Romania middle class grew more than any other country in the European Union between 2007 and 2022, a study shows.
It went from about 52% of the total population in 2007 when Romania joined the EU to about 60% of the total population in 2022, according to a study based on taxation in Romania, Ionuț Dumitru, professor at the Academy of Economic Science and former head of the Fiscal Council said Thursday.
Editor’s note: The middle class includes that part of the population whose annual disposable income is between 75% and 200% of the median annual disposable income
A Eurofound study last year found that two-thirds (17 out of 27 countries) of European countries have experienced a decline in the middle class. The study shows a growing middle class in only 10 countries between 2007 and 2022: very significant (by more than 5 percentage points) in Romania, Poland and Croatia, Portugal and Ireland; and less significant in Greece, Latvia, Slovakia, Belgium and Spain.
Dumitru attributes this development of the middle class in Romania to the flat rate, which simplified the tax system, reduced the administrative burden and stimulated tax compliance, stimulated the participation of the labor force in economic activity, which led to increased incomes, growth of the middle class, and a fairer distribution of income.
Dumitru coordinated a team of economists who analyzed, at the request of the Concordia Confederation, the impact of the flat tax rate and the progressive rate on the budget and individual well-being, concluding clearly in favor of the flat rate.
“The flat rate regime has contributed to reducing income inequality, stimulated the participation of the labor force in economic activity, increased the degree of tax compliance and contributed to the consolidation of the middle class,” said Ionuț Dumitru.
A recent study by EUROFOUND (2024), which includes data collected from the last 15 years, analysed economic inequality in the EU in the context of the perception that the share of the middle class is decreasing.
The existence of a large middle class is the expression of greater cohesion in society and a more inclusive society.
The same study (2024) shows that in terms of the middle class, in most Member States it decreased between 2007 and 2022.
“The flat rate regime also stimulated the economy and led to higher incomes…. by leaving a larger part of the disposable income to middle-income taxpayers. The positive effects of the flat rate are probably more pronounced in the case of economies with weak institutions,” explained Ionuț Dumitru.
He warned, however, that when public debt exceeds 59% of GDP, the effect of the flat rate has a negative effect on the middle class. Governments are forced to adopt stricter fiscal measures, which particularly affect the middle class.
Although Romania recorded the highest growth of the middle class in the EU27 between 2007 and 2022, the middle class is still relatively small. Romania has the seventh lowest middle class after Italy, Spain, Estonia, Latvia, Lithuania and Bulgaria in the EU.
In Hungary, the middle class shrunk to 65% in 2023 from 70% in 2007. Regionally, Czechia has the biggest middle class (72%), followed by Poland where it has risen to 67% from 60% in 2007.
Ionuț Dumitru’s research is confirmed by another study conducted by the chief economist of Alpha Bank, Ella Kallai and sent to HotNews agency last year.
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