Inequality is a growing concern in many EU Member States. However, the extent to and the time period in which economic inequality has increased, varies considerably between countries and regions. A new evidence review conducted by the London School of Economics and Political Science (LSE) on behalf of the European Commission looks at the role of policies and institutions on inequality. It examines the role of education, wage setting institutions and welfare states.

Universal vs means-tested benefits

Summarising existing academic literature and new research findings, the report outlines the difference between four types of European welfare states with regards to their effectiveness in poverty alleviation and redistribution. It finds that “welfare states that are characterised by more universal benefits use their social spending more effectively in alleviating income inequality and poverty. Conversely, welfare regimes that rely on means-testing and/or highly fragmented social transfers are less capable of using the social resources effectively”. In line with this, ESN advocates that social benefits need to be adequate to enable a dignified life and be combined with individual support services – accessible to all who require support.

Vulnerable groups

The economic crisis has exacerbated inequalities in many European societies, and a new briefing from the European Parliament explains which groups have been particularly vulnerable to financial, social and employment difficulties. The situation of three groups has worsened most significantly in comparison to mainstream society. First, people experiencing in-work poverty, often in the form of precarious self-employment, has risen sharply in the last few years. Second, disabled people’s disadvantaged position in society and the labour market has been worsened by decreasing economic and social support. Third, the crisis has increased the burden on single parents to juggle their multiple responsibilities and make ends meet.

Negative impact of the economic crisis

On the one hand, many vulnerable people in our societies are not reached by social services because they are not eligible or aware of social services and benefits. On the other hand, organisations and services that are supporting vulnerable groups have seen their budgets reduced and eligibility criteria tightened, leaving many people in need of support to their own devices. Reduced provision may also be guised in restructuring processes such as decentralisation and outsourcing of services when these are combined with a reduction in funding despite constant or increasing demand.

Reviving the positive impact of welfare states

Welfare states’ potential to combat poverty and reduce inequality is prevailing, but the LSE’s evidence review warns that economic inequality can increase not only the economic but also the political power of the richest in our societies who can disproportionately influence social policy to the disadvantage of the most vulnerable. Progressive tax systems, properly funded high-quality social services and effective income support systems are key to fighting inequality and the detrimental consequences it can have on our social fabric, the solidarity that our welfare states have been built on, and our societies’ ability to give everyone the opportunity to live a fulfilled, dignified life.