A Pan-European Perspective on Low-Income Dynamics in the EU

In this paper we study trends at the lower tail of the EU-wide distribution of disposable household income. In contrast to most studies, we take a pan-European perspective and compare income levels across countries, after accounting for average price differences. More in particular, we make use of EU-SILC 2008-2014 to study trends and levels in the EU-wide low income proportion and the EU-wide low income gap. From the analysis emerges a highly dynamic picture which points to both convergence and, especially since 2010, divergence. Living standards in the new EU Member States, most notably Poland, Slovakia, and Bulgaria, have considerably improved in comparison with the EU-wide median, while living standards in Greece, and to a lesser extent Spain and Italy have clearly lost ground. These trends mark an important change in the composition of the bottom of the pan-European income distribution, with an increasing weight of the ‘old’ EU Member States at the bottom end, most notably the crisis-hit Southern European countries. Worryingly, we also observe that no country succeeded in substantially reducing the EU-wide low-income proportion while also substantially reducing the at-risk-of-poverty rate. This emphasises the need of a dual perspective on solidarity, a national and a pan-European, and underscores the importance of reflecting further on the need of mutual insurance and true solidarity across borders.