Inequality, poverty, and material deprivation in new and old members of the European Union.

AIM

To analyze the main indicators of income inequality, objective and subjective poverty, material deprivation, and the role of public social transfers in the reduction of poverty in 15 old and 10 new member states of the European Union (EU), undergoing post-communist socio-economic transition, as well as in Croatia, a candidate EU country.

METHOD

Objective poverty rates, poverty reduction rates, poverty thresholds in purchasing power standards (PPS), total social expenditure, inequality indicators, and risks of poverty according to demographics were calculated using the data from the Eurostat databases, in particular, Household Budget Survey. For Croatia, Central Bureau of Statistics first releases on poverty indicators were used, as well as database of the Ministry of Finance (social expenditure). Subjective poverty rates and non-monetary deprivation index were calculated using the European Quality of Life Survey, which was carried out in 2003 in EU countries and in 2006 in Croatia.

RESULTS

According to the indicators of income inequality and objective poverty, there was a divide among old EU member states (EU15), with UK, Ireland and South European countries having higher and Continental and Nordic countries lower indicators of inequality and poverty. Among new member states (NMS10), Baltic countries and Poland had the highest and Slovenia and the Czech Republic the lowest indicators of inequality and poverty. In all EU15 countries, except Greece, subjective poverty rates were lower than objective ones, whereas in all NMS10 countries the levels of subjective poverty were much higher than those of objective poverty. With some exceptions, NMS10 countries had low or even decreasing social expenditures. The share of respondents who were deprived of more than 50% of items was 6 times higher in the NMS10 than in the EU15 countries. When standard of living was measured by income inequality, relative poverty rates, poverty reduction rates, total social protection expenditures, and non-monetary deprivation, only Slovenia, the Czech Republic, and Hungary, out of the NMS10, were in the upper half of the distribution, while Croatia had a medium position among NMS10 states.

CONCLUSION

Our analysis demonstrated that poverty in countries undergoing post-socialist socioeconomic transition is widespread and could seriously limit human development. Continual research and monitoring of different aspects of poverty is needed for setting appropriate policies across the EU to effectively combat poverty and social exclusion and to promote convergence process.