PRESEČI BDP IN MERJENJE REVŠČINE: NOVI IZZIVI V PRIHODNOSTI

PRESEČI BDP IN MERJENJE REVŠČINE: NOVI IZZIVI V PRIHODNOSTI Michail Skaliotis 1, Eurostat POVZETEK Potrebo po boljšem merjenju napredka v družbi jasno določajo sporočilo Komisije»BDP in več«, priporočila Stiglitz-Sen-Fitoussijev komisije in strategija EU-2020. Te politične potrebe pomenijo za Evropski statistični sistem (ESS) nove izzive, predvsem danes, ko mnogi nacionalni statistični uradi doživljajo zmanjšanje proračunov zaradi gospodarske in finančne krize. Predstaviti želim nedavne Eurostatove pobude za zagotovitev usklajenega in stroškovno učinkovitega odgovora na nove politične prioritete, predvsem pa opisati tekoči projekt Eurostat INSEE Merjenje napredka, blaginje in trajnostnega razvoja. Posebej je poudarjeno merjenje revščine. Eurostatov cilj je analizirati in spodbujati večdimenzionalno merjenje trajnostnega razvoja, dogovoriti se o tem, kako ambiciozna naj bo izvedba raznih priporočil, in predlagati strategijo za določanje prioritet glede teh priporočil in dejavnosti v ESS. Uspeh bo mogoče doseči, če bo doseženo soglasje med proizvajalci v ESS. Ena najpomembnejših prioritet je boljša identifikacija populacije, določene z novim merljivim ciljem strategije Evropa 2010: zmanjšanje tveganja za revščino in socialno izključenost. Uresničevanje tega cilja bomo spremljali s kazalnikom, ki opisuje število oseb, ki se jih ocenjuje glede na tri dimenzije: tveganje revščine, hudo pomanjkanje materialnih dobrin in življenje v gospodinjstvu z nizko intenzivnostjo dela. Izbor ustreznih merljivih podkazalnikov je bil opravljen glede na sporočilo Komisije»BDP in več«in priporočilo Stiglitzeve komisije. Ključne besede: Komisija Stiglitz-Sen-Fitoussi, BDP, blaginja, trajnostni razvoj 1 The views and opinions expressed in this paper are those of the author and do not necessarily reflect the official views of the European Commission. 1

GOING BEYOND GDP AND MEASURING POVERTY: NEW CHALLENGES AHEAD ABSTRACT The necessity to better measure progress in societies is clearly determined by the Commission communication GDP & beyond, the Stiglitz-Sen-Fitoussi commission recommendations and strengthened by the EU-2020 strategy. These top policy needs posed new challenges for the ESS, in particular nowadays when many NSIs experience budgetary cuts caused by economic and financial crisis. My presentation aims at highlighting recent Eurostat initiatives in order to provide a consistent and cost-effective response to the new political priorities, primarily at describing the ongoing Eurostat INSEE project on Measuring progress, wellbeing and sustainable development. Special focus is given to measuring poverty. Eurostat's aim is to analyse and promote multidimensional measurement of sustainable development, to agree on the level of ambition in the implementation of various recommendations and to propose a strategy to prioritise these recommendations and actions within the ESS. Building strategic consensus from the producers' side within the ESS is indispensible precondition for success. One of the top priorities is to better identify the population defined by a new measurable target of the Europe 2020 Strategy: the reduction of the risk of poverty and exclusion. This target will be monitored with an indicator describing the number of persons who are assessed according to three dimensions: at-risk-of-poverty, severe material deprivation, and living in a low work intensity household. The selection of relevant measurable sub-indicators is done according to Commission communication GDP & beyond, and the Stiglitz commission recommendations. Key words: Stiglitz-Sen-Fitoussi commission, GDP, wellbeing, sustainable development 2

1. Introduction The long-awaiting momentum for Official Statistics to embark on the measurement of multidimensional, 'beyond GDP',' quality of life' and well-being issues has finally arrived. Never before have political commitment and strategic policy developments in the macro-economic, social and environmental fields been jointly co-ordinated so closely with the adoption of ambitious action plans by Official Statistics. Today 2, the results of the search engine Google for the keywords (i) "GDP and beyond", (ii) "Europe 2020 strategy", and (iii) "Commission on the Measurement of Economic Performance and Social Progress", indicate, respectively, about 1,980,000 196,000 and 14,200 references. Every day, this list is enriched with more initiatives, debates, conferences, political speeches, scientific papers, surveys, benchmarking frameworks, and a multitude of other actions. The search results, while been indicative of general public's interest in these domains, should not be interpreted in terms of comparative importance of each of the three policy initiatives separately, but rather as reflecting dynamic, inter-related elements of current political commitments and statistical ambitions: The Europe 2020 strategy is setting clear measurable targets (that certainly go beyond GDP), while the GDP and beyond Communication, and the Stiglitz recommendations invite Official Statistics to think and act out of the box by supplementing traditional GDP and economic indicators with a set of additional (subjective and objective) measures of societal progress and well-being. The ability of the ESS (European Statistical System) in particular, and of the international statistical community in general, to deliver concrete and widely accepted measurement frameworks in the beyond GDP era constitutes a challenge and responsibility at the same time. For the ESS as a whole and for every NSI individually, meeting the political expectations for better measuring progress, wellbeing and sustainable development is a matter of credibility, reputation and accountability as well. It is not enough to say that Official Statistics are in front of a scientific challenge and (never-ending) statistical experimentation. Both, the Europe 2020 strategy and the Communication on GDP and beyond have very explicit implications for the obligations of Official Statistics in this regard. Monitoring progress towards the set national and EU headline targets as well as the follow-up of the 7 flagship initiatives of the strategy will require an appropriate statistical framework right from the very beginning. In this paper, we are particularly interested in the 5 th headline target of the strategy, i.e. '20 million less people should be at risk of poverty or social exclusion. It is important to underline that Official Statistics are expected to provide the corresponding indicators and sub-indicators annually. Similarly, the Commission Communication on GDP and beyond has put as deadline the year 2012 for the Commission (Eurostat) to report on the implementation and outcomes of the actions put forward by this Communication. It is very encouraging that the ESS s initial response to the above over-arching new policy developments has been analogous to the importance of the policy demand as such. Quite rapidly, Eurostat set up a dedicated ESS structure in the form of a sponsorship 3, with a mandate 4 to prioritise and implement the recommendations of both the CMEPSP and the Communication on GDP and beyond. At the same time we can observe similar initiatives undertaken by several countries and other international bodies. While these initiatives clearly demonstrate the commitment of Official Statistics in addressing the measurement of wellbeing, they also entail a potential risk of proliferation of different (official) approaches to measure identical aspects of wellbeing in particular subjective dimensions of wellbeing. It is therefore important to adopt internationally agreed standards in this regard. The contribution of the work of the 'sponsorship' will certainly minimise this potential risk. This paper is largely based on recent work carried out in Eurostat and in particular the analysis by J-L. Mercy, F. Montaigne, I. Steinbuka and P. Wolff 5 on the Multiple dimensions of poverty and social exclusion. It focuses on the measurement of the Europe 2020 headline target indicator which relates to the population at risk of poverty or social exclusion, and highlights the prominent role of the EU- 2 05 November 2010; using google.com and identical search settings, with preference for web-pages in english. 3 Co-chaired by Eurostat and INSEE; sponsorship on Measuring progress, wellbeing and sustainable development. 4 For a detailed description refer to the 4 th meeting of ESSC, doc. ESSC 2010/04/13/EN, Luxembourg, 11 February 2010. 5 http://www.dgins-sofia2010.eu/pdocs/dgins%20session%20iii%20eurostat_rev.pdf 3

SILC as a core instrument in this context. Besides illustrating the EU approach to the (multidimensional) measurement of at risk of poverty or social exclusion, this paper aims at encouraging the other members of the international community to undertake similar-in depth-analyses in order to build broader international consensus with regard to the measurement of such complex issues. Finally, I would argue that drastic improvements in the timely dissemination of EU-SILC main results are not only desirable but feasible as well. Time has come for the ESS to address this issue in a more determined manner. 2. Measuring poverty and social exclusion in the context of Europe 2020 The European Council of 17 June 2010 confirmed the five EU headline targets which will constitute shared objectives guiding the action of Member States and the Union. An extract from the Council conclusions 6 which refers to the adoption of the five headline targets reads as follows: aiming to raise to 75% the employment rate for women and men aged 20-64, including through the greater participation of young people, older workers and low-skilled workers and the better integration of legal migrants; improving the conditions for research and development, in particular with the aim of raising combined public and private investment levels in this sector to 3% of GDP; the Commission will elaborate an indicator reflecting R&D and innovation intensity; reducing greenhouse gas emissions by 20% compared to 1990 levels; increasing the share of renewables in final energy consumption to 20%; and moving towards a 20% increase in energy efficiency; the EU is committed to taking a decision to move to a 30% reduction by 2020 compared to 1990 levels as its conditional offer with a view to a global and comprehensive agreement for the period beyond 2012, provided that other developed countries commit themselves to comparable emission reductions and that developing countries contribute adequately according to their responsibilities and respective capabilities improving education levels, in particular by aiming to reduce school drop-out rates to less than 10% and by increasing the share of 30-34 years old having completed tertiary or equivalent education to at least 40%; Promoting social inclusion, in particular through the reduction of poverty, by aiming to lift at least 20 million people out of the risk of poverty and exclusion. The fifth headline target aims to lift at least 20 million people out of the risk of poverty and exclusion. More precisely, this target will be monitored with an indicator describing the number of persons who are at risk-of-poverty or exclusion according to three dimensions: (i) at-risk-of-poverty; (ii) severe material deprivation; (iii) living in a low work intensity household. This indicator is entirely based on EU-SILC (survey on income and living conditions). Member States are free to set their national targets on the basis of the most appropriate dimension, taking into account their national circumstances and priorities. The indicator (at risk of poverty or social exclusion) encompasses both relative [component (i)], and absolute dimensions [components (ii) and (iii)]. The following graphs illustrate the size and composition of this (target) population group for the EU 27, as well as some marked country differences (Netherlands and Romania): 6 http://ec.europa.eu/eu2020/pdf/115346.pdf 4

Graph 1: At risk of poverty or social exclusion EU 27, 2008 (source: EU-SILC) At risk of poverty : 81 mio Severe material deprivation: 41 mio At risk of poverty : 16.5 % Severe material deprivation: 8.3 % At risk of poverty or social exclusion: 115 mio At risk of poverty or social exclusion: 23.5 % EU 27, 2008 EU 27, 2008 Low work intensity: 34 mio Low work intensity: 7.0 % The size of the target population is quite important (115 million people), representing 23.5% of EU's total population. It varies considerably between countries, ranging from around 15% (NL, CZ, LU, SE) to more than 30% in PL, LV, BG, and RO. Graph 2: At risk of poverty or social exclusion, the Netherlands and Romania, 2008 At-risk-of poverty: 10.5 % Severe material deprivation: 1.5 % At risk of poverty: 23.4 % Severe material deprivation: 32.9 % At risk of poverty or social exclusion: 14.9 % At risk of poverty or social exclusion: 44.2 % Low work intensity: 6.4 % The Netherlands Low work intensity: 4.1 % Romania, 2008 It should be underlined that the agreed definition 7 of 'at risk of poverty or exclusion', which is used in the context of the Europe 2020 strategy (and applied here), includes the number of people who are at risk of poverty OR severely materially deprived OR living in households with very low work intensity. 7 People at risk-of-poverty have an equivalised disposable income below the risk-of-poverty threshold, which is set at 60 % of the national median equivalised disposable income (after social transfers). People who suffer from severe material deprivation have living conditions severely constrained by a lack of resources, they experience at least 4 out of the 9 following deprivation items: cannot afford i) to pay rent or utility bills, ii) keep home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein equivalent every second day, v) a week holiday away from home, vi) a car, vii) a washing machine, viii) a colour TV, or ix) a telephone. People living in households with very low work intensity are people aged 0-59 living in households where the adults worked less than 20% of their total work potential during the past year. 5

Graph 3 illustrates country differences with regard to the shares of population who are 'at risk of poverty' and 'material deprivation'. Graph 3: At-risk-of-poverty rates and material deprivation rates, 2008 30 At-risk of poverty rates and material deprivation rates, 2008 At-risk-of-poverty rate (% of the population) 25 20 15 10 ES UKEE IT EU15 EU27 IE FI BE MTDE LU DK SE FR AT SI NL IS NO CZ EL PO CY LT SK LV PL NMS12 HU RO BG 5 0 10 20 30 40 50 60 Material deprivation rate (% of the population) Source: Eurostat, EU-SILC Note: For readability, some country's labels have been slightly repositioned The share of the target population and its composition (AROP= at risk of poverty, MD= material deprivation, LWI= low work intensity) by country is shown in graph 4. Graph 4: Share of the target population across Member States, 2008 50% 40% AROP MD not AROP LWI not AROP 30% 20% 10% 0% EU27 CZ NL SK Source: EU - SILC DK SE SI HU AT FR LU FI MT BE DE IE CY PL PT IT UK EE ES LT EL BG RO LV 6

Another--policy and politically important--finding is the striking difference between the relative shares of the target population in terms of 'population' and 'income'. Graph 5 illustrates these differences for the 27 Member States. Overall, the target population represents 23.5% of the EU population, but only 12% of the total EU households' income. Graph 5: Persons at risk of poverty or exclusion: % of total population and % of total household income, 2008, [EU SILC] 50% Share of the population Share of the income 40% 30% 20% 10% 0% EU27 LU NL SE DK CZ FI EE DE MT ES FR AT SI BE CY IE PT SK IT EL LT UK LV BG HU PL RO For a more detailed analysis of the target population and its comparisons over different dimensions with the rest of the population, readers should refer to the excellent work of my colleagues (J-L. Mercy et al). It is important to underline in this regard that the EU - SILC provides a unique possibility for comparative analysis of the target population vs the rest of population in terms of 'quality of life' dimensions (health, deprivation of durable equipments, economic strain, housing conditions, environment, comfort of the dwelling and accessibility of private and public services). 3. Challenges and responsibilities Notwithstanding the obvious importance of other social surveys (e.g. LFS) and administrative sources (tax registers, health, immigration, education, etc.), the EU-SILC occupies a prominent position in the ESS for studying income, poverty, social exclusion, inequalities and living conditions. In the current context of the Europe 2020 strategy, the GDP and beyond and Stiglitz crossroads, SILC has proven its ability to provide a panoply of indicators and analytical results shedding light on several key multidimensional aspects of the target population, i.e. persons at risk of poverty or exclusion. A weak point though which the ESS needs to address in a more co-ordinated and determined manner is timeliness. J-L. Mercy et al., in the recent DGINS conference in Sofia, Bulgaria, also underlined timeliness as being one of the most important challenges to address in the near future. I would argue that this is a concern for immediate action. As a matter of fact, the most impressive and promising recent survey experience in improving timeliness while maintaining a good level of accuracy refers to the work carried out by the National Statistical Institute of Spain (INE) 8 in the context of the SILC. In the case of INE, under the traditional approach, data was released 16 months after the end of fieldwork (from June of year t to October in year t+1). This uncomfortable situation has led INE to investigate the possibility of applying some automatic treatment to the data and to calculate provisional main indicators (at national level) much earlier. After a detailed study and simulations with data from earlier waves of SILC, INE has selected for provisional release five indicators that performed best in 8 For a detailed description of the approach refer to: A. Argueso, J-M Mendez and P. Vega: EU-SILC provisional results available two months after collection, a dream come true? http://q2010.stat.fi/media//presentations/argueso_ine_spain_session_31_paper.pdf 7

terms of deviations from the final results. The outcome of the research has been very promising and INE decided to release the 2008 main results six months earlier 9 than what was done in previous years, while the release of provisional results for the 2010 SILC is scheduled for November 2010 (just in 4 months following the end of fieldwork period)! The target for 2011 is being put very high: INE believes that 'Additional time-saving operations can be incorporated so that provisional data availability could be reached two months after data collection (in September) could be reached in 2011..' I am confident that this example will set a new standard for the EU SILC and household surveys in general. It is now a responsibility for the ESS to bring this approach to the attention of all of its members and investigate the possibility of applying similar automation techniques across the EU. In addition to timeliness, Quality, comparability and coverage are highlighted by J-L. Mercy et al as critical areas for further improvements: Quality and comparability: SILC data acquired high political visibility, in particular in the context of the new governance and surveillance mechanism proposed by the Commission 10. As quality and comparability concerns increase, in depth scrutiny of these dimensions in each Member-State will be required, as well as progress towards improved comparability. Coverage: On one hand, an important element of the relevance of SILC relates to its broad scope, collecting various elements on living conditions and allowing the linkage of these elements at the micro data level. The elaboration of the complex indicator on the population at risk of poverty or exclusion would have been impossible without a common data source accessible at the micro data level. On the other hand, when it comes to address the various dimensions of quality of life and well being, EU-SILC is at this stage limited in scope. Further reflections on the scope of SILC are required. These elements will have to be taken into consideration at the occasion of the revision of the legal basis of SILC that has been announced for the years 2012-2013. Other elements should also be kept in mind at this occasion, in particular the strategy for modernisation of social statistics, the mainstreaming of migration statistics, the possible links with wealth and consumption surveys, the costs and burden of the survey, etc. Increased political and policy attention to quantitative and qualitative aspects of the at risk of poverty or exclusion target population group is also to be expected by the requirements which will emerge in the context of the flagship initiative European platform against poverty: 20 million less people should be at risk of poverty or social exclusion. Implementing a flagship initiative normally implies a plethora of operational actions and programmes at both EU and national levels, including quantitative benchmarking frameworks. Moreover, the flagship initiatives do not operate in isolation but rather in a co-ordinated manner involving strong interactions amongst them (for example: aspects of social exclusion are also addressed in the Digital Agenda for Europe, in terms of e-inclusion, Digital divide, web-accessibility, e-learning, etc). Great expectations have also been attached to the work of the INSEE Eurostat sponsorship on 'Measuring progress, wellbeing and sustainable development'; the work of the various Task Forces of the sponsorship should be supported by the entire ESS; it is a collective effort which goes beyond a mere theoretical exercise. I think we are at a turning point in the history of social statistics a momentum not to be lost. 4. Concluding remark The international statistical community and the ESS in particular should grasp the unique opportunity of developing an appropriate, comprehensive and widely recognised statistical framework capable for 9 http://www.ine.es/en/prensa/np589_en.pdf 10 Communication from the Commission COM(2010)367 / Final, of 30.06.2010, Enhancing economic policy co-ordination for stability, growth and jobs Tools for stronger EU economic governance : http://eur-lex.europa.eu/lexuriserv/lexuriserv.do?uri=com:2010:0367:fin:en:pdf 8

measuring progress, wellbeing and sustainable development. This task is both, a challenge and a responsibility. Never before have political commitment and strategic policy developments in the macroeconomic, social and environmental fields been jointly co-ordinated so closely with the adoption of ambitious action plans by Official Statistics. This represents a historical momentum, and Official Statistics cannot afford to lag behind political expectations. 5. Acknowledgments I am greatly thankful to my colleagues Jean-Louis Mercy and Pascal Wolff for their advice and analytical material for this paper. However, any errors are of my sole responsibility. 6. References 1. Argueso, A., Mendez, J-M, and Vega P.: EU - SILC provisional results available two months after collection, a dream come true? http://q2010.stat.fi/media//presentations/argueso_ine_spain_session_31_paper.pdf, last accessed on 05 November, 2010. 2. European Commission: Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions, Enhancing economic policy co-ordination for stability, growth and jobs Tools for stronger EU economic governance COM(2010)367 final, of 30.06.2010; http://eur-ex.europa.eu/lexuriserv/lexuriserv.do?uri=com:2010:0367:fin:en:pdf 3. European Commission: Communication from the Commission to the Council and the European Parliament, GDP and beyond Measuring progress in a changing world, COM(2009) 433 final, Brussels, 20.8.2009; http://eur-lex.europa.eu/lexuriserv/lexuriserv.do?uri=com:2009:0433:fin:en:pdf 4. European Commission: EUROPE 2020 - A European strategy for smart, sustainable and smart growth; http://ec.europa.eu/eu2020/pdf/complet%20en%20barroso%20%20%20007%20- %20Europe%202020%20-%20EN%20version.pdf 5. European Council: Conclusions of the European Council (17 June 2010) http://ec.europa.eu/eu2020/pdf/115346.pdf last accessed on 05 November 2010 6. Eurostat: 4 th meeting of the European Statistical System Committee, Sponsorship Group to deal with the outcomes of the Stiglitz-Sen report and the Commission Communication on GDP and Beyond, Luxembourg, 11 February 2010, ESSC 2010/04/13/EN http://unstats.un.org/unsd/envaccounting/ceea/meetings/unceea-5-20-a2.pdf 7. Mercy, J-L., Montaigne, F., Steinbuka, I., Wolff, P.: Multiple dimensions of poverty and social exclusion The example of the Europe 2020 strategy, DGINS conference, Sofia, Bulgaria, 1 st October 2010; paper available at the following web site (last visited on 05 Nov. 2010): http://www.dgins-sofia2010.eu/pdocs/dgins%20session%20iii%20eurostat_rev.pdf 8. Stiglitz, J., Sen, A., Fitoussi, J-P.: Report by the Commission on the Measurement of Economic Performance and Social Progress; http://www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf 9