1. Growth with Equity: Trends and Challenges in the ECE Region Ján Kubiš
UNITED NATIONS
ECONOMIC COMMISSION FOR EUROPE
Growth with Equity:
Trends and Challenges in the ECE Region
Ján Kubiš
UNECE EXECUTIVE SECRETARY
New York
3 November 2010 1

2. Long-run Trends in Inequality
Over the last two decades inequality has been increasing throughout much of the world
This has been true in the three regions of the ECE – North America, Western Europe and the European Emerging Economies of East, Central, and Southeast Europe, the Caucasus, and Central Asia
This has been due to changes in technology, globalization and government policy
Inequality has several dimensions including: the overall income distribution, by gender, ethnic groups, by geographical regions, and intergenerational
Although inequality has increased, in the ECE the poorest have been generally protected

3. Inequality in the ECE Region
Despite the trend towards higher inequality, the ECE region still has less inequality than most other regions of the world
Inequality in the US is generally higher than in Western Europe
Inequality in the UK and continental Europe is higher than in the Nordic economies
The Nordic economies are generally considered as being the most successful economies in the world in terms of achieving equity with growth
Inequality in the European Emerging economies varies considerably

4. Government Policy and Equity
There are two competing social models in the ECE
A “free market or American” model which emphasizes equality of opportunity, market provision of services, limited labor market regulation, and a safety net limited to the poorest
A “European or social” model which emphasizes social cohesion, equality of outcomes, universal provision of health, education and other public services, labor market regulation, and generous social transfers
Over the last two decades there has been a move from the European model to the American model under the belief that this will promote faster economic growth
How successful this transition has been in terms of increasing growth is debatable, but it has resulted in a general increase in inequality

5. Source: Eurostat, OECD Social and Welfare Statistics.

6. Markets are not enough

7. Inequality in the Transition Economies
With the economic collapse in the transition economies in the early 1990s, inequality increased significantly and social and health indicators declined significantly
The initial increases in inequality were largest in the most negatively impacted economies of the CIS with more moderate increases in the new EU member states
Since the late 1990s until 2008 sustained economic growth allowed the increases in inequality in the CIS to be partially reversed
Nevertheless large disparities continue to persist in many of the transition economies and many health and social indicators are inadequate

8. Gini Index in the European Emerging Economies A larger index number means higher inequality

9. High inequality declines somewhat in CIS economies10 20 30 40 50 60
Estonia
Bulgaria
Hungary
Latvia
Poland
Romania
Slovenia
Armenia
Azerbaijan
Belarus
Georgia
Kazakhstan
Kyrgyzstan
Moldova
Russia
Ukraine
Uzbekistan
Albania
Croatia
Macedonia, FYR
Turkey
Gini coefficient (%)
mid-1990s
mid-2000s

10. Major Challenges in Improving Equity in the Transition Economies
Promoting equity requires a strong, efficient government while governmental institutions in many of the transition economies are weak and inefficient
It is difficult to provide social protection to those working in the informal sector and living in informal settlements and these groups are often quite large
Natural resource economies often do not have a production structure which provides large numbers of stable well-paid jobs
However, resource-rich economies do provide governments with revenues that can be used to finance public services and social transfers; the sustainability of this depends on high oil price
Migrant populations are often poor and receive limited social protections and benefits

11. The Importance of Perceived Fairness in Assessing Equity
How a society views the inequities within it can be as important as the actual level of the inequities
For example, although income inequality is higher in the US than Western Europe, it is generally viewed by the US population as less of a problem than in Europe
Although income inequality is not particularly high in many of the transition economies compared to other emerging economies, because of cultural beliefs developed under Communism, the sense of unfairness is quite high in the transition economies

12. The Impact of the Financial Crisis on Equity
The ECE region was the hardest hit region in the world; most economies other than those in Central Asia experienced negative growth in 2009
It will be 2011 before most economies return to their 2008 levels of GDP; unemployment may not fall to 2008 levels until 2013 or beyond
As a result poverty has increased in most economies and social and health indicators have declined
Achieving a number of the MDGs now appears problematic
The need for fiscal retrenchment throughout the region means that social programs will have to be cut back for years to come

13. Improving Gender Equality
Progress in most ECE countries has been achieved in:
Women’s participation in the labour market
Women’s political participation at local levels
New and strengthened legislation for gender equality
Institutional mechanisms on gender equality and women’s empowerment
Key challenges for gender equality remain in the following areas:
The gap between legislation and implementation
Decent work for women and measures to counteract labour market segregation
The gender pay gap
The situation of migrant women and women belonging to minority groups
The persistence of gender stereotypes, especially in media and education
Insufficient availability of sex-disaggregated data and gender-sensitive indicators

14. Gender discrimination in the labour market
Gender pay gap by subregion, 2008 or latest available year (per cent) 5 10 15 20 25 30 35 40 45 50
GEO
AZE
TJK
ARM
RUS
KAZ
KGZ
BLR
UKR
MDA
ALB
MKD
HRV
SRB
TUR
EST
CZE
SVK
LTU
POL
BGR
LVA
ROM
HUN
SVN
Source: UNECE Gender Database.

15. Ethnic and Geographical Inequality
Minority groups in many of the ECE economies often have significantly higher levels of poverty and face other forms of social exclusion
Dicrimination often exists even when there is no government policy against minorities
Differences between ethnic groups have often led to conflict
Affirmative action for minorities may be effective if properly implemented
Active labor market policies and targeted educational programs have been effective
Income differences across geographical sub-regions within countries are often quite large
Poverty is usually much higher in rural areas
Regional development strategies have often been successful in addressing regional disparities

16. Source: UNECE Generations and Gender Surveys.

17. Source: UNECE Generations and Gender Surveys.

18. Intergenerational Equity
Intergenerational equity is often considered to be a major defect of democratic societies since future generations do not have a vote
There are a number of intergenerational issues of major importance for the ECE region
Provision and financing of age-related pensions and health care
All of the ECE economies except for those in Central Asia face a demographic aging problem
Although provision of pensions is well-developed their financing has not been adequately addressed
Excessive carbon emissions and the resulting climate change may be the result of an excessive discounting of the interests of future generations

19. Policy Directions for Growth with Equity
Integrated policy framework
Balance between macroeconomic, structural and social policies
Synergies between growth, employment, improved education and healthcare, and environmental sustainability
Gender equality policies
Cross-cutting effects on all social sectors
Review of fiscal policies
Income redistribution and fiscal space for social protection
Better data on disadvantaged population groups
Essential for monitoring the impact of pro-poor policies

20. THANK YOU