Beyond averages : fairness in an economy that works for people

Europeans are, on average, better educated and live healthier, longer and more prosperous lives today than at any point in the past. However, this view on average achievements obscures large disparities, both within and between European countries. The income of the richest 20 % of households in Europe is on average 5 times higher than that of the poorest 20 %, and up to 8 times higher in some Member States. Most indicators of well-being display a social gradient according to education level, occupation, income and social status. The Great Recession has reinforced existing socio-economic divides. Vulnerable groups – those with low education levels, the unemployed and individuals with a migrant experience – have largely borne the brunt of the resulting economic downturn and austerity programmes. Southern European countries were hit particularly hard. Growing disparities on multiple socio-economic dimensions have contributed to a sense of unfairness and discontent in Europe. Recent data show that 38 % of Europeans do not believe that they are treated fairly and 41 % do not agree that they have enjoyed equal opportunities in life. Fairness is a subjective phenomenon, but the far-reaching consequences of perceptions of unfairness warrant a closer look at its drivers and underlying dynamics. The present report analyses some of the most pertinent dimensions of fairness in relation to the agenda for a fair, inclusive and social European Union (EU). Chapter 2 describes Europeans’ perceptions of fairness and how they vary across countries and socio-economic groups. The chapter also discusses how perceptions of fairness relate to the functioning of society and to individual well being. Chapter 3 presents some stylised facts on income inequality for the whole EU before, during and after the Great Recession. The dynamics of income inequality are shown for the entire income distribution as well as for different income sources in the EU as a whole, but also for three macro-regions. Chapter 4 discusses inequality of opportunity – a key structural inequality in society – through the study of persistence of educational attainment levels across generations. The analysis goes beyond most existing evidence by considering persistence across three generations rather than only two. The second part of the chapter explores individual perceptions of social mobility and beliefs about equality of opportunity. After the examination of inequality of outcomes and opportunities in Europe, Chapter 5 provides some perspectives and evidence on welfare state arrangements and tax-benefit systems: the distributional impacts of tax reforms, individual tax evasion behaviour, corporate tax avoidance behaviour and aspects of social protection in changing labour markets. Chapter 6 concludes this report.