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Romania: The European ‘Queen’ of Poverty and Inequality?

Alex Coiov, XII A


‘But unemployment is at a meagre 5.5%, [1] and the economy grew at an annualised rate of 4.7%, [2] evidently outpacing most Western European nations’ is a prevalent statement beloved by all Romanian politicians. Digestible, easy to comprehend, and equally easy to convey to the broader electorate, it helps corroborate the competence of our wholehearted parliamentarians (or perhaps obscure their ineptitude). Albeit true, such declarations are all too ubiquitous and, alas, conceal a more hideous, perhaps repulsive image: most of this so-called ‘economic growth’ is insidiously going up to the tippy top, subsidising the bottomless pockets of the well-loaded and connected. Is this an overt exaggeration?


Romanians invariably love to lament over the fact that their country is seldom first, never amongst revered champions or imposing pioneers. Fortunately, the Black Sea queen adeptly excels at a particular metric: it has the absolute highest rate of people at risk of poverty or social exclusion in the entire European Union [3] and the almost highest rate of income inequality in the economic bloc. [4]


https://ec.europa.eu/eurostat/web/products-eurostat-news/w/DDN-20230614-1

Welcome to the Northern Balkans. Diligently serving the entrenched upper class since the dawn of the new democratic world, and even before that – Ceaușescu’s affluent and influential despots did not get their Casa Poporului, the grandest legislature building on the entire planet Earth, built on the benevolence and selflessness of the masses, but on the enforced slavery and the stolen lands of the Romanian citizenry.


Nevertheless, returning to the previous rhetorical question, is this an overt exaggeration? Whilst empirical data may tell us what we desperately yearn to hear (that we relish, in fact, higher living standards than it might otherwise seem), the evidence is ambivalent and oftentimes cherry-picked to fit a particular narrative. Yes, the nation’s unemployment rate, at 5.5% in July 2023, is significantly lower than the already record-low Eurozone equivalent of 6.4%. [5] Yes, the price level (inflation) is increasing at a slower pace than Poland’s and significantly slower than Hungary’s, which experienced an inflation rate of 25.7% in January 2023, [6] 10.63% higher than Romania’s equivalent figure in said period. [7] Indeed, Romania’s 2022 full-year economic growth reached 4.7%, overtaking Western Europe (Germany, France, Italy, Belgium, the Netherlands, the UK, Switzerland, et cetera), alongside the entire Scandinavian region. Yet, with evidence remaining ambivalent, the other side has yet to be fully provided. And when scrutinising economic metrics, statistical cherry-picking is of unequivocal disgrace.


Accordingly, while the aforementioned statistics hold true, they do not encompass the whole story. Despite a low unemployment rate and high economic growth, Romania is indeed the EU queen of poverty, as 34.4% of the total Romanian population in 2022 was at risk of poverty or social exclusion – a figure higher than that of each EU member and 60% greater than the 2022 EU-wide rate of 21.6%.


Regarding income inequality, the numbers are equally bleak. Pursuant to 2021 GINI coefficient measurements – used to ascertain a nation’s income inequality, where 0% denotes perfect equality, and 100% implies that a single person possesses all the income in the country – the Black Sea nation had the fourth highest income inequality in the union (a coefficient of 34.3%), behind Bulgaria (39.7%), Latvia (35.7%), and Lithuania (35.4%), and compared to an EU-spanning GINI coefficient of 30.01%. Thus, Romania has both the worst poverty/social exclusion levels in the entire European bloc and the quasi-highest income inequality levels in the union, socio-economic issues that are only exacerbated by the government’s peculiar policies, such as lower taxes on stock profits, with profits now taxed at either 1% or 3% based on how long the stock is held (down from 10%). [8]


https://www.researchgate.net/figure/Gini-coefficient-in-the-EU-and-EFTA-Switzerland-Norway-Iceland-countries-in-2015_fig4_316879139

However, besides those clear metrics of poverty and income inequality, the numbers get worse the deeper you dig. Take unemployment, for example. Although the general unemployment rate is currently at 5.5%, what this seemingly positive rate is hiding is the great degree to which the Romanian youth is especially predisposed to joblessness, with 22.3% of young individuals unemployed as of June 2023. [9] While the Euro Area has a general unemployment rate of 6.4% (an absolute 0.9% higher than Romania’s), the bloc’s youth equivalent sits at 13.8% (an absolute 8.5% lower than Romania’s). [10] The numbers do not lie, and young Romanians are preponderantly vulnerable when it comes to employment opportunities.


https://tradingeconomics.com/romania/youth-unemployment-rate

Countless more examples can be found to illustrate the deep-seated socio-economic conundrums that persist in Romania, notwithstanding the rosy economic statistics extolled by politicians. Ultimately, the true measure of a nation's welfare ought to extend beyond the narrow confines of GDP growth, unemployment numbers, and inflation rates. Whilst such metrics are unequivocally paramount for gauging a country’s ‘economic pulse’, well-being measurements should encompass the broader social fabric that defines the quality of life of a nation’s citizens. In the case of Romania, this fabric is tattered by poverty, income inequality, and a lack of opportunities, particularly for its youth.


Although some superficial metrics might look promising and denote a flourishing nation, closer scrutiny helps vindicate Romanians’ seemingly widespread feelings of despondency regarding their and their country’s future. It really does seem like the wealth is going up to the tippy top, with lower societal strata marginalised and left ‘out of the game’.


Bibliography


1. Trading Economics, ‘Romania Unemployment Rate’, Trading Economics [website], 2023, <https://tradingeconomics.com/romania/unemployment-rate>, accessed 1 October 2023.


2. Trading Economics, ‘Romania Full Year GDP Growth’, Trading Economics [website], 2023, <https://tradingeconomics.com/romania/full-year-gdp-growth>, accessed 1 October 2023.


3. Eurostat, ‘People at risk of poverty or social exclusion in 2022’, Eurostat [website], 14 June 2023, <https://ec.europa.eu/eurostat/web/products-eurostat-news/w/DDN-20230614-1>, accessed 1 October 2023.


4. Eurostat Statistics Explained, ‘Living conditions in Europe - income distribution and income inequality’, Eurostat Statistics Explained [website], 3 September 2023, <https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Living_conditions_in_Europe_-_income_distribution_and_income_inequality&oldid=528159#Key_findings>, accessed 1 October 2023.


5. Trading Economics, ‘Euro Area Unemployment Rate’, Trading Economics [website], 2023, <https://tradingeconomics.com/euro-area/unemployment-rate>, accessed 1 October 2023.


6. Trading Economics, ‘Hungary Inflation Rate’, Trading Economics [website], 2023, <https://tradingeconomics.com/hungary/inflation-cpi>, accessed 1 October 2023.


7. Trading Economics, ‘Romania Inflation Rate’, Trading Economics [website], 2023, <https://tradingeconomics.com/romania/inflation-cpi>, accessed 1 October 2023.


8. Racovițan, M., ‘Changes to the Fiscal Code- new rules on investment income’, KPMQ [website], 2023, <https://kpmg.com/ro/en/home/insights/2022/06/changes-fiscal-code-investment-revenues.html>, accessed 1 October 2023.


9. Trading Economics, ‘Romania Youth Unemployment Rate’, Trading Economics [website], 2023, <https://tradingeconomics.com/romania/youth-unemployment-rate>, accessed 1 October 2023.


10. Trading Economics, ‘Euro Area Youth Unemployment Rate’, Trading Economics [website], 2023, <https://tradingeconomics.com/euro-area/youth-unemployment-rate>, accessed 1 October 2023.

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