GI-NI Newsletter

By Growing Inequality: a novel integration of transformations research

Quarterly Newsletter - Issue #3

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GI-NI Newsletter
Welcome to the GI-NI project newsletter. Our message is to contribute to an inclusive Europe of shared prosperity by providing a better understanding of the changes and joint impact of three major transformations: technological progress, globalisation and migration; and offering policy and governance solutions to better equip citizens and companies, securing more equal opportunities and outcomes.

New video: GI-NI Research Team & Topics
A new video has been produced by the GINI project. Let us introduce you to our team of researchers from nine European universities and research centres. The video summarises the main research lines followed in the project. 
GI-NI Project: Research team & topics on Vimeo
GI-NI Project: Research team & topics on Vimeo
Editorial: On Fighting Inflation and Inequality
By Prof. Dr. Bart Los (University of Groningen)
Policymakers all over Europe are concerned about the current high rates of inflation. Lockdowns to mitigate the health effects of the Covid-19 pandemic have created supply shortages in markets for a wide variety of products. These effects were exacerbated by disruptions in international maritime transport, which caused enormous problems for firms operating lean just-in-time production processes. On top of this, sanctions against Russia have led to serious price hikes in energy markets. For example, in The Netherlands, the year-on-year rate of inflation was as high as 12% in March. This implies substantial losses of purchasing power, which are worrisome and led national governments to introduce various kinds of (often ill-advised) compensation policies to alleviate problems in the short run.
But should we worry about a long period of high inflation? It seems unlikely that the prices of energy will continue to increase at the pace of the last few months simply because energy cannot become much scarcer than it currently is. The recent Covid-19 lockdowns in China might well cause new problems regarding the global supply of manufactured products, but this will also be a temporary problem. However, the main worry is that a detrimental long-run wage-price spiral will emerge: to sustain purchasing power in these times of high inflation, employees would demand higher nominal wages. In turn, employers would increase the prices of their products to make up for the higher labor costs and remain profitable, leading to further nominal wage hikes, etc. Such a spiral should be avoided at all costs.
The most straightforward approach to this problem would be to avoid an initial rise in nominal wages. If this would not happen, the main cause of long-term high rates of inflation would most probably disappear altogether. In several European countries, the power of unions has waned over the past few decades to such an extent that a strategy like this might be successful. As I recently argued (with five fellow economists at the University of Groningen) in two articles in the Dutch newspaper Dagblad van het Noorden, I think this is not the right way to deal with the problem. It would aggravate inequality within countries, which was a major concern already before inflation started to soar. The GI-NI research project actually focuses on the implications of rapid digitalization and rapid international fragmentation of production processes for different types of workers. It is widely believed that high-skilled workers and capital owners in advanced countries benefit from these transformations, while low-skilled and medium-skilled workers lose out. They face more unemployment, lower wage growth and much more job insecurity. Poorer households were already hit disproportionally by the short-run energy price hikes (because they tend to spend larger fractions of their incomes on energy) and would then have to bear most of the burden of fighting long-term inflation as well. One can hardly think of better ways to create fertile ground for more populism. Are better alternatives available?
Reforms of tax systems seem to be more necessary than ever. It is a bit tricky to generalize across EU countries because of the differences in tax systems, but still… If labour income taxes were reduced, a given wage rate would yield more disposable income. And if the costs for firms to employ people would be reduced, their profitability would remain intact. It might even become more attractive to continue hiring medium- and low-skilled workers rather than replacing them with computers or robots, or with Chinese workers. Employers might even have opportunities to offer longer-term contracts, increasing job security for the most vulnerable workers. One might be afraid that reductions in tax revenues would hurt future generations, but this fear would not be justified if taxes on wealth (or income derived from wealth) were increased.
We are at a major crossroads. Technological change and globalization have increased inequality during a period of more than two decades. Populism was fueled by a lack of policies to distribute the associated welfare gains. The victims of this lack of redistribution in times of transformation are also the victims of the energy price hikes caused by the sanctions imposed on Russia, aggravated by prolonged scarcity of products due to consequences of Covid-19. Letting the weakest parts of society bear the burden of avoiding high long-run inflation seems a good recipe for election victories of populist parties. The presidential elections in France were nearly won by a populist. It is high time that unequal tax systems in advanced countries (like The Netherlands) are radically overhauled before it is too late and disaster really strikes.
Blog: Migration and Mobility in the European Union
By Dr. Leire Aldaz & Dr. Begoña Eguia (University of the Basque Country).
Economies and societies are undergoing multiple transformations driven by the rapid emergence of digital technologies, the globalising international trade and migration. Indeed, the movement of people, either across an international border or within a state, can be affected by digitalisation and globalisation. The European Union is no stranger to these changes.
Regarding migration, the International Organization for Migration indicates that 281 million people lived outside their countries of birth in 2020, accounting for about 3.6% of the world’s population[1]. 31% of them lived in Europe, and EU-27 hosted 19.4% of the world’s migrants.
The total population in the EU27 has grown by nearly 2% in the last ten years, thanks to the contribution of third-country nationals (TCN), as the volume of the national population has declined during this period. In other words, these migration flows have prevented the EU’s population from being depleted.
The EU has countries with a high migration tradition but also countries that, without such a tradition, have attracted large volumes of migrants over a relatively short period of time, namely Spain and Italy.
In the Figure above, we can observe internal spatial disparities within EU member states in terms of the distribution of immigrants. Some countries receive large numbers of foreign-born people: Germany leads the ranking, followed by France, Spain and Italy. This is not surprising as they are the most populated countries, accounting for 57.6% of the total EU27 population. However, these are not the countries where foreigners have the greatest weight: in Luxembourg,48.7% of the population is foreign-born. It is followed by Malta, Cyprus, Austria, Sweden and Germany. At the bottom of the list are Romania, Bulgaria and Poland, with around 2-3% immigrants.
It is worth noting that around half of these migrants are women.
Another phenomenon related to the movement of people is internal mobility within the EU. In 2021, 4% of the EU-born population resided in an EU member country other than the country of birth.
Both extra-European migration and intra-EU mobility have implications for various spheres of economic and social reality, including, logically, the labour market.
In 2021, 12.2% of the employed population in the EU27 was foreign-born, being almost 45% of them females. According to the origin, 33.2% of the employed foreign-born workers were movers (born in an EU member state), while 66.8% were TCN (born outside the EU).
It is significant that 24% of workers employed in low-skill occupations were migrants, especially, extra-EU migrants. On the contrary, foreign-born workers in high-skill occupations are only 8%.
Furthermore, it should be emphasised that Covid-19 pandemic has severely affected the EU labour market and may also have implications for skills, inequality and the volume and quality of work. More than 2.5 million occupations have been destroyed, and this negative impact has been greater among immigrants. As a result, the participation of employed immigrants in the EU labour market has decreased by one point since 2019.
Understanding the causes and consequences of migration and mobility requires analysing the EU wide perspective. Therefore, the GI-NI project will not only focus on the EU level but will also study in depth different economies with different productive structures: Spain, Germany, Norway, Austria and Hungary.
Currently, the war in Ukraine is causing the arrival of large numbers of migrants in the EU member states. How will it affect European labour markets? Will TCNs increase in all member states? In some of them? In which ones? They may face different barriers in different countries related to language, culture, skills, etc. It will take time to answer these questions.
In addition, the study of trajectories of workers by country of birth will enable the design of policies to be able to anticipate new future scenarios.
Publications:
Policy Brief #1: The GI-NI project and the need for new policy to tackle inequality
The first Policy Brief has been published under the title “the GI-NI project and the need for new policy to tackle inequality”. This first issue translates the project findings into recommended policy actions at EU and national levels. The GI-NI project focuses on the broad discussion on inequalities and skills development. It produces novel insights into the transformations of technology, globalisation and migration and their effects on inequality and skills development. A better understanding of these transformations, and how they are connected with one another, is crucial to reducing inequality and skills gaps. The Policy Brief #1 is limited to reflecting on our principles and what they mean for European policy related to the three transformations central to the project.
Report on definition and measurement of GI-NI key concepts within EU data sources (Deliverable 1.2)
This report presents a critical overview of how the key concepts of the GI-NI project –i.e. technological change, globalisation, inequality and skills are measured, relying on existing EU or international databases. Each concept is operationalised building on a set of measures that will be used to perform the project’s different tasks. The advantages and drawbacks are set both from conceptual and measurement perspectives for each measure. With these lessons in mind, the report lists and discusses alternative measures whenever possible, relying on either different measurement frameworks or alternative data sources.
Report on definition and measurement of GI-NI key concepts within EU data sources: Read the full report here.
Positioning paper on relevant EU policy areas & Governance models/instruments (Deliverable 2.1)
This report contains an assessment of the policy relevance of the GI-NI project. It starts from the European Social Model, which states that the European Union strives for less poverty and inequality, and convergence to higher living conditions. More skills are conducive to these goals. With this starting point, the position paper assesses the complexity of the European governance model. The EU has different competencies and instruments to manage the three transformations that are central to the GI-NI project: technology, globalisation and migration. The European policy context is one of constant change. Even the COVID-19 pandemic and the Ukrainian crisis are changing the content of the current European policy. The position paper maps these changes and challenges for the future. The paper also shows what the different tasks will bring to the policy debate. The final section of the position paper summarises the main results and makes four observations on the contribution of the GI-NI project to the research on the three transformations and the outcomes of inequality and skill changes.
Positioning paper on relevant EU policy areas & Governance models/instruments: Read the full report here.
GI-NI Events:
CEPS Ideas Lab: “Inequalities in times of Covid-19”
The Covid-19 pandemic has drawn a lot of attention to various aspects of the dynamics in the income distribution and other forms of possible inequality. The crisis induced by the pandemic hit hard the economy, nevertheless, there is consensus on concluding that the income inequality would have been much higher without the counterbalancing effects of the public policy measures. Giorgia Menta, (Research Associate at LISER), describing an ad-hoc survey, COME-HERE, highlighted that between January 2020 and January 2021 household income inequality increased in the first months, but then decreased more than its initial value by September 2020. Michael Christ (Economic and Policy Analyst at DG ECFIN, European Commission), referring to a study conducted with the microsimulation model EUROMOD, concluded that most of the Member States experienced a large drop in market income and, especially, poor households. Nevertheless, the national tax and benefit systems, and in particular the monetary compensation schemes, cushioned the negative shock of the Covid-19 pandemic. Ivailo Kalfin (Managing Director at Eurofound) stressed that in the labour market, among the changes that occurred to face the pandemic, telework or remote work are particularly relevant and with high probability will become a stable feature of the labour market. On the other hand, the rise of teleworking and teleworkable jobs across the EU post-pandemic, and the varying levels in terms of work intensity and frequencies, may affect the working conditions and, thus, inequality. Finally, Marcel Smolka (Professor of International Economics, University of Flensburg) considered some aspects of the megatrends and highlighted that it is recorded a decline in the labour share of income in favour of the capital share. Unfortunately, available data does not allow for a conclusion about the impact during the Covid-19 period. He concluded that offshoring may change in the post-pandemic era.
GI-NI International Conference: The Impact of the Global Transformations on Inequality
GI-NI will hold its first conference on the economic impact of technological transformation, globalisation and migration. The GINI International Conference: The Impact of the Global Transformations on Inequality" will take place ­in the first half of 2023.
The conference aims to foster academic debate and cross-disciplinary exchanges covering major global transformations associated with globalisation, technological change, and migration.
Researchers from all fields of economics, political science and sociology are invited to present new research results and discuss possible directions for future research activities. We welcome the submission of papers with an empirical, theoretical, and/or policy orientation focusing on micro- or macroeconomic aspects of inequalities linked to globalisation, migration and technological change. The analysis should focus on Europe or be related to it. 
GI-NI Collaborations:
Joint activities between University of Flensburg & Utrecht University
Utrecht University School of Economics (U.S.E.) has invited Marcel Smolka to be a visiting professor for the period from January 2023 to June 2023. Marcel Smolka is a professor of international economics at the University of Flensburg (EUF) with research interests within international trade, multinational firms, and migration. During his visit, he will be given the opportunity to be a part of the research community at U.S.E. and he will attend seminars, engage with other researchers, and present his own research. The visit is facilitated by Assistant Professors Emilie Rademakers and Ulrich Zierahn from Utrecht University (UU), leaders of work package 3 on the impact of the digital transformation on skills and inequality. It will support joint activities between EUF and UU within the GI-NI project and allow for mutually beneficial exchange and collaboration.
Call for applications from CNAM. Funding of one-year post-docs (2022-2023)
Our GI-NI partner CNAM-CEET offers 6 one-year post-doctoral fellowships (October 2022 to September 2023). The Centre for Employment and Labour Studies (CEET) is a transversal programme of CNAM. It aims to develop multidisciplinary research on work and employment, from an academic perspective and in response to social demand.
The research themes of the post-docs recruited should focus on work and employment issues, and more specifically on the research themes explored by CEET. For the year 2022-2023, the CEET will be particularly interested in research on the following themes: new forms of employment and employers, jobs in the ecological transition, care jobs and the professional situation of carers, wages and professional trajectories (particularly for low wages and ‘first’ and ‘second’ line jobs in the COVID crisis), the development of teleworking and its effects on territories, the forms and effectiveness of social dialogue (including in the health crisis). Health issues related to work and employment are also a central issue, in relation to transformations in the organisation of work and collective bargaining. As regards public policies, particular attention will be paid to the reform of apprenticeship, and more broadly to training policies and their territorial implementation. For all subjects, the selection committee will be particularly attentive to works dealing with gender and/or origin inequalities, especially in international comparison.
CEET will provide or facilitate access to quantitative databases. Specific research areas may be proposed with support, in conjunction with the CNAM centres in the regions, overseas and internationally. The CEET and CNAM expect the post-docs recruited to participate regularly in research activities, seminars and publications.
Stay tuned to the GI-NI Website:
About GI-NI (H2020):
This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement number 101004494. 
The sole responsibility of this newsletter lies with the authors (GI-NI consortium). The European Union is not responsible for any use that may be made of the information contained therein.
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Growing Inequality: a novel integration of transformations research
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GI-NI project (H2020) is about inequality, migration and globalisation in the context of technological transformation.

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