in Germany on inclusiveness and in France on flexibility.

The Distribution of Well-Being Among Europeans

The authors analyse the evolution of citizens’ living standards in the European Union (EU), considering the EU as a single country. Average living standards have improved considerably as the European integration process has unfolded. EU28 income inequality has steadily declined, mostly as a result of the macroeconomic convergence of new EU-accession countries. EU15 income inequality fell steadily until the mid-1980s, but picked up again during the economic turmoil following the Great Recession, largely reflecting the divergence between periphery and core countries in the Euro Area. Using a common EU standard reveals more progress in terms of poverty reduction. It also shows that the patterns of income convergence across member states differ across categories of residents, thus calling for a more careful consideration of the personal and national dimensions of EU policies.

Europe’s Migration Experience and Its Effects on Economic Inequality

This chapter provides the historical context for the past half-century in Europe, focusing specifically on the link between migration and economic development and inequality. The literature review suggests that there are several channels through which migration affects economic inequality between countries in one or the other direction, and it may decrease inequality within countries. The net effects are an open empirical question and are likely to depend on the institutional and policy context, sources and destinations of migration, and its type. The authors undertake an empirical analysis and find that immigration has contributed to reducing inequality within the 25 European Union (EU) countries over the 2003–2017 period. As the EU has attracted mostly high-skilled immigrants throughout this period, the authors’ results are consistent with the ameliorating effect of high-skilled migration on within-country inequality, as predicted by theory.

Living Standards in Southern Europe over the Long Run

This chapter reviews how material conditions improved in Italy, Spain, Portugal, and Greece over many decades from the postwar period to the onset of the Eurozone crisis and the Great Recession; how Southern Europe lost ground in the 2010s; and how changes in living standards affected different population groups. The chapter unfolds in 15 short sections. Section 4.1 sets the scene by briefly discussing similarities and differences between the four countries. Section 4.2 recounts how life in Southern Europe was transformed since the mid-20th century in terms of material well-being. Sections 4.3–4.14 look at changes in gross domestic product, consumption, investment, labour productivity, employment, education attainment, population health, social spending, income inequality, poverty and social exclusion, the distribution of wealth, and life satisfaction. Section 4.15 concludes.

Can the European Union Contain and Improve Income Inequality?

The chapter examines the results of EU-level actions regarding inequalities and their coordination with member countries. A comprehensive picture is drawn of income inequality and poverty for both the average EU country and the European Union as a single entity. Their linkages to the (combined) labour earnings received by households are explored. Contents and instruments of Europe 2020 flagship anti-poverty policymaking are analysed. Lessons are drawn for future EU policies concerning inequality, in particular for the recent European Pillar of Social Rights. As to policy contents, a strong focus on reducing the poverty gap is promoted, supported by introducing a child basic income and an earned income tax credit aimed at offering adequate minimum-income protection. The EU-level itself is addressed and inequality effects of unification scrutinized. Organizationally, a full and equivalent embedding in the dominant mechanism of EU social and economic policy making is advocated.

Income, Wealth, Employment, and Beyond

This chapter looks at trends in 10 Central and Eastern European (CEE) countries, exploring both convergence between these countries and the centre of the European Union on the one hand and comparative inequality trends within some of the CEE economies on the other. Time trends are presented from the beginning of the 1990s until the most recent available year. The aim is to explore patterns of income convergence and inequality developments experienced during and after the transition from non-democratic regimes and centrally planned economies to competitive markets and representative democracies. Attention is paid to between-country similarities and dissimilarities of the paths taken, attempting to find out whether homogeneity or heterogeneity dominates between the observed countries, both in relation to trends and results.