IPSWICH Follow-up committee: Incidence, composition and drivers of in-work poverty

Transcription

1 IPSWICH Follow-up committee: Incidence, composition and drivers of in-work poverty Jeroen Horemans Herman Deleeck - Centre for Social Policy 19/06/2017

2 Overview of the presentation The context A story of a steady river and shifting undercurrents - Can the specific profile of non-standard workers explain their increased poverty risk? - Single parents as a particular risk-group Mapping the rough and isolated landscape of the living Standards and Poverty among the Self-employed Clarifying the policy conundrum

3 3 The context

4 Employment and poverty: a macro perspective (1) Figure 1 Employment rate and at-risk-of poverty rate Europe, 2015 At-risk-of-poverty rate total population EL IT HR ES RO BG PT LV LT EE PL EU-28 CY UK DE MT IE HU LU SE BE SL AT CH SK FR DK FI NL NO CZ IS Source: Eurostat: EU-LFS (lfsi_emp) and EU-SILC database (ilc_li) Note: for CH, HR, and IE the at-risk of poverty rate refers to the year Employment rate population age

5 Employment and poverty: a macro perspective (2) Figure 2 Evolution employment rate and AROP rate, Europe, Change at-risk-of-poverty rate total population, EL ES CY IE RO SL IT NL LT SE PT NO LU BG FR BE SK HR DKFI UK IS CH EE LV CZ AT HU DE PL MT Source: Eurostat: EU-LFS (lfsi_emp) and EU-SILC database (ilc_li) Note: : CH: , BG: , HR: , RO: , IE: , and for : CH: , HR: , IE: Change employment rate population age 20-64,

6 Employment and poverty: a macro perspective (3) Figure 3 Evolution employment rate and AROP rate, Europe, EU-28 EU-15 FI CZ BE DK MT IE NL HR NO SK CH SL IS SE FR BG AT UK CY HU LV DE LT EE PT PL IT LU ES EL RO Source: Eurostat EU-SILC database (ilc_iw) Note: 2014 for EU-15, IE, HR, and CH 6

7 Employment and poverty: a macro perspective (4) Figure 4 In-work poverty employed persons aged 18-64, BE NL DE EU-15 Source: Eurostat EU-SILC database (ilc_iw) 7

8 In-work poverty in Belgium the past decade A story of a steady river and shifting undercurrents 8

9 Poverty Share among workers Poverty Total Share among workers INDIVIDUAL LEVEL CHARACTERISTICS Sex men women Education low middle high Age 18_ _ _ Born in Belgium EU Not EU Region Flanders Brussels Wallonia

10 Poverty Share among workers Poverty Share among workers HOUSEHOLD LEVEL CHARACTERISTICS Children > Family type Single adult Couple Other Household ]0;0,5[ Work intensity [0,5;0,8[ [0,8;1[ The basic story For some groups the poverty risk increased, but their share decreased 10

11 Poverty Share among workers Poverty Share among workers JOB CHARACTERISTICS Full year No Yes Low market income No Yes Temporary No Yes Part-time No Yes Self-employed No Yes

12 Non-standard workers Can the specific profile of non-standard workers explain their increased poverty risk? 12

13 Non-standard workers Difference in poverty rate Part-time temporary self-employed Difference in poverty rate 13

14 Non-standard workers Part-time temporary self-employed wage Difference in poverty rate 14

15 Non-standard workers Part-time temporary self-employed individual controls famtype (ref.: single) wihho child_d (ref.: no) wage occup (ref.: ISCO 1 + 2) benefitself (ref.: no) Difference in poverty rate 15

16 Non-standard workers Part-time temporary self-employed individual controls famtype (ref.: single) wihho child_d (ref.: no) wage occup (ref.: ISCO 1 + 2) benefitself (ref.: no) Total explained Difference in poverty rate 16

17 Non-standard workers Earnings differences explain a substantial share of the difference in the AROP rate between standard and nonstandard workers. However... Low earnings are not the key explenation for in-work poverty in general! 17

18 Non-standard workers

19 Belgium in comparison to the Dutch miracle 19

20 Belgium compared to the Netherlands NL: higer employment rate, also for the low skilled NL: more non-standard and low paid jobs NL: less poverty in general NL: In-work poverty slightly higher NL: lower relative poverty risk for non-standard and low paid workers

21 Temporary workers eq_disp HH income active age (18-64). relative to poverty line NL total workers BE total workers NL temporary workers BE temporary workers Source: EU-SILC own calculations

22 Part-time workers eq_disp HH income active age (18-64). relative to poverty line NL total workers BE total workers NL strictly PT employee BE strictly PT employee Source: EU-SILC own calculations

23 Low paid (part-time and full-time) workers eq_disp HH income active age (18-64). relative to poverty line BE total workers BE FYPT low paid BE FYFT low paid BE all FY workers NL total workers NL FYPT low paid NL FYFT low paid NL all FY workers Source: EU-SILC own calculations

24 Composition active age population (18-64). by household work-intensity 100% 90% 80% 70% 60% 50% 40% 30% HH_WI = 1 HH_WI = ]0.8, 1[ HH_WI = ]0.5, 0.8] HH_WI = ]0,0.5] HH_WI = 0 20% 10% 0% Source: EU-SILC own calculations BE NL

25 Composition active age population (18-64). by personal income source(s) 100% 90% 80% 70% 60% 50% 40% 30% only earnings both benefits and earnings only benefit income no income 20% 10% 0% BE Source: EU-SILC own calculations; Note: earnings = income as an employee or income from self-employment NL

26 Mapping Living Standards and Poverty among the Self-employed An Exploration of a Rough and Isolated Landscape 26

27 Self-employment and poverty At-risk of poverty rate self-employed and the difference with the poverty risk of employees, CZ HU CY MT AT FI HR BG BE NL SE UK IS NO FR DK IT LT DE LU SK LV SL difference employees and self-employed self-employed EU-28 EL ES PL PT EE RO Source: Eurostat: EU-SILC_[ilc_li04] Note : self-employed include self-employed with or without employees and family workers. 27

28 Self-employment and poverty 2 issues 1) Different results when looking at AROP (income poverty) andmd (material deprivation) 2) Limited overlap between AROP (income poverty) and MD (material deprivation) among self-employed in particular 28

29 Self-employment and poverty The story - Self-employed: increased income poverty risk, but not lower living standard - The situation is most problematic for self-employed without employees ~ Australia (Bradbury, 1997), the UK (Hick, 2015), and Sweden (Sevä & Larsson, 2015). 29

30 Self-employment and poverty Two individuals with the same income can have very different living standards if their income does not measure adequately all the resources available to them (Fusco et al., 2011: 139). Unobserved (and unobservable) for self-employed: tax-benefit regulations allowing wealth accumulation through their businesses Life-time wealth accumulation income volatility, and/or other problems with income data from self-employment 30

31 Self-employment and poverty Figure xx MD rate employees Correlation at-risk of poverty rate and material deprivation among employees (only income as employee), individuals aged 18-64, 2014 (r=0,367) FI CZ IE BE IS SI SK MT NL DK NO HR RO UK SE HU PL FR AT LV DE PT CY LT EL IT EE BG ES LU Source: EU-SILC 2014, own calculations at-risk of poverty rate employees

32 Self-employment and poverty Figure xx MD rate self-employed Correlation at-risk of poverty rate and material deprivation among self-employed (only income from self-employment), individuals aged 18-64, 2014 (r=0,060) CZ CY HU SK IE NL FI NO HR BG PLPT LT MT UK BE AT DE DKIS IT LU EL SI FR ES SE LV EE at-risk of poverty rate self-employed Source: EU-SILC 2014, own calculations Note: Romania is not included as an extreme case that influenced overall correlation level. Including it gives a correlation of r=0,480.

33 Self-employment and poverty Share of MD among workers who are AROP, individuals aged 18-64, Belgium 2014: * Employees: 40.7 % of the AROP are also MD * Self-employed: 9.4 % of the AROP are also MD Income poverty is a worse predictor of (material) living standard among self-employed. 33

34 Single working parents A policy dilemma? 34

35 Single parents: key findings Single parents face poverty risks that are more than ten percentage point higher than for partnered parents in most countries. Work-intensity is key, but more difficult for Single parents Yet, even FYFT working single parents face a substantial poverty rates. e.g. Belgium: - Total IWP: lower than 5 % - FYFT single parents: 10.4 % - not FYFT single parents: 29.8 % 35

36 Single parents: key findings Targeted income supplements strongly support the living standards of single parents. Welfare state arrangements have a potentially negative effect on the initial position of single parents in the predistribution, moderating their net impact on poverty.. Simply looking at how transfers affect the income situation of single parents misses the point that the pre-transfer position is also determined by these transfers and the work- (dis) incentives they may bring. 36

37 Clarifying the policy conundrum The puzzle of disappointing poverty trends despite employment growth? (Bea Cantillon) 37

38 Clarifying the policy conundrum Cantillon, B., Marchal, S., & Luigjes, C. (2016). Decent Incomes for the Poor: Which Role for Europe? Journal of Common Market Studies, 55(2), Cantillon, B., Collado, D., & Van Mechelen, N. (2017 forthcoming). The Glass ceiling of poverty reduction. In: Cantillon, B. Hills, J., & Goedemé, T. (eds.). Improving Poverty Reduction in Europe. Oxford: Oxford University Press. Collado, D.,, Cantillon, B., Van den Bosh, K., Goedemé, T., & Vandelannoote, D. (2017 forthcoming).the end of cheap talk about poverty reduction: The cost of closing the poverty gap while maintaining work incentives. In: Cantillon, B. Hills, J., & Goedemé, T. (eds.). Improving Poverty Reduction in Europe. Oxford: Oxford University Press. Cantillon, B., Collado, D., & Van Mechelen, N. (2017 forthcoming). The structural nature of inadequate social floors for single parent families. In: Nieuwenhuis, R. & Maldonado, L. C. (Eds.). The Triple Bind of Single-Parent Families, Bristol: Policy Press

39 Clarifying the policy conundrum An overall approach to fighting poverty basically means fighting unemployment traps and raising minimum income packages for working and non-working families. 39

40 Clarifying the policy conundrum Eradicating poverty does not come cheap! Difficult trade-offs between the cost of social spending, guaranteeing decent incomes for the poor and work incentives both for those out of work and those in work The cost of closing the poverty gap without worsening current incentives at the bottom of the income distribution would be around twice the cost of just lifting all incomes to the level of the poverty threshold 40

41 In concreto, what can we do? Clarifying the policy conundrum - At the least: adjusting social benefits and tax thresholds to changes in prices and average wages; on top of that, increasing the minimum social floor - However, little room exist for doing so without compromising too much on work incentives - Minimum wages relate as a glass ceiling to the social minimum floor and the fight against unemployment traps => adequate wage policies and collective bargaining; 41

42 Clarifying the policy conundrum - Raising net income packages for low-wage earning HH - (targeted) tax and/or social contribution credits - specific wage subsidies for (household) service sector jobs - increasing significantly (targeted) child benefits and/or other cost compensations; - Financed by: - Tax shifts towards consumption and wealth, - A return to more progressive income taxes - A 'spending shift to increase the pro-poorness of social spending; 42

43 Clarifying the policy conundrum - Structural inadequacy of the minimum floor for families with children => Financial provisions to compensate for unpaid caring activities - In addition to the necessary structural policies to combat poverty, small-scale and local socially innovative practices are important complementary instruments, not at least to reinforce non-financial incentives to work rather than merely focusing on financial incentives. 43

44 Clarifying the policy conundrum The role that the EU in realising a decent income for all in Europe: decisive advancement of the current European social governance. - Common goals and targets should become more concrete - We need to move from output to input governance 44

45 IPSWICH Follow-up committee: Incidence, composition and drivers of in-work poverty Jeroen Horemans Herman Deleeck - Centre for Social Policy 19/06/2017