Equality: a political choice. Income inequality in Europe and the US: trends, causes and solutions

This paper discusses the levels, trends and causes of income inequality in Europe and the US with a particular focus on inequalities within European countries. It argues that inequality is significantly related to political choices made by national governments in taxation and broader economic and social policy.

In particular, the biggest difference between Europe and the US, which explains why the US is more unequal, is the European social model of adequate minimum wages, stronger unionisation and salaries that are more centrally or sector defined. In Europe, Mediterranean and eastern European countries are the most unequal; the UK is the most unequal of the rich EU members; continental countries rank in the middle; while the Nordics are the most equal.

This variation is attributed to the different degree of redistributive policies. A mixture of policies can reduce inequality: redistributive taxation, a 'flexicure' labour market, easier access to education, public housing and health services and a more inclusive immigration policy.

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