A study commissioned by DG Employment and Social Affairs suggests that ageing populations may lead to an increase in income inequality and poverty in the EU. The report entitled ’Unequal Welfare States. Distributive Consequences of Population Ageing in six European Countries’ says that member states can limit the impact by hitting the Lisbon Agenda’s employment targets.
The report looked at ageing’s potential impact in six European countries (Netherlands, Germany, France, Italy, UK and Denmark) by 2025.
Nearly all European countries are experiencing ageing. As retired people generally have lower incomes than employed workers, ageing will lead to a slight rise in income inequality in Europe in the next 20 years. Larger numbers of people with lower incomes will in turn lead to higher poverty rates.
But if all EU Member States meet the Lisbon employment targets by 2010, the impact will be mitigated. People who work longer build up increased rights to benefits, thereby raising their income from pensions. In fact, increased participation in the labour market would even mean a reduction of income inequality and poverty in countries like France and Italy.
The alternative option of making social security and pensions more financially sustainable by lowering levels of benefits would lead to a further increase in inequality and poverty levels, the report stated.
The study found that the "Scandinavian model" would provide the best protection against increased income inequality and poverty rates. The model is based on a social security system which focuses strongly on increasing labour force participation, where practically all women work full-time and the pension age is relatively high.
But this model is not for everyone. Financing problems in social security in some Member States are simply too great, while in others the necessary increase in labour force participation appears unlikely.
