Social exclusion, long term poverty and social transfers in the EU: Evidence from the ECHP

Transcription

1 Panos Tsakloglou Athens University of Economics and Business, IZA & IMOP and Fotis Papadopoulos Athens University of Economics and Business Social exclusion, long term poverty and social transfers in the EU: Evidence from the ECHP December 2005 Preliminary results Please do not quote without the authors permission

2 Social exclusion : New/old concept Closely related but not identical to Poverty Especially if viewed as Capabilities deprivation (Sen, 2000) Broadly interpreted it denotes: The inability of an individual to participate in the basic political, economic and social functionings of the society in which she/he lives

3 In recent years, there seems to emerge a consensus among social scientists belonging to various disciplines regarding a number of attributes of social exclusion: Multidimensionality Dynamic nature Relativity Agency Relational nature In this paper, social exclusion is approximated by the concept of chronic cumulative disadvantage, using the longitudinal information of the ECHP (8 waves / 7 years).

4 Aims of the paper I. To compare the aggregate levels and structure of social exclusion and poverty in EU member-states in a long-term perspective II. To examine the distributional impact of social transfers in EU member-states in a long-term perspective III. To identify similarities and differences across countries and, if possible, to associate them with welfare state regimes

5 The data (ECHP) Ambitious effort at collecting information on the living conditions of the households of the EU15 member-states Common rules and information collection and editing procedures. Detailed information on incomes, socio-economic characteristics, housing amenities, consumer durables, social relations, employment conditions, health status, subjective evaluation of well-being, etc. One of the main aims of the ECHP: to monitor the living conditions of the population of the EU and, especially those at high risk of poverty and social exclusion. In most cases, though, information refers to functionings rather than capabilities

6 General approach three steps: 1. Use static indicators in particular fields to identify deprived persons Income (Poverty) Living Conditions Necessities of Life Social Relations 2. Identify persons suffering from cumulative disadvantage in a particular year (wave) (deprived in at least two of the above fields) 3. Identify persons suffering from chronic cumulative disadvantage ( high risk of social exclusion ) (cumulative disadvantage in at least three years)

7 Moreover, the ECHP contains detailed information on the incomes of the population members (and its components). Using this information, we can approximate their Permanent Income and analyse poverty within this framework Since one of the main instruments in the fight against poverty and social exclusion are the social transfers, their role is also analysed in detail.

8 Low income (poverty) Poverty line 60% of the median, Modified OECD equivalence scales Only monetary incomes Social Relations Talks to neighbours once or twice a month or less frequently and meets friends once or twice a month or less frequently and not a member of club, political party, etc.

9 Living conditions Does this dwelling have the following amenities? A separate kitchen A bath or shower etc Do you have any of the following problems with your accommodation? Shortage of space Noise from neighbours or outside etc Enforced lack of durable goods ( Would like but cannot afford ) Car or van (available for private use) Colour TV etc 22 items altogether

10 Welfare score for each population member, j μ j I i= 1 = I i= 1 w X i w i ij where: I : 22 (items) w i : proportion of the population with amenity (or lack of problem) i X ij : a variable that takes the value of 1 if the particular amenity is available and 0 if it is not Select a cut-off point (in our case, 80% of the median score)

11 Necessities of Life Can your household afford these, if you want them? Keeping your home adequately warm Paying for a week s annual holiday away from home etc 6 items Construct a welfare indicator in a similar way Select a cut-off point (in our case, 60% of the median score)

12 Country Table 1. Deprivation indicators Proportion of the population in the 7 th wave of the ECHP classified as deprived according to: Income (Poverty) Living Conditions Necessities of Life Social Relations Austria Belgium Denmark Finland France Greece Ireland Italy Netherlands Portugal Spain

13 Country Table 2. Cumulative disadvantage (wave 7) Proportion of the population classified as deprived according to: No criterion At least one criterion At least two criteria At least three criteria All four criteria Austria ** Belgium ** Denmark [0.5] ** Finland ** France [0.1] Greece ** Ireland ** Italy Netherlands ** Portugal Spain [0.2]

14 Country Table 3. Aggregate indicators of social exclusion Never Proportion of the population classified as suffering from cumulative disadvantage during a period of seven years:* At Least Once At Least Twice At Least 3 Times At Least 4 Times At Least 5 Times At Least 6 Times Seven Times Austria Belgium [0.2] Denmark [0.6] ** ** ** Finland France Greece Ireland [0.4] Italy Netherlands [0.2] Portugal Spain *6 for Austria and 5 for Finland

15 Table 4. Social Exclusion and Poverty (PI) in the sample (based on 7 waves)* Country Population share of socially excluded Population share of poor (PI) Proportion of socially excluded who are poor Proportion of poor who are socially excluded Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK * Austria and Luxembourg: 6 waves, Finland: 5 waves

16 Employment status (ref. person) Employed full-time Retired Employed part-time Unemployed Other inactive Employment status (individual) Employed full-time Employed part-time Unemployed Discouraged worker Constrained worker Precariously employed Other inactive Retired Education level (ref. person) Tertiary 2 nd stage secondary Less than 2 nd stage secondary Still in education Education level (individual) Tertiary 2 nd stage secondary Less than 2 nd stage secondary Still in education Aged less than 17 Household type Older household, no children Younger household, no children Lone parent household Couple with children Other Household type Table 5. structure of PI poverty and Social Exclusion according first wave status AT BE DK D E FIN FR GR IRL IT LUX NL PT UK A B A B A B A B A B A B A B A B A B A B A B A B A B A B A: Relative Poverty Risk B: Relative Risk of Social Exclusion X < 0.5 mean risk mean risk 0.5 < X <1.5 mean risk X > 1.5 mean risk

17 Country Table 6. Structure and share of cash transfers in disposable income Pensions Sickness & Inval. Benefits Family Benefits Unempl. Benefits Other Benefits All social transfers Nonpension social transfers Ratio of cash to non-cash soc. tr. (1991) Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK : , 2 :

18 Figure 1a. Per Capita Cash Social Transfers per Decile Figure 2a. Income Share of Cash Social Transfers per Decile 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Decile Denmark Netherlands Belgium France Ireland Italy Greece Spain Portugal Germany UK Austria Luxembourg Finland Decile Denmark Netherlands Belgium France Ireland Italy Greece Spain Portugal Germany UK Austria Luxembourg Finland

19 Figure 1b. Per Capita Non-Pension Cash Social Transfers per Decile Figure 2b. Income Share of Non-Pension Cash Social Transfers per Decile 4,500 4,000 3,500 3,000 2,500 2,000 De nmark Netherlands Be lgium France Ireland Italy Greece Denmark Netherlands Belgium France Ireland Italy Greece 1,500 Spain 20.0 Spain 1, Decil e Portugal Ge rmany UK Austria Luxembourg Finland De cile Portugal Germany UK Austria Luxembourg Finland

20 Country Aggregate disposable income Table 7. Share of social transfers in disposable income Share of all social transfers in Disposable income of poor persons Disposable income of socially excluded Share of non-pension social transfers in Aggregate disposable income Disposable income of poor persons Disposable income of socially excluded Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK : , 2 :

21 Table 8. Distributional Impact of Cash Social Transfers (Gini index, PI) Country All social transfers All social transfers except pensions A B C A B C Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK A: Distribution of disposable income including cash transfers B: Proportional decline in inequality due to cash transfers (%) C: Increase in inequality due to uniform 10 per cent cut in cash transfers (%) 1 :6-waves, 2 :5-waves

22 Table 9. Elasticity of inequality with respect to particular social transfers (Gini index, PI) Country Pensions All nonpension transfers Sickness and invalidity benefits Family benefits Unemploy ment benefits Other Benefits 3 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK : , 2: : Other Benefits include: Education related allowances, social assistance, housing allowance and any other personal benefit not falling into any of the above categories

23 Country Table 10. The impact of cash social transfers on poverty Final distribution All social transfers All social transfers except pensions Poverty Poverty rate FGT2 Poverty rate FGT2 FGT2 rate A B A B A B A B Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK A: Proportional decline in poverty due to cash transfers (%) B: Increase in poverty due to uniform 10 per cent cut in cash transfers (%)

24 Table 11. Impact of particular social transfers on poverty (PI, FGT2) Country Pensions Sickness and Invalidity Benefits Family Benefits Unemployment Benefits Other Benefits 14 A B A B A B A B A B Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK A: Proportional decline in poverty due to cash transfers (%) B: Increase in poverty due to uniform 10 per cent cut in cash transfers (%) 1 : Other Benefits include: Education related allowances, social assistance, housing allowance and any other personal benefit not falling into any of the above categories

25 Conclusions: 1. Considerable differences across EU member-states regarding both the level and the structure of the population at high risk of social exclusion and poverty (analysed in a long-term framework) 2. Differences associated with welfare state regimes 3. Substantial cross-country differences regarding the size, the structure and the effectiveness of the social transfers in fighting poverty (and social exclusion?)

26 Appendix. Sample sizes and comparisons of cross-sectional and balanced sample estimates Wave 1 sample size (unweighted) Balanced panel sample size (unweighted) % Attrition Gini Wave 1 Wave 7 Balanced panel Poverty rate Wave 1 Wave 7 Balanced panel Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain UK : 6 waves, 2 : 5 waves