Divide between rich and poor

Divide between rich and poor

Jordi Sevilla, Belén Santa Cruz and Diana Ortega, economists

Key points
  • 1
       Spain has become an increasingly more unequal country, with ever greater numbers of rich people but more poor people too. This is creating dynamics of polarisation that are leading to a dual society that is advancing at two speeds. A multidimensional divide that, based on the different indicators analysed, we can affirm exists, is broad and has different social, economic and even political implications, thus does not simply obey a mere lack of income.
  • 2
       Inequality in Spain is high, exceeding the European average and, furthermore, it has a structural component. High levels of inequality of income and of wealth, as well as serious problems in terms of equal opportunities, with a social elevator that does not work as it should, are giving rise to an intergenerational transmission of poverty or, to put it another way, to poverty becoming hereditary.
  • 3
       The snapshot of poverty and social exclusion in Spain evidences a strong increase in people who are in this situation, both following the financial crisis of 2008 and following the covid-19 epidemic. Some 25.5% of the Spanish population is in this situation.
  • 4
       Furthermore, covid-19 has not affected the whole population in the same way, it has had a greater impact on more disadvantaged areas and vulnerable groups. A recent Oxfam report estimates a 22.9% increase in poverty in the last year, leading to the highest figures in the last decade.
  • 5
       The Spanish system presents inequality in the distribution of income and wealth (fundamentally due to the labour market and an economic fabric with low productivity and a small business size). Furthermore, this inequality is not sufficiently reduced, above all if we compare it with countries from the European environment, after the action of a model of redistribution and of social protection that is not capable of providing a solution to current problems and that leaves numerous social groups in a situation of exclusion. The capacity to reduce poverty and inequality is lower than in other Eurozone countries and, moreover, the system does not always target those who need it most.
  • 6
       Economic growth alone will not be sufficient to close this divide; therefore, it will be necessary to review and update the existing mechanisms and incorporate other new ones. From debate with twelve experts on the subject, specific proposals for a solution can be inferred, such as a reduction in fiscal spending, shifting the burden of taxation from working income towards capital income, a minimum living wage, an increase in benefits aimed at the lowest deciles of the distribution and the improvement of child benefits, a modern and innovative industrial policy with an increase in investment in RDI up to 3% of GDP, a new housing rental law and a greater pool of social housing, universal infant education or an increase in spending on dependency, among others.
  • 7
       This divide is converting us into a more vulnerable society with regard to tackling the less positive phases of the economic cycle in the immediate future but, also, more vulnerable with views to tackling the great challenges of the future in the medium and long term. Closing this divide in the present means investing in the future of society.
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Authors

Jordi Sevilla, Belén Santa Cruz and Diana Ortega , economists

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