In one of his speeches, Franklin D Roosevelt stated that progress should be measured by our ability to uplift those who are the least fortunate. He foresaw the dominating nature of world policy and the economic agenda. Income disparity, once a subtle economic undercurrent, today figures as one of the top global risks. The European Union consists of 27 countries and although it is considered a consolidated market with a novel structure (supranational) of political and economic integration, it has a diverse and dynamic landscape for observing income disparities. My colleague Tetiana Semenenko and I examined data on the Gini coefficient of equivalised disposable income from 2005 to 2019, which sheds light on the shifting economic landscape during and after the financial crisis.
The Gini coefficient is the most frequently used measure of inequality. The Gini coefficient measures the distribution of cumulative income among a population. Recent studies across EU member states indicate that gaps between the highest and lowest earners, although not exceeding 40% in most countries, still vary significantly. Income inequalities are influenced by a complex interplay of several factors, including local economies, talent, effort and broader economic conditions. According to the OECD, understanding changes in the Gini coefficient will enable policymakers and relevant authorities to make informed decisions for economic growth and development.
The EU experienced marked divergence in household income growth, particularly among Baltic and Southern European countries, after the global financial crisis of 2008–2009. While all nations saw growth resume by 2014, the legacies of the crisis — widened gaps and incomplete convergence — have persisted. Together with a colleague, I analysed the trends and classified the EU-27 into clusters based on the standard deviation of Gini coefficient data. This classification yielded six focus countries: Italy, Spain, Germany, Slovakia, Hungary and Bulgaria. For each, the study tracked changes in income inequality over a fifteen-year period, encompassing both boom years and a deep recession. Italy and Spain, for example, experienced a moderate rise in inequality over the period. For Italy, the Gini coefficient hovered between 31.2% and 33.4%; Spain’s ranged from 31.9% to 34.7%. By contrast, Bulgaria spiked at 40.8%, which was a European high. On the other hand, Slovakia and Hungary experienced substantial decreases in inequality, indicating that not all EU states follow the same trajectory, even after shared external shocks such as the 2008 crisis. Germany consistently maintained one of the smallest gaps between its richest and poorest citizens, while Bulgaria again ranked at the top for inequality by this measure.
An intriguing finding of the study is the lack of a single clear trend in how income inequality reacted to the financial crisis. While the Gini coefficient for some countries peaked during or after the crisis, for others the highest or lowest points bore no connection to external economic shocks.
Forecasts using advanced statistical techniques suggest a continuation of these patterns in most countries — slight increases or sustained high levels of inequality in countries like Bulgaria and Italy; and relative stability or further improvement in countries such as Slovakia.
Research on the Gini coefficient brings a measure of clarity to a complex and dynamic target. For policymakers, the implications are clear: economic resilience, social policies and targeted interventions can help insulate vulnerable populations; however, the local context matters and broad averages can mask critical variations.
The EU has undergone numerous dynamic changes on both the political and economic fronts, yet it remains the most competitive region in the world. Despite their competitive strength, the pursuit of income equality and social unity is of paramount importance. The learnings from the EU have value well beyond its borders.
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