Upward convergence in material well-being: Is a COVID-19 setback inevitable?

Indicators of material well-being have generally followed the business cycle. They all deteriorated during the 2008–2013 economic crisis and most improved in the following years. In 2018, however, several indicators, had not reached their pre-crisis levels.

Convergence in material well-being has followed a similar pattern: countries diverged during the 2008–2013 crisis, and converged during the recovery, albeit not always enough to reduce the gaps between countries to their pre-crisis levels.

These patterns must be seen as a strong warning signal for policymakers who wish to avoid history repeating itself, with the COVID-19 crisis prompting another escalation of material hardship and divergence among Member States, followed by a slow process of return to the path of upward convergence.

The policy brief further reveals the insensitivity to the economic upturn of indicators representing elements of income inequality. Policymakers seeking to address this may need to look into structural improvements of the situation of the lowest income groups in society rather than relying on economic growth.

Enhanced coordination of minimum income schemes at EU level could be examined as a tool to help prevent downward convergence in material well-being during economic crises. However, the limitations of such schemes and the widely differing policy contexts among Member States should be considered.