Growing inequalities and their impacts in Luxembourg

CEPS Instead presented the Growing Inequalities' Impacts (GINI) country report for Luxembourg. Even if the country can still be considered a low inequality country by international standards, this trend is a potential source of concern. Several factors may explain the increase in income inequality. Income source decomposition analysis reveals that the relative contribution of paid employment income to total inequality increased over time. This reflects major labour market evolutions: (i) the expansion of the high wage financial sector, (ii) an increase in the female employment rate, mainly married women, as well as (iii) an increase in earnings inequality. The recent upward trend in the unemployment rate also coincided with a period of increasing inequality. Finally, the analysis of education inequalities shows that for both men and women the share of highly educated increased while the share of low educated remained stable. This changing educational inequalities and the change in skills required by the structural change from a heavy industry based society to a high value-added service society also influenced income inequality.

The increase in inequality does not seem to have had a strong impact on most of the social outcomes considered in this project. Material deprivation in Luxembourg is still among the lowest in Europe, the level of life satisfaction is stable and the overall level of health has improved (except for overweight). An exception is the level of criminality and of the population imprisoned which both recently increased. By and large, the positive effects on social outcomes due to the improvement of overall living standards seem to have prevailed compared to the negative effects of increasing inequality.