People in Europe still find it difficult to cope with the effects of the financial and economic crisis still. This is a well-known fact and has been confirmed repeatedly by various sides. Now, the International Labour Organisation (ILO), in cooperation with the EU Commission, has upheld this in a report and demonstrated that in particular the middle class has not only been badly affected but that it has also shrunk, just like its share in the collected income. However, thanks to social partnership, mechanisms of wage determination and wage negotiations there were also positive examples.

Erosion of Europe's middle class during the past decade

In most European countries, the middle class grew between the 1980s and 1990s mainly due to more men and women being in work as well as due the emerging model of dual-earner households. On the other hand, long-term trends such as changes in the world of work and the rise of atypical forms of employment were aggravated by further factors caused by the crisis, such as growing unemployment, loss of actual earnings and changes by institutions of social dialogue. These factors contributed to the further erosion of Europe’s middle class during the last decade.

Social partnership is a guarantor for lower inequality

Fortunately, the ILO Report comes to realise that especially a functioning social dialogue, a lived social partnership, a high density of collective agreements, mechanisms of wage determination and wage negotiations decide that the middle class are growing in spite of the crisis. What is interesting is the fact that for example the survival of the wage index system in Belgium was named as a positive example, which significantly contributed to reduce inequalities. However, it was in particular the index system of the Belgians, which was an annual thorn in the flesh of the EU Commission. Each year, during the scope of the EU Semester, the Commission made the recommendation to Belgium to reform her system of automatic wage indexing, as this would get in the way of the country’s competitiveness – clearly a serious error. As the index systems does not only contribute to reducing inequality, but also strengthens the social security system and thereby the solidarity between male and female citizens.

Weakening of the social dialogue has disastrous consequences

The weakening of the social dialogue in countries such as Greece, Spain and Ireland has shown that this can contribute to greater inequality. Hence, in countries with a weaker social partnership and a lower density of collective agreements, such as Hungary and the Baltic States, the growth of the middle class depends directly on the economic environment. To reduce the trend of inequality, politics should take targeted measures for the middle class. Such initiatives should not only affect the world of work, but also related sectors such as tax law, education and social security.

Further information:

Long version of the ILO Report (available only in English)

Synopsis of the ILO Report (available only in English)