Population income in the European Union and situation in Latvia

Svetlana Ivanova

Abstract


Purpose. Objective of this study is to determine differences in population income within the European Union and a correlation of the personal income with the social and economic situation in the country.

Methodology. Firstly, research papers on an income inequality were reviewed – methods of generalization and synthesis of scientific literature were used in the study. Secondly, the method of comparison was used to analyze the situation of population income in Latvia and the EU during the years 2005-2013. Finally, the method of correlation was used to verify the population income coherence to other dimensions of a person’s life quality within the EU countries.

Results. There are different dimensions of inequality, but income inequality is one of the most important indicators. Amount and level of income sufficiently affects prosperity and opportunities. There are remarkable differences in terms of the population income in the EU countries, and the income in Latvia is one of the lowest in the EU. Countries have diverse reactions to economic shocks – there is a different dynamic of the income after the economic crisis. Income is a sufficient factor for the quality of person’s life – there is a sufficient correlation between the level of income (measured by the income index) and the life expectancy at birth (measured by the health index), as well as between the amount of income and the risk of poverty and social exclusion. The population income can also be seen as the effect of economic activity in the country.  With such approach, the results of research show a very varied competitiveness of nations that can sufficiently determine the social and economic development of the EU member states, including Latvia.

The theoretical contribution. This study gives a compact summary on the income inequality issue. At individual’s level, the income is an essential factor influencing different dimensions of the life. The population income inequality can be included in the models of competitiveness of nations as indicator, but in the models describing sustainable development – as factor.

Practical implications. Regions are formed in an interaction of political, social, cultural and spatial dimensions. If there are differences in these factors, the level of social and economic development among the regions may differ. This may result in the inequality of population income and other aspects of life. The EU is region that consists of 28 member states. To be sustainable, it is vital to avoid a substantial difference in the development within the Union.  The results of research can be used to evaluate regional development performance, implemented in the EU and Latvia, as well as to consider future priorities and activities.

Keywords: European Union, income inequality, poverty, sustainable development.

Paper type: Research paper.

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