The JRC report entitled “What makes a fair society? Insights and evidence” contributes to the debate on the future of Europe.
This first report has fairness and social convergence at its heart.
It provides input for the European Pillar of Social Rights, which sets out a number of key principles and rights to support fair and well-functioning labour markets and welfare systems. Furthermore, it serves as a compass for a renewed process of convergence towards better working and living conditions among participating member states.
Insights and evidence
The report presents insights and evidence on income inequality; the impact family background and geographical location have on opportunities in education, health and the labour market; people's perceptions and attitudes regarding fairness and how they relate to measurable inequalities.
JRC researchers analysed the most recent available survey data (such as the European Survey of Income and Living conditions, the European Social Survey and the Programme for the International Assessment of Adult Competencies) and combined them in order to look at the various facets of fairness, whilst also taking into account the most recent scientific literature.
The survey data analysed typically covered countries that are members in the EU, the Organisation for Economic Co-operation and Development (OECD) and European Economic Area (EEA).
Depending on data availability and the topics addressed the statistical analysis was based on single years or comparisons over time.
The report tries to address to the following questions:
Is Europe getting more or less equal?
Between 2006 and 2012, the overall level of inequality decreased in the EU, by about 2.7% according to the data reviewed in the report.
During this period, the average income of the richest 5% of households fell by about 5%, whereas the average income of the bottom 10% increased by over 12%.
However, the EU-wide figures hide substantial disparities among EU28 Member States.
The overall improvement was mainly driven by decreasing inequality in Central and Eastern Europe, where the average income of the poorest families increased substantially, with the bottom 10% gaining at least 14%. Conversely, in both the Mediterranean and North Western Europe, the average income of households at all levels declined.
In the Mediterranean, the income of households in the bottom 10% fell by at least 2.4%, more than that of richer households in the top 5% which fell only by 0.5%, thus increasing inequality.
In North Western Europe, the average income of richer households declined by around 4%, more than that of poorer households which decreased by around 0.3%. As a result, inequality was reduced overall.
What are the drivers behind increasing or decreasing income inequality?
The JRC reports suggest that changes in inequality are largely shaped by underlying market income inequality (what people earn from their work or assets) and changes in tax and social benefit policies (government redistribution).
In the EU, direct taxation and social benefit systems redistribute incomes significantly, reducing income differences by between 20%- 45% on average, with social benefits playing the biggest role for the poorest households.
What is the impact of family background?
The JRC report also finds that educational attainment and health are still strongly associated with family background.
Individuals who have at least one parent with completed tertiary education are twice as likely as their counterparts with less educated parents to earn a university degree. Such ratio is as high as four in Italy and below two in North-Western Europe.
Finland stands out as the only EU Member State where the likelihood of completing tertiary education is virtually independent of parents' educational levels. Furthermore, individuals whose parents have not reached tertiary education perform significantly worse in literacy and numeracy tests.
Similarly, poor health is also much more prevalent among those coming from poorer families than among those coming from richer ones.
These results point to the persistence of substantial inequality of opportunities in the vast mqajority of EU Member States.
How are changes in the labour market driving inequalities?
The study looked at data on the digitisation of jobs and the rise of the collaborative economy as potential drivers of inequalities.
It points to the risk of many jobs being substituted by machines or computers, especially in Southern Europe, and the shift from permanent contracts to more precarious ones.
The report stresses that while the internet and work platforms may create jobs for the unemployed - and workers may benefit from greater flexibility - the collaborative economy might also lead to higher precariousness and a lower level of social protection.
This is especially true as digital skills are unevenly distributed across EU member States – 44.5% of the total EU population lack digital skills, with the share being higher in 17 Member States.
How close are people's perceptions of inequality to reality?
The most recent available data coming from the International Social Survey Programme 2009, suggests that the majority of people in European countries believe that income differences in their country are too large.
Concerns about inequality are lower in Scandinavian countries, for example in Sweden where 73.1% of the population are worried about income inequalities, and highest in Southern and Central European countries where over 90% of the population believe that income differences are too big.
Survey data also show, however, that these perceptions of income inequality are only weakly correlated with the level of observed income inequality in the respective countries.
Regardless of this gap, the more people agree that income differences are too large in their country, the more they favour government measures aimed at reducing income differences.
In all European countries, between 50% and 90% of the population believe that governments should reduce income inequalities.
Finally, data also show that people are more likely to tolerate income inequality if they think that there is a high degree of equality of opportunity in their country. The same applies if they believe that hard work determines an individual's success rather than family background, race, gender or connections.