Economically, Luxembourg is rated one of the most affluent and prosperous countries in Europe. Acclaimed for high standards of living, a strong economy and a strategic geographical position to become a doorway for international business, the Grand Duchy has made its own identity in the international arena. Nevertheless, one of the greatest challenges of the country comes in the form of income inequality and societal differences.

Economic Prosperity

Luxembourg has a very high economic potential, with a strong financial services industry, high-quality steel and a strategic position in geography. Its financial sector acts as the backbone of its economy. It attracts world corporations, investment funds and financial institutions who are looking for stability and fine regulatory frameworks.

Financial services are one industry that heavily contributes to Luxembourg’s gross domestic product (GDP). Luxembourg for Finance reports that “the financial sector accounts for approximately 26% of the GDP of the country, making it one of the greatest contributors to the economy.”

Although not quite as prosperous as in its heyday, Luxembourg’s steel industry remains another important sector of the country’s economy. Its location in the center of Europe makes it easy to trade and carry out commerce, making it a good place for international businesses to have their headquarters or regional offices.

Income Inequality in Luxembourg

Despite its prospering economy, Luxembourg is faced with sharp income inequality, a challenge pervading many aspects of society. According to a report by Sustainable Development Goal (SDG) Watch Europe, the top 20% of earners in Luxembourg take home about five times what the bottom 20% earn.

Differences between the well-off and the underprivileged are reflected in the accessibility of basic services: education, health and housing. While the country is generally characterized by a high living standard, spots of poverty and social exclusion do remain, particularly among certain groups.

Government Response

The government of Luxembourg has implemented social welfare policies that try to alleviate poverty and enhance social mobility. At the very core of these lies a comprehensive social safety net. They include salient welfare programs in the form of unemployment allowances, housing subsidies and even health support schemes. These range from better education and training opportunities to job prospects that economically empower marginalized communities.

Conclusion

Of course, Luxembourg’s impressive economic success is praiseworthy. The government continues with new social welfare policies and programs intended to level the playing field in society.  They aim to foster mobility and bring the nation closer to achieving its vision of an equitable society.

– Honorine Lanka Perera

Honorine is based in Highland, NY, USA and focuses on Business and Good News for The Borgen Project.

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