EESC public hearing calls on the EU to give more political support to the Member States in the fight against inequality

Growing inequality is a problem which can no longer be ignored. It is causing a divide between different social groups and has contributed to the rise of extreme movements and parties. It is a destabilising factor for both the economy and society and we urgently need to tackle this problem – these are among the main messages which the rapporteur put forward in a draft EESC own-initiative opinion on "Wealth inequality in Europe: the profit-labour split".

On 23 June, the EESC organised a public hearing on this topic gathering expert views from European institutions, academics and civil society representatives. "Our task is to find out what the EU itself can do in order to reverse the trend of growing inequality between social classes, in addition to the Member States' efforts in this field. Putting forward a set of possible measures at EU level is the key to address also the existing cross-country divergences", said Joost van Iersel, president of the ECO section, at the beginning of the meeting.

The figures presented show there is an urgent need for action. Wilfried Altzinger from Vienna University of Economics and Business pointed out that from the mid-1940s to the mid-1980s the levels of inequality fell due to tax policies geared towards a more even redistribution of revenues. However, since the mid-80s – when the decades of tax cutting and light financial regulation began - inequality went in the opposite direction. The top 1% saw their wealth increase by 52% between 1993 and 2015, while that of the remaining 99% rose by only 14.3% over the same period.

Professor Wiemer Salverda from the University of Amsterdam pointed to the political impact of an extremely unequal distribution of wealth, giving those at the top end of the wealth scale enormous economic and political power. This could be detrimental to fair market competition, consumption and investment in the real economy. He also highlighted the social significance of large inheritances, which tend to affirm the cleavage between the few who benefit from them and the rest of the population overwhelmed with financial difficulties. These problems are further reinforced by the enhanced geographical mobility of wealth, allowing it to be shifted to tax havens and thus increasing tax avoidance.

Javi López, European Parliament rapporteur on "Combating inequalities as a lever to boost job creation and growth", said that "we need growth for fighting inequality, but we also need to fight inequality in order to achieve growth". Regarding the European Pillar of Social Rights, Mr López said that Europe needs more than just a list of recommendations – Europe also needs a common social policy with appropriate rules to rebalance the European semester.

What needs to be done?

One important step to fight inequality is to seek the return to full employment. Participants also felt that collective bargaining mechanisms across the EU should be reinforced, not only in the individual companies but also at sectoral level. Furthermore, the fight against tax evasion needs to be reinforced through better European and international cooperation. Tackling inequality must also be better integrated in policy-making through a set of specific indicators to be used within the European Semester. Inequality between social groups would need to be taken into consideration in all policy deliberations. Other important steps include tax policy measures: shifting taxes away from labour and targeting them at the top end of the wealth scale in particular (on average 10% of Europe's population owns 50% of Europe's wealth). Participants also called for better data collection as the very rich are underrepresented in the current data.

"Tax evasion and tax fraud must not be seen as a trivial matter. Europe and its Member States need to get back their fiscal and tax sovereignty by forging closer cooperation and by converging taxes and aligning fiscal policy over time. This should be accompanied by the creation of a financial registry for the big fortunes, as well as ensuring benchmarking and safeguarding collective bargaining rights across the Member States", said Plamen Dimitrov, rapporteur for the EESC opinion on wealth inequality. The opinion taking on board the conclusions from this public hearing is scheduled for adoption by the EESC Plenary on 20-21 September 2017.