Striving for Triple-A on Social Issues
Jean-Claude Juncker’s European Commission has declared to put social issues further up on its agenda. Yet, the European Union and its member states need to focus on more than economic growth to foster social justice in Europe.
“I want Europe to be dedicated to being triple-A on social issues, as much as it is to being triple-A in the financial and economic sense,” the President of the European Commission, Jean-Claude Juncker, declared last October upon receiving the EU Parliament’s support for his list of commissioners.
After an economic storm that ravaged Europe and called its integration project into question, the new team in charge of the European Union’s executive branch has indeed a great challenge to overcome — fighting growing social inequality throughout the continent.
New research points to an alarming concentration of wealth at the top of society. Currently, 46 percent of the world’s wealth is in the hands of one percent of its population. According to Eurostat, in 2013, 122.6 million people, or 24.5 percent of the population of the 28 EU countries, were at risk of poverty or social exclusion. Europe is expected to have nearly 150 million of poor people by 2025.
The Bertelsmann Stiftung’s EU Social Justice Index finds that the reach and scope of social justice declined during the global financial crisis in the majority of EU member states. Only three countries — Poland, Germany and Luxembourg — have managed to improve significantly over the past years.
Social exclusion is often leading to the disengagement of socially excluded groups or to various forms of political extremism. This is a frightening sign for the future of the democratic values enshrined in the Maastricht Treaty.
So what needs to be done for us to take the Commission president at his word?
Shaping the future: social issues still matter
Despite the positive economic results and return to growth in most EU countries in recent years, the numbers that measure inequality rates are far less encouraging. The EU’s GINI research project shows a widening income gap between top earners and other workers across Europe. This means that only investing in growth and job creation, the top priorities of the Commission’s plan under Juncker, may not be enough to ensure a fair and sustainable turnaround for the continent.
“Inequality and growth are intertwined,” explains Ana Llena-Nozal, an analyst in the Social Policy Division of the Directorate for Employment, Labor and Social Affairs at the Organization for Economic Cooperation and Development (OECD), interviewed by SGI News. “High inequality can hinder social mobility and an increase in income inequality not only raises social and political but also economic concerns. Our research has shown that raising inequality by three Gini points would drag down economic growth by 0.35 percentage points per year for 25 years. That’s a cumulative loss in GDP of 8.5 percent at the end of the period."
On a similar note, the EU’s GUSTO project emphasizes that among the 28 EU member states, the best performing countries in economic terms have a large welfare state that invests in people and satisfactorily protects them when needed.
The member states therefore need to find pro-growth policies that are also suitable for reducing inequality. According to Llena-Nozal, this includes “policies that promote access to education, active labor market policies (such as stepping up job-search support and activation programs), and growth-friendly tax and transfer systems. Such tax reforms include abolishing or scaling back a wide range of tax deductions that disproportionately benefit high earners, shifting the tax mix towards a greater reliance on recurrent taxes on immovable property, and reviewing other forms of wealth taxes such as inheritance taxes."
By contrast, the countries most affected by the crisis and the austerity measures it has entailed — especially Greece, Spain and Portugal — have ended up dismantling their social security systems and have consequently impaired their ability to invest in critical future-oriented policy areas, such as education or research and development, as observed by the EU Social Justice Index. “The future socioeconomic strategy for the EU must be one that is not only concerned with the goal of budgetary consolidation and the resolution of the debt crisis, but also with the aim of combating social injustice within the Union,” the Bertelsmann Stiftung’s study concludes.
The social justice strategy in Europe
Despite its urgency, fostering social justice is a complex matter and it becomes even more complex when applied to a group of states with heterogeneous social makeups. The heterogeneity of the drivers of inequality — which require different responses — also aggravates the situation.
According to Llena-Nozal, “One of the main factors behind the increases in income inequality seen in the majority of EU countries is technological change, which involves stronger demand for highly skilled workers. People with in-demand skills needed to deal with new information and communication technologies or skills specific to the financial sector, for instance, have enjoyed significant income gains while workers with low or no skills have been left behind.
In addition, regulatory reforms and institutional changes have increased employment opportunities but they have also contributed to greater wage inequality. Changes in working conditions, such as the rise in atypical work, have also contributed to rising income inequality. Societal changes, such as the rise in single and single-parent households and more couples marrying within the same income range, have also contributed but are less important. Finally, tax and benefit systems have become less redistributive in many countries since the mid-1990s.”
The European Union has an important role to play in this scenario. By setting priorities and common objectives, it can encourage states to move towards addressing the same social issues. The Europe 2020 strategy lists these priorities and objectives for 2014 to 2020. It has set a target of “promoting social inclusion, in particular through the reduction of poverty, by aiming to lift at least 20 million people out of the risk of poverty and exclusion” by 2020.
For this to happen, European civil society will also need to push decision-makers to invest in ambitious and integrated social policies. Accordingly, raising popular awareness of developments in this area — as instruments such as the EU Social Justice Index do — is a key task in bringing the EU closer to its self-declared goals.
In its five-year mandate, Juncker’s Commission will need to reverse the discrepancies among the member states at the risk of undermining the foundations of European integration. The current unjust state of affairs must have a much more prominent place on the political agenda.