PEARL: The Many Sides of Socio-Economic Inequality

Economist Conchita D’Ambrosio and sociologist Louis Chauvel examine the same issue but from different perspectives.

“In a way, we are doctors of society,” says Louis Chauvel.

“Our mission is to investigate society’s health.” He explains his view using the example of the USA: “We are particularly interested in the USA because the system there is actually only perfect for the top ten percent. With the situation worsening for two thirds of the population, what we are seeing in the States is a shrinking middle class.”

He stresses the importance of examining the situation, adding: “It is critical that we understand the relationships so that we can prevent the same happening here.”

Each an expert in their own field

Chauvel is a professor at the University of Luxembourg. Together with Professor Conchita D’Ambrosio, he leads the Institute for Research on Socio-Economic Inequality founded in 2013. What is special about this particular joint FNR PEARL chair shared by D’Ambrosio and Chauvel, is their unusual collaboration. Despite their offices being just a few metres apart, they analyse socio-economic inequality from different academic directions: Chauvel is a sociologist while D’Ambrosio is an economist.

D’Ambrosio, who as an economist enjoys explaining relationships in mathematical terms, is excited to be working in the humanities department.

“In my line of work, I have to work closely with sociologists, as well as with psychologists, biologists and IT specialists,” she says. “This allows us to observe complex relationships from all angles because we are all experts in our own field.”

Facts not always indicative of the perception of social inequality

According to D’Ambrosio, individual well-being within society is a very complex system influenced by genetic and psychological processes and their interaction with the socio-economic environment, meaning that perception within society does not necessarily match factual evidence.

“For example, if we take a look at how incomes have changed over the last 25 years, we see that inequality has increased significantly in countries such as Denmark, France, Germany, Japan and the USA. In Belgium, Greece, Ireland, Portugal and the Netherlands on the other hand, levels of inequality have remained stable or even decreased,” explains D’Ambrosio. “Yet,” she adds, “what has increased in these countries is the perceived inequality.”

Professor D’Ambrosio explains numerous studies and surveys among EU citizens have shown that many more people consider themselves a victim of social inequality than is actually the case.

Ever stronger correlation between income and wealth

Not everyone has it as bad as they think. Yet it is well known that a large part of society is becoming getting poorer, while a minority are seeing their situation improve – a fact also confirmed by a study currently being carried out by Chauvel. Using data on the financial situation of American consumers collected over more than 20 years, Chauvel has been studying the relationship between income and distribution of wealth. According to the results of the study, the differences within society in terms of both income and wealth are becoming ever greater, with the correlation between high income and affluence getting stronger and stronger.

“Wealth distribution is always more inequitable than income: wealth is not only more unequal, but also less earned than income,” explains Chauvel.

“Because when parents earn well but are not well-off by birth, the financing of the children’s studies can become a nightmare for them,” says the sociologist. And now comes the generation that is both high-earning and well-off. The problem, however, is that this applies only to a small percentage of society:

“What we see in the US is basically the development of a new aristocracy. But the problem for progress is less inequality than the lack of competition, investment and effort that creates inequality in general: wealth is often a threat to social stability, but could be an opportunity for socio-economic development.”

Unlike the USA, wealth in Europe is far more democratically distributed, says the sociologist. “Having to fork out €800,000 for a home in Luxembourg may seem excessive to Germans, but this has long been a relatively normal amount for their western neighbours.” Chauvel explains that the situation in Germany, France and Luxembourg is still in no way comparable to the extremes in the States, where middle-class wealth was struck in the core economic meltdown of 2008.

However, he adds, this makes it all the more important to analyse developments in the USA to prevent the same happening in Europe – after all, there must be some reasons why Donald Trump was elected.

This success story is from the 2016 FNR Annual Report. View the Annual Report as PDF or digital version