Inequality, Skills, and the Policy Crossroads: Rethinking Europe’s Social Contract

By Steven Dhondt and Ulrich Zierahn-Weilage

At the dawn of 2026, the central challenges of inequality and skills remain at the forefront of social and economic discourse. Yet, contemporary policymaking appears increasingly detached from the foundational insights of economic and social sciences. Instead of pursuing evidence-based strategies for societal well-being, political agendas often recycle outdated concepts, underinvest in critical areas such as migration, and overstate the transformative potential of technology without a nuanced understanding of its real-world impacts.

Recent economic shocks—ranging from the COVID-19 pandemic to geopolitical upheavals like the Ukraine-Russia war and the Trump administration’s mercantilist turn—have exposed the fragility of existing policy frameworks. These events underscore the urgent need for a more sophisticated understanding of how such shocks propagate through economies and societies, especially as policymakers increasingly disregard established principles of economic and social science.

Our book embarks on a reconnaissance of the technological frontier, critically examining the interplay between technology, migration, and globalisation. Contrary to the prevailing narrative, the benefits of high-tech innovation are unevenly distributed. While some firms capitalize on technological advances, most struggle to harness these tools effectively. The rise of Large Language Models, for instance, has exacerbated labour market inequalities—diminishing opportunities for low-skilled workers, favouring the highly skilled, and even threatening segments of the highly educated workforce. This dynamic calls for a renewed debate on how the productivity surplus generated by new technologies should be shared.

Migration and worker mobility represent another underappreciated dimension. European countries have chronically underinvested in supporting migrant workers, deepening intra-national inequalities—particularly for women migrants. The lack of political will to reform migration and mobility policies not only perpetuates these disparities but also undermines Europe’s capacity to adapt to demographic shifts, such as ageing populations, and to absorb future economic shocks.

Looking ahead, the debates that will shape Europe’s future revolve around aging societies, the allure of technological utopias, and evolving notions of solidarity. The book interrogates whether a new social contract is required to address these converging challenges, exploring both global responses and the potential for a unified European approach. Managing inequality in this era of transformation requires recalibrating economic governance, recognising migration as an economic asset, and appreciating that political convergence is as vital as economic convergence. Only by embracing greater globalisation—rather than retreating from it—can Europe foster inclusive growth and resilience amid rapid change.

Through this exploration, the book aims to provide a comprehensive understanding of how technology, globalisation, and migration are reshaping businesses, labour markets, and policy. It offers insights into the adjustments required for a more equitable and prosperous European future.

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This article was written by Steven Dhondt, Professor, Centre for Sociological Research (CeSO), Belgium; Senior Research Scientist, TNO, the Netherlands and Ulrich Zierahn-Weilage, Associate Professor, Utrecht University School of Economics, the Netherlands. The authoring team for the Handbook of Teaching Philosophy to Economists also includes Leire Aldaz Odriozola, Associate Professor, University of the Basque Country (UPV/EHU), Spain.