Inequality and Poverty across Generations in the European Union

From a new IMF Staff Discussion Note:

Overall income inequality has remained broadly stable in the EU over the past decade but disparities in poverty and income inequality across generations have increased markedly. Developments and drivers of overall inequality are well documented but the generational dimension of inequality has received much less attention. In Europe, real disposable incomes of the young have fallen behind those of other generations. Also, the young are facing increasing risks of poverty relative to those faced by other generations.”

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High youth unemployment has been a major source of growing youth poverty. Unemployment disproportionately affects the young. Also, there is a strong association in the data between unemployment and youth poverty. Facilitating the integration of the young into the labor market is a crucial task facing policymakers. In this regard, market-based and meritocratic institutions in general can help mitigate inequality of opportunity, offering relatively larger benefits for the young.”

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Fiscal redistribution needs to be more inclusive to better tackle youth poverty. Social protection schemes have reduced old-age poverty but they have not prevented an increase in youth poverty following the global financial crisis. Reducing youth poverty is likely to require additional resources. However, for countries with an already high level of social spending and a heavy tax burden, as well as limited fiscal space, this may not be an option. In these countries, reducing youth poverty and inequality across generations in a fiscally-neutral way may require partially rebalancing fiscal redistribution to better protect the young, while continuing to protect minimum pension assistance schemes to avoid reversing the trend decline in old-age poverty.”

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Posted by at 10:36 AM

Labels: Unemployment

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