Financial and social equality under threat in Eastern Europe and Central Asia, UNDP warns

Mosharrof Hossain lost his hands in an electrical fire but now runs his own mechanic shop, as part of the EU-funded TVET Reform Project. Photo by: Muntasir Mamum / ILO / CC BY-NC-ND

Progress toward greater financial and social equality is under threat in parts of Eastern Europe and Central Asia and this could jeopardize the region’s ability to meet the Sustainable Development Goals which calls for reduced inequality within and between countries.

These concerns are raised in a new United Nations Development Program report “Progress at Risk,” which finds women in the region are 30 percent less likely to be employed than men, but perform two and a half times more unpaid domestic work. Labor migrants, ethnic minorities and people living with HIV/AIDS or disabilities are also facing serious risks, the report said.

Slow economic growth in Europe and falling commodity prices, which have hit oil exporting countries in the region, are in part to blame for the backward trend, according to UNDP.

The report outlines a way to reverse the negative trend; a government crackdown on illicit financial flows, estimated at $65 billion annually, leaving the region through misinvoiced transactions. The recovered budget could then be used to create jobs and expand social safety nets.

Devex spoke to Ben Slay, a senior adviser at UNDP who worked on the report to learn more about the findings and its potential implications for the region and beyond.

History of UNDP in Europe and Central Asia

The makeup of the UNDP portfolio in Europe and Central Asia has changed dramatically since it was formed in 1966.

Initially, the agency stayed out of what was then known as “The Second World,” referring to former socialist states under the influence of the Soviet Union.

However, after the fall of the Soviet Union in the 1990s, the UNDP began to support new client countries from the former Soviet Union and Eastern Bloc.

In the 2000s, many of these countries graduated out of the UNDP.

Currently the organization works in 17 middle-income countries and territories in the region, from Albania to Uzbekistan.

Progress in reducing inequalities is under threat

Low levels of income inequality are central to ensuring poverty reduction and development in all countries where UNDP operates, not just in Europe and Central Asia, said Slay.

While the region has made good progress in reducing rates of income inequalities since the 1990s, alongside other positive developments such as a booming middle class and increasing levels of gross domestic product, Slay said that when experts took a closer look at the data it became clear something wasn’t right.

“When you scratch the surface of this data the picture is nowhere near as good as it seems,” said Slay.

In fact, with falling oil prices and recession in Europe, there is a danger of countries backsliding on their progress.

“UNDP is trying to call attention to the possibility that many of the social development benefits people enjoyed in the Socialist period, and which were consolidated in the years before the global financial crisis of 2008-2009, are at risk of being lost,” he said.

What was wrong with the data?

When the data tells you there is less income inequality in Ukraine than Sweden, this is a “red flag,” said Slay. Even accounting for the fact Ukraine has social protection policies and low unemployment rates, the data is still clearly “out of touch,” he said.

The problem lies in the way inequality data is collected. Slay explained that when Ukrainian researchers scrutinized the household budget surveys in their country, it became clear that wealthy people had much lower response rates and this resulted in the inequality figures being naturally biased downward.

Statisticians can account and correct for this discrepancy in their results, but Slay said the evidence — both statistical and from unofficial polls — reveals that people in the regions see inequality as a “problem and one which is growing.”

Equality in the workforce under threat

Inequalities within the workforce are also on the rise in the region, with women, young workers, migrants, the long-term unemployed, people with disabilities, and ethnic Roma are more likely to be without decent jobs, according to the report.

This affects more than just a person’s income, Slay explained, since it means they are more likely to be excluded from forms of social protection generally tied to employment, such as medical insurance.

Furthermore, the report found that women are a third less likely to be employed than men, they put in two and half times more domestic work, which goes unpaid.

For women, Slay said part of the problem stems from social and cultural beliefs that men get first pick of jobs when there is a shortage of work. In contrast, women were much more likely to be employed under the Soviet Union, where most people worked in state enterprises.  

A rise of nationalism?

This increasing marginalization of women in the region can be linked to nationalism, according to Slay.

“Independence in some countries came with certain nationalist viewpoints that are oftentimes backward looking and bring with them traditional gender roles,” he said.

What does this mean for the region?

Slay warned increased protests and possibly civil conflict, like what is being seen in Ukraine at the moment, is a real possibility.

“We are seeing protest movements in many of these countries which have the potential to boil over and if social inequalities are not addressed then the risks grow,” he said.

What can be done and how do we foot the bill?

The report proposes a number of strategies to bring down income inequality including cutting taxes and regulation around labor markets in order to boost job growth, and other measures to increase worker productivity. Other recommendations include boosting access to quality medical care and other social services.

UNDP has been doing some “innovative thinking” about how governments can pay for these reforms. The report calls on governments to capture illicit financial for state budgets, which could generate, according to conservative estimates, 1-2 percent of GDP.

Specifically, “misinvoiced trade flows,” which refers to the practice of fraudulently over invoicing exports and under invoicing imports, should be targeted, according to Slay.

A Global Financial Integrity Project report estimates countries in the region lose $65 billion annually through the practice.

Europe and Central Asia’s rising inequality levels are a global problem

Goal 10 of the sustainable development agenda calls for reduced inequality within and among countries.  

But given the report’s warnings about income inequality, high levels of discrimination, unemployment and women’s vulnerability, implementing the 2030 SDG agenda could be a real challenge in the Eastern Europe and Central Asia region, according to Slay.

If governments and the international community are serious about SDG 10 and committed to “leaving no one behind”, then surely this is more than a regional problem, but a “global phenomena”, Slay said, and one which needs a united effort to address.

Over three weeks, Devex will explore how the development sector can work together to promote inclusive local, and sustainable approaches to development. Global to Local will reimagine how to work together to address a myriad of interrelated challenges, pivoting toward more connected and crosscutting approaches to solving global problems. Join the conversation, tagging @Devex and #Global2Local.

About the author

  • Sophie Edwards

    Sophie Edwards is a Reporter for Devex based in London covering global development news including global education, water and sanitation, innovative financing, the environment along with other topics. She has previously worked for NGOs, the World Bank and spent a number of years as a journalist for a regional newspaper in the U.K. She has an MA from the Institute of Development Studies and a BA from Cambridge University.