THE UNEQUAL IMPACT OF THE CRISIS BY AGE: AN ANALYSIS BASED ON NATIONAL TRANSFER ACCOUNTS

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1 Global NTA, México D.F. 23-7/7/2018 THE UNEQUAL IMPACT OF THE CRISIS BY AGE: AN ANALYSIS BASED ON NATIONAL TRANSFER ACCOUNTS Meritxell Solé (UB), Giorgos Papadomichelakis (UB), Guadalupe Souto (UAB), Elisenda Rentería (CED-UAB), Ció Patxot (UB) WELTRANSIM PROJECT This project has received funding from the European Union s Seventh Framework Programme for research, technological development and demonstration under grant agreement no

2 The unequal impact of the crisis by age: An analysis based on National Transfer Accounts Giorgos Papadomichelakis (UB) Ció Patxot (UB) Elisenda Rentería (CED-UAB) Meritxell Solé (UB) Guadalupe Souto (UAB)

3 The risk of poverty for children is, in general, higher than for other age groups The welfare state basically protects the elderly, but not (to the same extent) children The situation has worsened with the crisis in a significant number of countries

4 Population at risk of poverty in the EU before and after social transfers 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 87.2% 88.0% 35.6% 36.7% 32.0% 34.0% 20.3% 21.2% 14.7% 17.1% 18.9% 14.0% and more before social transfers after social transfers Source: Eurostat, 2016

5 Net public transfers to children and the elderly in NTA countries (% of their own consumption) Source: Authors elaboration from NTA data (

6 Change in child (0-18) poverty rate and social exclusion Japan USA Canada Iceland Greece Latvia Croatia Ireland Lithuania Spain Louxembourg Italy Estonia France Hungary Cyprus Slovenia U. K. Denmark Portugal Netherlands Malta Bulgaria Germany Czech Rep Austria Sweden Blegium Romania Finland Norway Switzerland Slovakia Poland In 20 out of 31 European countries child poverty has increased with the crisis

7 People at risk of poverty in Europe (households with children) SPAIN FINLAND SWEDEN UK FRANCE GERMANY ITALY European Union (27 countries) Source: Eurostat, 2016

8 People at risk of poverty or social exclusion by age in Spain (% of total population) Less than 18 years From 18 to 64 years 65 years or over total Source: Eurostat, 2016

9 People at risk of poverty by type of household in Spain % of total population ,3 10, Households without dependent children Households with dependent children Source: Eurostat, 2016

10 Our contribution Use NTA to explore the unequal impact of the crisis by age in Spain Estimate NTA for 2012 and compare results with previous available years (2000, 2006 and 2008)

11 National Transfer Accounts Analyses how individuals consume, produce, share resources and save And how resources are reallocated with intergenerational transfers, through three institutions: Markets, family and the public sector NTA complement (and are consistent with) National Accounts, by incorporating age and making it possible to disentangle intergenerational transfers

12 Basic NTA identity YL + YA + TG + + TF + = C + S + TG - + TF - inflows outflows C YL = (YA S) + [TG + -TG - ] + [TF + - TG - ] Lifecycle deficit LCD Asset-based reallocation ABR Net Public transfers TG Net private transfers TF

13 Lifecycle deficit scheme Labor income US$ adjusted by Purchasing Power Parity Deficit (LY < C) Surplus (LY > C) Consumption Deficit (LY < C) childhood Working age Retirement

14 Per capita labor income profile (in constant 2012 euros per year) Lower labor income for the young Higher labor income for older workers

15 Per capita consumption profile (in constant 2012 euros per year) Youngsters consumption has not come back to 2000s level The effects on the elderly are smoother

16 Per capita lifecycle deficit profile (in constant 2012 euros per year) The surplus size clearly shrinks LCD moves from age 26 to

17 Financing aggregated lifecycle deficit of children (0-19) and the elderly (65+) 120% 100% 80% 60% 64% 63% 56% 1% 60% 46% 20% 3% 27% 28% 1% 40% 66% 78% 71% 74% 20% 38% 40% 44% 39% 0% -2% -3% 0% -12% -2% -20% TG TF ABR

18 Per capita profile of net public transfers (TG) in Spain Returning to the pre-crisis level Increasing TG for ages Young workers paying less taxes Older workers paying more taxes

19 Per capita profiles of public transfers inflows (transfers received) Sharp decrease in 2012 for children Decrease for old workers Significant increase for ages

20 Per capita profiles of public transfers inflows: Education (E), health (H) and contributory pensions (P) E-2008 E-2012 H-2008 H-2012 P-2008 P-2012 Sharp decrease in education Significant increase for pensioners aged

21 Per capita profiles of net private transfers The most important flow is from parents to children Important reduction with the crisis

22 Net public transfers to the children and the elderly in Spain (in % of their own consumption) 70% 65% 60% TG/C young 55% 50% 45% % 35% % 30% 40% 50% 60% 70% TG/C elderly

23 Main findings Children received much less public and private transfers during the crisis, so their consumption has significantly decreased Labor income has decreased especially for younger workers By contrast, public transfers to the elderly have increased

24 Main findings Welfare state systems have proven to be a very effective tool in improving intergenerational redistribution and reducing inequalities Why are high-income societies highly averse to old-age poverty while they seem to accept child poverty quite easily? - An automatic policy to protect the elderly and not children? - Foster education as a way to pre-fund the PAYG pension system