Income Inequality as a Main Social Challenge for the European Union

The poverty rate and the preserving cross-country social and economic inequalities in the European
Union are a major social problem that is likely to have serious economic consequences for its society.
The existing levels of poverty and social exclusion in the European Union in general are high having
in mind that this is the continent with the biggest share of the world’s GDP. It is responsibility of both -
the European Union and its member states to take urgent measures for economic recovery and
growth. The main goal should be poverty reduction, which is also a major aim of the Europe 2020
Strategy, but which still has not delivered the necessary results. Its task to save at least 20 million
people from poverty and social exclusion by 2020 has proved very difficult to achieve, both in the
short and long-run.
This paper aims to explore one of the most pressing challenges for the European Union’s society and
economy today – poverty and social exclusion, on one hand, and income inequality on the other.
These two indictors are analyzed on EU level and as variations between EU member states, as a
result of which the lack of social cohesion is proven. The interdependence between economic growth
and poverty and social exclusion in the EU is explored and proved negative. The interdependence
between economic growth and income inequality (Gini coefficient) in the EU is explored and proved
positive. The second part of the paper analyses the main causes of income inequality in the EU – the
member states national social policy and social model, the existing inequality in individual
opportunities, the negative effects of economic globalization, the rapid technological progress, the
tendency to weaken the role of trade unions, and others. The chapter ends with a brief summary of
the challenges for the European social model in the future.