Inequality is growing in Europe, but falling (for now) in Spain

BarcelonaInequality is growing in Europe, but it has fallen in recent years in Spain thanks to the strong performance of the labor market. senior of the Bank of Spain Laura Hospido, and the deputy director of the Foundation for Applied Economic Studies (Fedea, the think tank of banking and other large Spanish companies), José Ignacio Conde.

Milanovic – one of the world's leading experts in this field – has indicated that inequality in Europe will rise if the current growth rate is maintained, so that, in the coming years, "European countries will become very similar to Latin American countries." This is due to internal factors of wealth redistribution, but also to the growth of Asian economies.

In this regard, Milanovic recalled that not many years ago, the poorest strata of European society were part of the richest 20% in the world. With the rise of emerging countries, especially China and other Southeast Asian countries, Europe's poor have slipped behind the rest of the world. This real and relative impoverishment of a large part of the European population has political consequences, the main ones being the collapse of moderate parties and the success of more extremist options that propose changes in the political and productive system.

The Serbian economist from CUNY became known for studying the distribution of wealth around the world over the last 40 years, explaining that, with globalization, the middle and working classes in advanced countries (Europe, North America, and other countries such as Japan and Australia) have been among the biggest losers from the dismantling of the welfare state and tax cuts that have benefited high-income earners more than low-income earners.

The rise of political extremism, therefore, is "a reflection of the neoliberal era" that began in the late 1970s and lasted until the 2008 crisis, of which "we are now paying the costs," Milanovic said. Added to this is the fact that the good situation of Asian economies has occurred in states with political regimes "very different" from those of Western democracies.

Unemployment and inequality in the State

Regarding Spain, Hospido asserted that the situation is relatively good compared to the rest of the world, but at the same time, the state is more unequal than neighboring countries, such as France and Germany. The Bank of Spain economist explained that inequality in Spain "is closely linked" to the reduction in unemployment and job creation: "When employment rises, inequality falls," he said. Therefore, in this area, the fact that the post-pandemic labor market is more active and the number of workers registered with Social Security continue to grow to record levels (along with salary increases, especially the minimum wage) has allowed Spain to narrow the gap between the rich and the poor.

However, and considering the good news that inequality is at levels lower than those prior to the 2008 financial crisis, Hospido emphasized that there is another variable to take into account, which is the risk of losing income. This indicator, which is "very important when making economic decisions" for families, shows workers' insecurity about having a stable income for the near future. Thus, in the case of civil servants, the index "barely fluctuates," while in the case of young people it is "extremely high," as they have much more precarious jobs and shorter contracts.

Specifically regarding inequality between generations, Conde indicated that today's younger generations "are not supported by either politics or the economy." In Conde's opinion, this is the key to preventing inequality between generations from growing even further, as current economic growth will be lower in percentage terms than that enjoyed in the 1970s, 1980s, and 1990s by the generations who were then younger and are now older.