Social Situation Monitor Seminar on Making Work Pay: 25 May 2016, Brussels. Unpacking In-work Poverty Fran Bennett

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1 Social Situation Monitor Seminar on Making Work Pay: 25 May 2016, Brussels Unpacking In-work Poverty Fran Bennett

2 Outline Complexity of in-work poverty Recent developments in research Confusion in public debates (UK living wage ) Policy implications? Need for gender analysis Avoid over-emphasis on earner Thinking about low pay Social protection issues Alternative perspective?

3 Complexity of in-work poverty Indicator at EU level but portmanteau phrase, ripe for unpacking Working poor, eg: individuals having work (either waged employees or self-employed) for at least 7 months in the year prior to the survey, and who are members from households whose annual equivalised disposable income is below the poverty threshold (Fraser et al. 2011, p. 7) Hybrid: individual activity status, but household income (pooled) In-work poverty may be applied to worker/adults/all in household? Obscured in debates - eg working household / hard-working families Employment norm at household level: household is not a labour market unit but has implications for employment activity (Ponthieux 2010)

4 Poverty: income? Material deprivation? Financial strain? Usually measured by relative income (under 60% median national equivalised disposable household income, though may be under 50% sometimes) In work / worker : months per year? Normal situation, not current activity status, used in EU definition: worked 7 months/more in year - or (for longitudinal analysis), every month for 3 years (Hallerod et al. 2015) which results in more salience of household factors, inconsistency with flexicurity & potential to omit more during crises? (Ponthieux 2010) Employees only? or self-employed as well? (Hallerod et al. 2015) Household: not just singles/couples but wider households: vary within EU, increased in crisis? (eg some 16% in UK today) Range of causes including other household members incomes

5 Recent developments in research In-work poverty associated with not having full-time/permanent labour market presence at individual level & low work intensity & single earners in couples at household level (Marx & Nolan 2014) Overlap with other categories? (eg low work intensity) (Hallerod et al. 2015) Impact of 2 earners in couples on median income (& thus on poverty threshold) raises bar for 1-earner couples to escape in-work poverty Loci of potential policy failure: low (household) work intensity; inadequate out of work benefits; inadequate earnings; inadequate earnings supplements; number of children relative to income & other issues: low hourly pay/few working hours? Employees/selfemployed? (etc.)

6 Confusion in public debates (UK living wage ) Living wage : well-known in UK/US (only game in town to tackle low pay?) but also global south - and also in EU? (eg Ozdemir & Ward forthcoming) UK government introduced National Living Wage (April 2016) but this is higher national minimum wage (& accompanied by tax & benefit cuts) Living wage means wage at a level ensuring socially acceptable / decent life but concept under-interrogated (Gavin Kelly, then Resolution Foundation) (Leaving aside arguments about employment impact of higher pay etc.) Conceptual and practical difficulties of living wage as an idea Low pay as poverty pay blurs difference low pay/in-work poverty (gross hourly individual pay vs weekly household disposable income) - & causes

7 Some overlap between these (& may be growing?) but Low paid to benefit from living wage are often young people, parttimers, 2 nd earners often not model examples used to calculate it Living wage for one family type? / averaged across range of types? Calculation complicated by taking into account in-work benefits Government action on tax & benefits affects living wage calculation Costs taken into account (but not included in poverty measure) Earnings increase cap applied, to relate to general wage increases

8 Policy implications? Need for gender analysis Gender paradox? (Fraser et al. 2011) but many relevant issues are gendered: household work patterns, care costs/responsibilities, low pay for women Low work intensity : may describe gendered division of labour Significance of your work characteristics/situation depends on who you live with & your role (eg male part-timers at more risk of in-work poverty but female risk increased recently, due to decrease in male employment) Inadequate social protection for partners out of labour market Decommodification & defamilialisation (Lohmann & Marx 2008): o Eg in-work poverty in couples would increase if non-means-tested earnings replacement benefits in UK were abolished (Bennett & Sutherland 2011); o Eg lack of childcare provision/lone parenthood without adequate support

9 Some attempts to individualise in-work poverty measurement Latent individual poverty assuming no sharing of incomes within household except for joint benefits (Pena-Casas & Ghailani in Fraser et al. 2011) - ie insufficient own income to avoid poverty but children s benefits? Women s in-work poverty much more than men s, more risk factors & even when comparable situation, less protected by skills/progression Ponthieux (2010) looks at individual poverty in earned income (earnings & sickness/unemployment benefits) & how much in-work poverty is tackled via intra-household & fiscal redistribution: women s in-work poverty is more tied to earned income, men s to household

10 Policy implications? Avoid over-emphasis on earner Clear overlap between individual & household for single childless But otherwise: whose situation in foreground? & what element(s) of household income seen as important? In-work poverty focuses policy attention on earner and earnings Resulting in policy proposals to tackle and/or supplement low pay But (as discussed) living wage ideas confuse low pay & poverty - & in-work supplements may subsidise low work intensity, not just (as traditionally noted) low pay? Family as system to redistribute income but can t always be relied on

11 In-work supplements may disincentivise potential 2 nd earners, often (+ lone parents) more sensitive to incentives (Allegre & Jaehrling in Fraser et al. 2011) In addition to family means test, joint taxation, transferable tax allowances, dependent spouse allowances etc. may have similar effects If access to independent income is seen as important issue, household distribution of resources cannot be ignored, and reforms to these systems should also be part of thinking on in-work poverty But even when potential 2 nd earners seen as solution, thinking may not go beyond conditionality, welfare to work schemes etc. Make work pay policies may not consider: for him/her + gender dimension

12 Policy implications? Thinking about low pay Is problem of in-work poverty due to insufficient earnings? Not much association with low hourly pay per se (Marx & Nolan 2014) Matsaganis et al. (forthcoming) analyse hourly pay below 50% mean for full-year workers: in-work poverty risk usually higher, esp. when low earner is household head but this is less common; & other factors Women at lower risk of in-work poverty (including part timers) (Van Lancker et al. 2015; & see Horemans, Marx & Nolan, 2015) But majority of those in employment with hourly pay of under 50% median in nearly all EU countries are women, with many working part time (though some differences LFS/EU-SILC) (Ozdemir & Ward, forthcoming)

13 Young also disproportionate share but who are low paid long term? Mothers trade down, get stuck, even sometimes after children grown Traditional argument: low pay of 2 nd earners was not important: pin money, additional to family wage, increases go to non-poor households etc. But even low-paid work of 2 nd earner can help prevent in-work (household) poverty And low pay matters for the individual not just if you live in a household in in-work poverty now, but also because of life-course effects on risk of poverty in future

14 Policy implications? Social protection issues In-work benefits: only effective in particular settings & for particular groups (Marx & Nolan 2014) Migrants may not qualify for a range of benefits Generosity of out of work benefits matters to in-work poverty including limited entitlements for part timers (Horemans, Marx & Nolan 2015) Unemployment benefits more means testing has gender dimension But also sickness benefits & maternity/paternity/parental/care leave So significance of low work intensity does not stop at employment Adequacy of benefits for children

15 Alternative perspective? In-work poverty debates focus on snapshot of household situation Alternative: individual in dynamic perspective (Pena-Casas & Ghailani 2011) Peripheral/precarity: promote employment security (Hallerod et al. 2015) Low pay: inequality of rewards in labour market decent/fair wages Low pay: gendered labour market, & under-valuation of certain jobs Individual non-means-tested social protection (Bennett & Sutherland 2011) Individual taxation & less emphasis on family means-tested in-work benefits, to lessen obstacles for 2 nd earners But also focus on (gendered) analysis of household situation

16 Wages can t take account of family size: child benefits (Hallerod et al. 2015) Employer role in relation to workers with family responsibilities Childcare costs (not included) given importance of 2 nd earners to inwork poverty for those with children (Rastrigina & Verashchagina, 2015) Housing costs (not included) including changes composition of poor Work does pay ie workers are less often at risk of poverty than others - but this is not just due to their own work (Ponthieux 2010) Is in-work poverty too heterogeneous and complex to use for interpretation of trends/comparisons and/or for policy directions? Or separate individual (work) & household (social policies) more clearly?

17 References Bennett, F. (2014) "The 'living wage', low pay and in work poverty: rethinking the relationships", Critical Social Policy: Bennett, F. (2015) Gender and poverty in the UK: inside the household & across the lifecourse (blog post): Bennett, F. & Sutherland, H. (2011) The importance of independent income: understanding the role of non-means-tested earnings replacement benefits (ISER Working Paper , University of Essex): Fraser, N., Gutierrez, R. & Pena-Casas, R. (2011) Working Poverty in Europe: A comparative approach, Palgrave Macmillan, including: Intro.; Pena-Casas & Ghailani; Allegre & Jaehrling Hallerod, B., Ekbrand, H. & Bengtsson, M. (2015) In-work poverty and labour market trajectories: poverty risks among the working population in 22 European countries, Journal of European Social Policy 25(5): Horemans, J., Marx, I. & Nolan, B. (2015) Hanging in, but only just. Part-time employment & in-work poverty throughout the crisis, CSB Working Paper 15/03, Antwerp: University of Antwerp

18 Lohmann, H. & Marx, I. (2008) The different faces of in-work poverty across welfare state regimes, in H. Andress & H. Lohmann (eds.) The Working Poor in Europe: Employment, poverty & globalisation, Northampton: Edward Elgar Publishing: Marx, I. & Nolan, B. (2014) In-work poverty, in Cantillon, B. et al. (eds.) Reconciling Work & Poverty Reduction: How successful are European welfare states?, Oxford: OUP: Matsaganis, M., Medgyesi, M. & Karakitsios, A. (forthcoming) The interaction between minimum wages, income support & poverty, Research note 10/2015, Social Situation Monitor, Brussels: EU Ozdemir, E. & Ward, T. (forthcoming) The characteristics of workers on low wages, Research note 9/2015, Social Situation Monitor, Brussels: EU Ponthieux, S. (2010) Assessing & analysing in-work poverty risk, in A.B. Atkinson & E. Marlier (eds.) Income & Living Conditions in Europe, Eurostat, Luxembourg: Pubs. Office, EU: Rastrigina, O. & Verashchagina, V. (2015) Secondary earners & fiscal policies in Europe, Brussels: Directorate General for Justice, for European Commission Van Lancker, W. et al. (2015) Workshop on main causes of female poverty, workshop for FEMM Committee, Brussels: European Parliament, EU: