Income Disparities in the European Union

Abstract

The inequality of disposable income in the European Union (EU) is higher than the official figures by Eurostat suggest and matches the level of US inequality. It is a major driver of migration and relocation of production within the EU, which are concerns for low-skilled people in the richer member states (leading to nativist votes and Brexit). Relative inequality has been declining due to the increased growth of poorer economies in Central and Eastern Europe (so-called ‘beta convergence’). However, absolute inequality is unlikely to decline for many years. Fighting EU-wide inequality requires long-term growth accompanied by appropriate expansionary EU policies.