Balkans and former Yugoslavia Will Bartlett Visiting Fellow, LSEE - - PowerPoint PPT Presentation

Inequality in the Western Balkans and former Yugoslavia

Will Bartlett Visiting Fellow, LSEE & International Inequalities Institute

International Inequalities Institute project: Specific research questions

Together with Gorana Krstic, Jelena Zarkovic Rakis and Nermin Oruc – research questions:

• 1. What is the extent of income inequality in four

Yugoslav successor states, and how much has it changed over the last three decades?

• 2. What factors determine the level of labour

income inequality?

• 3. What has been the role of different welfare

policies in determining the pattern of earnings inequalities?

Welfare system before breakup

• Yugoslav market socialism aimed to reconcile efficiency

and equity through “self-management” (workplace democracy) and social ownership

• Adopted an inclusive welfare system based upon mixed

principles of contribution and solidarity

– combining Bismarckian and Universal systems – major benefits provided on contributory basis (pensions, health care, unemployment and maternity benefits) – Non-contributory cash benefits (social assistance, child allowance, war veterans’ benefits)

• All this led to low levels of inequality

– In 1968, standardised household income Gini = 0.24

Varieties of capitalism (VoC) in Yugoslav successor states

• Successor states emerged from common institutional background

– Path dependency, but:

• Different effects of wars and conflicts
• Differences in pace and pattern of privatisation

– Speed of reforms

• Early reformers: Croatia and Macedonia
• Late reformers: Slovenia and Serbia
• Impact of neo-liberal agenda on welfare reform varied between

countries

– Primary influence of World Bank and IMF (Bosnia, Serbia), EU (Slovenia, Macedonia), mixed influences (Croatia)

• Quite different outcomes in terms of inequality
• Can VoC paradigm explain this outcome?

– Coordinated market economies versus Liberal market economies

European Values Survey: % of respondents with much confidence in trade unions

12 18 34 53 10 20 30 40 50 60 Serbia Croatia Macedonia Slovenia

Gini coefficient of equivalised disposable income before pensions and social transfers

40.4 43.9 44.4 44.9 46.1 47.4 47.6 47.9 48.0 48.1 48.6 48.7 49.1 49.1 49.3 49.9 50.2 50.8 51.1 51.5 51.6 51.7 51.8 53.2 53.7 55.4 56.4 56.7 60.7 62.4 64.1 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Slovakia Slovenia Malta Czech Netherlands Finland Austria Poland Belgium Luxembourg Italy Macedonia Estonia Latvia Croatia Cyprus France Spain Ireland Hungary Bulgaria Denmark EU-28 Romania Lithuania UK Germany Sweden Greece Serbia Portugal

Quantity of employment

• In Serbia, Krstić (2014) using SILC survey data

concluded that inequality of incomes of employees is related to:

– Quantity and quality of employment

• In Serbia, 18.2% of persons live in households

with very low work intensity (10.5% in EU)

– Almost 50% of persons in lowest income quintile live in households with very low work intensity – Related to low participation rate of working age population due to unemployment and retirement and

• ther reasons

People living in households with very low work intensity (aged 0 to 59 years)

5.7 6.6 6.8 6.9 7.1 7.4 7.8 7.9 8.2 8.6 8.7 9.2 9.2 9.4 9.8 10.2 10.7 10.8 10.9 10.9 11.6 11.6 11.7 11.9 14.4 14.9 15.4 16.8 17.4 19.2 21.2 5 10 15 20 25 Estonia Czech Poland Slovakia Slovenia Latvia Romania Austria France Sweden Malta Lithuania Hungary Germany Netherlands EU-28 Finland Portugal Cyprus Denmark Bulgaria Italy UK Croatia Belgium Spain Greece Macedonia Ireland Serbia

Low work intensity and Gini inequality

Croatia Macedonia Serbia Slovenia y = 0.3663x + 26.773 R² = 0.1128 20 22 24 26 28 30 32 34 36 38 40 5 7 9 11 13 15 17 19 21 23 Gini coefficient % of people living in households with very low work intensity

Quality of employment

• In Serbia, three quarters of employed poor do not live in

households with low work intensity (Krstić, 2014)

– So, low quality of employment contributes to poverty and inequality

• In 2014, 12.9% of employed were part-time workers, 24.1% were

self-employed, and 18.2% were temporary workers

– Self employed and part-time workers are most exposed to poverty risk

• Many of the self-employed are informal workers who are outside

the social protection system

– 22% of employees are informal workers, earning 22% less than formal workers (Krstić & Sanfey 2011)

• One third of part-time workers are poor, compared to 13% of full

time workers

– Many part-time workers are in the informal sector, as working part- time in the formal sector faces very high marginal tax rates due to low progressivity of the Serbian tax system – In contrast, Slovenia has a progressive system of personal income tax

Own account workers % of total employment

8.5 8.9 13.9 22.2 5 10 15 20 25 Croatia Slovenia Macedonia Serbia

Redistributive impact of pensions and social assistance on Gini inequality

24.5 30.4 31.0 33.7 38.2 10 20 30 40 50 60 70 Slovakia Slovenia Czech Finland Belgium Netherlands Sweden Austria Denmark Malta Hungary Luxembourg France Ireland Germany Croatia Poland EU-28 Italy UK Cyprus Macedonia Portugal Greece Spain Estonia Latvia Bulgaria Romania Lithuania Serbia Gini before SA + P Gini before SA Gini EDI Linear (Gini EDI) Linear (Gini before SA) Linear (Gini before SA + P)

Gini coefficients in ex-Yugoslavia & EU (%)

52 44 49 49 62 37 30 37 36 46 31 25 30 34 38 10 20 30 40 50 60 70 EU-28 Slovenia Croatia Macedonia Serbia Gini before SA + P Gini before SA Gini EDI

Redistributive impact of pensions and social transfers

20.8 19.4 18.9 15.0 24.2 15.3 13.6 12.5 12.5 16.6 5.5 5.8 6.4 2.5 7.6 5 10 15 20 25 EU-28 Slovenia Croatia Macedonia Serbia Effect of social transfers and pensions Effect of pensions Effect of social transfers

Rank order of redistributive effort from pensions and social assistance

2 12 13 15 28 30 3 15 24 19 14 31 2 22 26 16 7 31 5 10 15 20 25 30 35 Slovenia Macedonia Estonia Croatia Sweden Serbia Before pensions or social transfers After pensions before social transfers After pensions and social transfers

S80/S20 equivalised disposable income share ratio, 2015

3.5 3.5 3.6 3.6 3.8 3.8 4.0 4.1 4.1 4.2 4.3 4.3 4.3 4.5 4.8 4.9 5.2 5.2 5.2 5.2 5.8 6.0 6.2 6.5 6.5 6.6 6.9 7.1 7.5 8.3 9.0 1 2 3 4 5 6 7 8 9 10 Czech Slovakia Slovenia Finland Belgium Netherlands Austria Denmark Sweden Malta France Luxembourg Hungary Ireland Germany Poland EU-28 Croatia Cyprus UK Italy Portugal Estonia Greece Latvia Macedonia Spain Bulgaria Lithuania Romania Serbia

Share of equivalised disposable income by each decile income group, 2015

20.2 22.6 23.9 27.2 5 10 15 20 25 30 1 2 3 4 5 6 7 8 9 10 Slovenia Croatia Macedonia Serbia

Income shares of upper, middle and lower class after pensions and social transfers (% of national equivalised disposable income)

33.8 33.2 33.1 32.8 32.7 32.1 31.9 31.7 31.7 30.8 30.7 30.6 30.6 29.7 29.6 29.3 29.1 28.9 28.2 28.0 27.6 27.2 26.8 26.5 26.3 26.1 25.7 25.5 24.7 24.6 24.0 47.0 46.6 45.0 46.2 47.3 45.5 47.4 46.0 45.6 46.8 46.7 46.8 44.8 46.8 47.1 46.9 46.9 48.5 46.6 48.0 45.2 46.7 47.9 49.6 48.9 48.4 48.0 46.3 48.2 46.7 48.8 19.3 20.2 21.7 21.0 20.1 22.3 20.8 22.3 22.6 22.4 22.7 22.5 24.6 23.6 23.3 23.9 24.1 22.6 25.2 24.1 27.2 26.1 25.3 23.9 24.8 25.6 26.3 28.4 27.1 28.8 27.2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Slovakia Slovenia Czech Republic Finland Sweden Netherlands Belgium Austria Denmark Hungary Luxembourg Malta France Germany Ireland Poland EU Croatia UK Italy Cyprus Portugal Greece Macedonia Spain Estonia Latvia Bulgaria Romania Lithuania Serbia Lower class (bottom 50%) Middle class (40%) Upper class (top 10%)

Variation of income shares

• Income shares of the

middle class are much less variable than of the lower

• r upper classes
• Middle classes are

protected by their “sharp elbows” or “voice”

• Upper classes in predatory

societies extract surplus from the lower classes

• Easier to do where political

power is concentrated in economic-political elite

S.D Mean C.V Lower class 2.836 29.145 0.097 Middle class 1.157 47.006 0.025 Upper class 2.420 23.871 0.101 S.D.= Standard deviation CV = Coefficient of variation

Shares of disposable income gained by top 1% (% of national equivalised income), 2015

3.3 3.4 3.8 3.9 4.0 4.0 4.0 4.1 4.2 4.3 4.3 4.4 4.5 4.5 4.7 4.7 4.8 4.8 4.9 5.2 5.2 5.2 5.5 5.6 5.8 6.0 6.4 6.5 7.1 7.5 8.3 1 2 3 4 5 6 7 8 9 Slovakia Slovenia Croatia Macedonia Belgium Malta Finland Czech Sweden Estonia Hungary Poland Ireland Spain Italy Austria Latvia Netherlands Luxembourg EU-28 Germany Portugal France Greece Denmark UK Bulgaria Serbia Lithuania Cyprus Romania

Why does inequality differ between countries of former Yugoslavia?

• Explanation 1: Varieties of capitalism and paths of transition

– The gradual corporatist Slovenian transition was egalitarian, while the delayed shock therapy neoliberal Serbian transition was more extractive of the surplus from lower class workers generating relatively high levels of poverty

• Explanation 3: Labour market institutions

– Differences in the quantity and quality of jobs may contribute to an explanation of the differences in inequality between these countries – Linked to degree of resistance to labour market reforms – And to progressivity or regressivity of tax system and consequent extent of informality

• Explanation 2: Elite composition and forms of political capitalism

– The Slovenian elite was formed of ex-nomenklatura elements who resisted reforms, while the Croatian elite was reconstituted by members of the HDZ party and the diaspora who supported rapid but incomplete privatisation

Thank you for your attention !!!