EF

A
COMMITTEE

Macedonia 2021
 AGENDA
TOPIC
1 INTRODUCTION 2 MEASURING

THE EUROPE
2020 HOW WE CAN
3 STRATEGY 4 SOLVE IT

INCOME
Money received or earned, especially
on a regular basis, from working,
investments or business
INCOME DISPARITY
Income disparity is how unevenly income is
distributed throughout a population. The less
equal the distribution, the higher income
inequality is.
SIMPLE
TERMINOLOGY
DISPOSAL
‘AT THEIR DISPOSAL’ - available for
them to use; available for whatever one
needs
e.g. We had plenty of money at our disposal
SOCIAL
The process in which individuals are blocked
EXCLUSION
from various rights, opportunities and resources
that are normally available to members of a
different group
(e.g., housing, employment, healthcare, civic
engagement, democratic participation..)
 EFA TOPIC 2021

The poorest 20% of the European population has 5 times less

income at their disposal than the top 20%, indicating an alarming
tendency towards income disparity and social exclusion. With
nearly 1 in 4 European citizens living at risk of poverty or social
exclusion, how can European countries change this trend and
improve the quality of living of individuals in the lower parts of
the wealth distribution chain? Can the system of a basic income
tested in Finland and other parts of the world be an answer.
(Alaska oil, Germany).
 EFFECTS OF INCOME
INEQUALITY
WHY IS THIS SO IMPORTANT?
Inequality should be seen as the key of both sustainable and
inclusive growth. In fact, unequal societies are also more unstable
societies and more polarised (i.e. exclusive).

• SUSTAINABLE GROWTH is the realistically achievable growth that a

company could maintain without running into problems. ... A sustainable growth
rate (SGR) is the maximum growth rate that a company can sustain without
having to increase financial leverage.

• INCLUSIVE GROWTH is economic growth that is distributed fairly across

society and creates opportunities for all.

• SOCIAL POLARIZATION is associated with the segregation (separation)

within a society that may emerge from income inequality, and result in such
differentiation that would consist of various social groups, from high-income to
low-income.
INTRODUCTORY FACTS
According to the latest Eurostat data, the population at risk of poverty or social exclusion in Europe reached
almost 123 million people in 2012, up by almost 8.5 million compared with 2009.

› In the short run, higher inequality encourages higher levels of debt, because consumption patterns tend to
show much more inertia than income patterns.

› In the long run, inequality may slow down the motivation to invest in education and other assets, lowering
growth potential. It has been argued that the persistence of poverty might be due to internal constraints
adding their negative effects to those of external ones.

As we said, unequal societies are also polarised societies, where the poor not only lack access to credit and
public services but also may lack the capacity to aspire, since social mobility becomes less and less easy to
accomplish.
Income inequality has political and economic impacts such as slower GDP growth, reduced income
mobility, greater household debt, political polarization, and higher poverty rates.
 MEASURING INEQUALITY
THE S80/S20 SHARE RATIO Inequality of income can be measured using a range of indicators.
Some of the most commonly used ones are the S80/S20 share
ratio and the Gini coefficient.
The S80/S20 share ratio measures the annual
income of the richest 20% of households,
compared to the poorest 20% of households.
This is the headline indicator for measuring
inequality in the Social Scoreboard. So, for
example, an S80/S20 of 5.0 means that the richest
20% of households receive five times as much
income in a year as the poorest 20%.
A higher S80/S20 implies more income
inequality; a lower number implies less
inequality. An S80/S20 of 1.0 would imply
perfect equality of income — i.e. all households
would have the same annual income.
For the EU, the S80/S20 is around 5.1 (2015)
In economics, the GINI COEFFICIENT, is a measure
intended to represent the income inequality or GINI COEFFICIENT
wealth inequality within a nation or
any other group of people.

The Gini coefficient ranges from 0 (0%) to 1 (100%), with 0 representing perfect equality and 1 representing perfect inequality.
 A higher Gini index indicates greater inequality, with high income individuals receiving much larger percentages of the total income of the
population.
 If every resident of a nation had the same income, the Gini coefficient would be zero. If one resident earned all of the income in a nation and
the rest earned zero, the Gini coefficient would be 1.
 While the Gini coefficient is a useful tool for analyzing the wealth or income distribution in a country, it should not indicate a country's overall
wealth or income. Some of the world's poorest countries, such as the Central African Republic, have some of the highest Gini coefficients

TOP 5 COUNTRIES
WITH THE HIGHEST GINI COEFFICIENTS ARE:
1. Lesotho (0.632)
2. South Africa (0.625) Many European countries have some of the lowest Gini coefficients,
3. Haiti (0.608) such as Slovakia, Slovenia, Sweden, Ukraine, Belgium, and Norway.
4. Botswana (0.605) Inequality is generally lower in European nations than it is in non-
5. Namibia (0.597) European nations. The Nordic countries and Central Eastern
European countries are among the most equal countries.
Figure 1: measured
by S80/S20 ratio

Figure 2: Measured
by GINI INDEX
Inequality of opportunity cannot be
MEASURING INEQUALITY OF
directly measured using standard OPPORTUNITY
indicators.
As only one person's outcomes can be directly observed, in order to gain an insight into how unequal
opportunities are, certain assumptions must to be made and PROXY indicators need to be used to measure
equality of opportunity.
Proxies for measuring opportunity are focused on young people. Because an individual's situation results from
choices made, and luck experienced, over her or his life, it can be assumed that for younger people, observed
well-being (including income) is less associated with an individual's life choices, and more so with the
opportunities afforded to them. For this reason, poverty or social exclusion risk for children is an
important indicator of unequal opportunities .
*
EU ADDRESSING INEQUALITIES (the Europe 2020 strategy)

When the income PRODUCED in a country, is growing faster

than the incomes RECEIVED by that country's households, this
suggests that growth is not *inclusive and that its benefits are not
being felt by all households.

For example, evidence shows that GDP growth in recent years in

the United States has almost exclusively benefitted the highest
income households.

This document aims to provide a brief overview on two key

dimensions of the inequality challenge in the European Union,
that of income inequality and inequality of opportunity.

https://ec.europa.eu/info/sites/info/files/file_import/
european-semester_thematic-factsheet_addressing-
inequalities_en_0.pdf
 INEQUALITY OF
INCOME
This refers to how the income earned in an economy is distributed across the
QUIC
What did
INCOME
K
population. It is usually calculated at household level, weighted for the number of mean, once
household members and their age.
again?
INEQUALITY OF QUES
WEALTH
In some countries, such as Austria, the Netherlands and Germany, while
income inequality is not particularly high, wealth inequality has been increasing TION
in recent years. Overall, wealth tends to be more unequally distributed than
income, due to the role of inheritance and rising property prices.

INEQUALITY OF
OPPORTUNITY
Income inequality measures outcomes, but this is a mix of the opportunities
afforded to an individual at birth, the choices they made in life, and luck. While
more difficult to measure, ensuring individuals have an equal opportunity to
succeed is a policy goal for which there is a clearer consensus to act, than for
achieving equal outcomes.
 EXPLANATION AND CONCLUSIONS

Inequality of opportunity When inequality

can contribute to becomes too large, Inequality also
inequality of income, and it can threaten undermines social
vice versa: growth. fairness.

If incomes are distributed too
unequally, it results in less equality
of opportunity for the next
generation, as family advantages
that result from higher income
and wealth are more easily
passed on to the next generation.
A good economical state motivates
individuals to achieve better with
their own hard work.
Individuals at the bottom
of the income (or wealth)
distribution lack the
resources to invest in their
skills and education. They
may be unable to reach
their full potential, which
is harmful for overall
growth.
If the resources of the economy are
too unevenly distributed, it may
threaten the common sense of
belonging. Both these effects can
be seen if the high levels of
inequality are driven by greater
numbers of people living in
poverty. These people may be
facing increased deprivation,
homelessness or social exclusion.
 MORE ON INEQUALITY

Inequality of opportunity is also linked to disadvantage being passed from one generation to the next. Another important indicator of equality
of opportunity is the relationship between adolescents' educational outcomes and their parents' socioeconomic status.

SOCIOECONOMIC STATUS is the social standing or class of an

individual or group. It is often measured as a combination of education,
income and occupation. Examinations of socioeconomic status often
reveal unfairness in access to resources, plus issues related to privilege,
power and control.

Inequality results from low income growth among poorer households. While growing inequality results both from faster income
growth at the top of the distribution and slower than average growth at the bottom, it is the slow growth at the bottom that has
had the biggest effect on overall inequality in the years following the crisis. This effect has been particularly strong in Romania
and Portugal, but also in Italy and Germany.
RIVERS OF INEQUALITY
Drivers of income inequality differ across Member States.
While UNEMPLOYMENT is a factor in inequality in most EU countries, in some cases (such as Bulgaria, Cyprus, Estonia, Lithuania and
Latvia) the weak redistributive effect of taxes and benefits plays a key role.

In others, high income inequality is the result of UNEMPLOYMENT combined with an UNEVEN DISTRIBUTION OF MARKET
INCOMES (Greece, Spain and Portugal).

FACTORS THAT INCREASE INCOME INEQUALITY:

INCREASES IN TECHNOLOGICAL CHA
While positive for economic growth overall, technological progress increases the
spread of wages ('wage dispersion') by rewarding high skills, in particular in high-value
sectors of the economy like Information and Communications Technology (ICT). At the
same time, automation tends to displace workers at lower and medium skill levels.

DEMOGRAPHICS AND HOUSEHOLD

COMPOSITION
The increase in the share of single-person households can increase inequality by reducing
their capacity to pool resources. Falling household size, coupled with higher rates of
immigration, can also increase inequality — in particular inequality of opportunity — by
leading to a higher concentration of assets among the native-born population.
(to pool resources means to combine more than one person's supply of something)
 POLICY LEVERS TO ADDRESS THE INEQUALITY
Policy lever was defined as any instrument that could CHALLENGE
be applied by an organization or government to influence use of psychological services.
Policy levers are the tools that government and its agencies have at their disposal to direct, manage, and shape changes in public services.

Investment in education and skills is a key policy tool

for reducing inequality and promoting equal
opportunities.
For children and young people, education is
effective at creating more equal opportunities as
long as all children have access to high quality
education, regardless of their background
The tax and benefit system is the key policy lever
for addressing income inequality
Benefit taxation is a system in which individuals
are taxed according to the benefits they receive
from public expenditures.

Wealth inequality may be curbed

through well-designed taxes.
Capital taxation (including property and
inheritance taxation) may be a relevant means to
ensure fairness in opportunities and a more equal
distribution of wealth.
SYSTEM OF
BASIC INCOME
Universal Basic Income Explained
https://www.youtube.com/watch?
v=kl39KHS07Xc&feature=share&fbclid=IwAR1Wc1
BG9w_6hOYBgNAXtatnISmabqxrykLFaekGuEeOC
kzjmUfVQ4O8oz0
What Countries Have Tried Universal
Basic Income?
https://www.youtube.com/watch?
v=7XqoKgch4Ck&feature=share&fbclid=IwAR1-
vwfvNpoZnP6lUeTh0LIJhaWQ1uFRm-
qai3_6Zd0gnfpIh3Jb3DWK2zk

Did Finland's basic income experiment

work?
https://www.youtube.com/watch?
v=9nPQM54oPMg&feature=share&fbclid=IwAR3LCcE
plTcyHEpxRIbqBvX9s8GJSPL6ZmtT4sDBr_xt3EyTW
VgU2YYWzQo
THANK
YOU
Does
anyone
have any
COMMITTEE OF
CREDITS: This presentation template was created by
ECONOMICAL AND
Slidesgo, including icons by Flaticon, and

questions?
infographics & images by Freepik and illustrations
FINANCIAL
by StorysetAFFAIRS
Macedonia 2021