The miserables and the untouchables of the economic crisis

Happy meeting between Christine Lagarde, Managing Director of the IMF (on the left) and Jeroen Dijsselbloem, President of the Eurogroup, in the foreground. Eurogroup 15/03/2013, (Council of the European Union Photographic Library).

Happy meeting between Christine Lagarde, Managing Director of the IMF (on the left) and Jeroen Dijsselbloem, President of the Eurogroup, in the foreground. Eurogroup 15/03/2013, (Council of the European Union Photographic Library).

The worsening of social conditions for the poorer part of the population, in the years of the still ongoing financial and real economy crisis, is an easily predictable development. However it is a revelation and a pity to observe the difference of the degree and the way recession badly affects some, and at the same time unbelievably favours others in different countries and social strata. A relevant study by Eurostat, the European Union statistical service, stands witness of that.

In the Eurostat series, “Population and social conditions” author, Emilio Di Meglio, conducted a ground-breaking research. His basic conclusion was that living standards fell in 15 out of the 27 EU member states, and the fall was the steepest in poorer countries like Bulgaria, Latvia, Greece and Spain. In detail the conclusion is that “Living standards, (measured by the median equivalised disposable income), fell in 15 Member States in 2010 compared with a year earlier, after adjusting for inflation”. The median is the point on the income scale at which half of the population earn more and half earn less than that. The equivalised disposable income corresponds to the income that households have available for spending and saving, adjusted for household size and composition. “The sharpest drops occurred in Greece, where median income decreased by 12.3%, Bulgaria (-6.6 %), Latvia (-6.1 %) and Spain (-5.8 %)”.

Unequal effects

The economic crisis increased the inequality even within the worst hit EU countries. The study observes that incomes “decreased in the bottom quintile of the income distribution in most Member States”. A quintile is one fifth of the total or 20%. The reason why inequality increased in 15 member states was that the incomes of the top 20% of people in the income distribution curve decreased less or increased more than in the bottom 20%.

The study though was not restricted only to statistics. It went a step forward in presenting the repercussions of the increased inequality. According to the author, “When looking at households’ material conditions, in 2011, around 10 % of the EU population reported that they could not afford a meal with meat, chicken, fish or a vegetarian equivalent every second day. The author informs that this represents an increase of 1 percentage point compared with 2010.

The deep differences between the haves and the have-nots can also be identified in the segment of the population without a job. The study found that the median income for the unemployed fell by 15.2 % in Greece, 12.2 % in Bulgaria, 12.0 % in Estonia, 8.9 % in Italy, 8.8 % in Spain and 8.7 % in Latvia. It grew by 5.8 % in Denmark, 4.3 % in Poland, 4.2 % in Finland and 4.1 % in Germany. If one could add the effect of the skyrocketing differences of unemployment in those two groups of countries, the final repercussion on income inequality would be quite appalling.

Poorer poor, richer rich

In any case the deterioration of living standards was proportionally worse in the bottom 20% of the incomes ladder. According to the study, “Incomes decreased from 2009 to 2010 in the bottom quintile in 18 Member States after adjusting for inflation. The sharpest fall occurred in Greece, where the median income of this quintile decreased by 17.3 %, in Estonia (-11.4 %) and in Bulgaria (-10.2 %). It increased the most in Lithuania (+3.5%), Luxembourg and Poland (both +2.9 %). For the top quintile income also decreased in 18 Member States but with different patterns and intensity. The sharpest fall occurred in Lithuania, where the median of this quintile decreased by 12.4%, in Greece (-11.1 %) and in Latvia (-7.4 %). It increased the most in Hungary (+9.1 %), Denmark (+4.3 %) and Finland (+2.5 %)”.

The author concludes that if all things are taken into account, income inequality is rising in 15 member states. This is like that because income in the more affluent 20% of the population decreased less or even increased more than in the lowest fifth.

 

 

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