The chart on the left illustrates the specific impact of a number of fiscal consolidation measures affecting household incomes. This is based on micro-simulation. The measures include cuts in public sector wages, cuts in benefits (pensions, and other benefits) and changes (mostly increases) to taxes and social security contributions. Alltogether they lead to a significant reduction in household incomes, notably in Greece, latvia, Portugal and Romania. In all countries reductions in real household incomes put a heavy strain on the living standards of low income households. The chart on the right illustrates that spending cuts and tax increases have impacted differently on high and low income groups. It shows that careful design of budget reforms is crucial to avoid the poorest being disproportionately affected, as was for instance the case in Estonia and Lithuania. On the contrary the impact was more progressive in Romania, Spain and Latvia.
Poverty Indicators - supporting the coordination of social policies at EU level
Social EuropePoverty indicatorssupporting the coordination ofsocial policies at EU level28 May 2013Isabelle Engsted-MaquetDG Employment, Social affairs and inclusion
Social EuropeStructure of presentation1. The Europe 2020 target for reduction of povertyand social exclusion2. Improving the measurement of poverty andsocial exclusion3. Improving analysis in support of policy making
Social EuropeThe target adopted on June 2010• Results from intense negotiations between MS• Builds on existing work on indicators at EU level• EU level target• “Lifting 20 millions people out of poverty or exclusion by 2020”• Based on 3 existing EU social inclusion indicators:- At-risk-of-poverty,- Severe material deprivation (adopted in February 2009),- People living in jobless households (agreement on new definition)• National targets• Member States are free to chose the most appropriate indicator to settheir national target• Member States to show how they will contribute to meeting the EUlevel target, in dialogue with the Commission
4The number of Europeans living at risk of poverty or socialremains stable – 120 million or 24.2% in 2011Population at risk of povertyor social exclusion*, 2011At risk of poverty84 MioSeverely materiallydeprived43 MioJobless households38 MioAt Risk of Poverty Severe Material Deprivation Jobless HouseholdsVarious facets of poverty andsocial exclusion*Source: European Commission* People at risk of poverty or social exclusion are at least in one of the following three conditions: at-risk-of-poverty, severely material deprivation or living in a jobless household.19%LatviaRisk of poverty orSocial exclusion 40%ItalyRisk of poverty orSocial exclusion 28%IrelandRisk of poverty orSocial exclusion 30%DeprivationprevailsRelative povertyprevailsBenefitdependancyissues31%13%20%11%10%16%23%8%
Social EuropeThe reasons of low income countries…•The risk-of-poverty rate is a measure of inequality rather than a povertymeasure•It underestimates poverty in low income countries. When the poverty line isless than 100 € being above the poverty line is not enough to be out of poverty•The relation with GDP growth is weak and sometimes problematic•It doesn’t reflect differences of living standards across Europe and produces arather implausible picture of the distribution of poverty across EUThe reasons of high income countries…•The risk of poverty, focused on monetary income, does not take into accountin kind benefits and access to universal services•The risk of poverty only refers to one dimension of poverty and not necessarilythe most relevant one, that is, social exclusion•Participation in the labour market is the most significant indicator of socialinclusion•Benefits can lift people above the poverty line, but may create benefitdependency and new forms of exclusion
6EU not on track to reach the targetSource: Eurostat (EU-SILC) Extraction date: 16.05.2013
7The situation is very different across Member StatesPeople living in poverty or social exclusion (in %)* People at risk of poverty or social exclusion are at least in one of the following three conditions: at-risk-of-poverty, severely material deprivation or living in a jobless household.** Member States without a marked national 2020 target have chosen to use a different monitoring indicatorwhich does not directly translate into a comparable indicator at the EU level.Population at risk of poverty or social exlusion* in 2011 2020 target**Source: European Commission
8Some groups at higher risk of monetary povertySource: European Commission* Monetary poverty refers to people living in a household with an equivalisedincome below the national poverty line (defined as 60% of the median income).
9During the crisis, the number of children in joblesshouseholds increasedChildren living in jobless households*Source: European Commission* Children in jobless households refer to children living in ahousehold where none of the parents are a work.
10The number of working poors is increasingin more than half of EU countriesShare of working poors** Working poors are people that are employedbut live with an income under the poverty threshold.Source: European Commission
Social EuropeIMPROVING DATA AVAILABILITYIMPROVING DATA AVAILABILITYTimelinessTimelinessSILC and other sourcesSILC and other sourcesData on social protection systemsData on social protection systemsModelling (Euromod)Modelling (Euromod)
Social EuropeStatistical Priorities and modelling (1)Improving timeliness• Improving SILC delivery, especially for material deprivation• Adding auxiliary data in LFS (monthly income)• Use models to produce nowcasts• Use alternative sources: e.g. consumer surveys (financial distressindicator)Upcoming SILC revision (with European Statistical systems)• Improving the measurement of material deprivation,• Improving the longitudinal component of SILC to better analyse thedynamics of poverty and exclusion• Improve data on access to services to better measure the redistributiveimpact of in-kind benefits• Better documentation of indicators
Social EuropeStatistical Priorities and modelling (2)Data on social protection systems•ESSPROS: Good identification of in-kind benefits, means-tested benefits, netexpenditure•Data on benefit recipients (Coverage rates, Take-up rates, Characteristics ofthe beneficiaries)Alternative sources•Special data collection efforts « extreme » poverty (homelessness, Roma):Poverty maps and Roma with World Bank and FRAModelling•Euromod microsimulation to illustrate impact of reforms on poverty, budgets,labour market incentives or economic stabilisation•OECD/EC tax benefit model
Social EuropeBetter analysis in support of Europe 2020 andthe European semester• Europe 2020: an integrated strategyCombined employment and social analysis:•EMPL directorate in charge of analysis in both areas,•merged publications (ESDE, Quarterly Review)•merged monitoring tools (JAF, EPM, SPPM)• European semester•identify challenges for AGS (ESDE Key Features)•country specific diagnosis in view of CSR (JointAssessment Framework)
Social EuropeAnalysis in support of policy makingExample of themes relevant for social inclusiona. Multiple facets of poverty (ESDE 2011)b. Drivers of in-work poverty (ESDE 2011)c. The dynamics of poverty (ESDE 2012 & 2013)d. Efficiency and effectiveness of social protection(ESDE 2012 & 2013)e. Distributional impact of fiscal consolidation(ESSQR March 2013, Working paper)
Social Europe3 Main productshttp://ec.europa.eu/social/main.jsp?langId=en&catId=113ESDE: Employment and SocialDevelopments in Europe (AnnualReview)Content: Key features + Thematics chaptersESSQR: Employment and Social SituationQuarterly ReviewContent: Recent trends + Special focusesWorking papersMethodological papers(e.g. Social expenditure in the crisis,timely monitoring of social trends, etc )
Social Europe"Looking at entries and exits separatelyrather than at poverty itself"High turnover ofpoverty framework favourabledoes not exclude risksof recurrencerisk of core bulkpermanently poorHigh entry & low exitrates Risk of massive povertytrap.Low entry & low exit rates framework favourableRisk of social polarisation2006-2009, EU-SILC, 18-64 population
Social EuropeWho is facing poverty?... and for how long?2006-2009, EU-SILC, 18-64 populationUKITCZ
Social EuropeNegative impact of fiscal consolidation onhousehold incomesContribution of different austerity measures to changein households incomes, overall (below) and atdifferent points of the income distribution in selectedMember States (right)Source: EUROMOD (cumulated impact of austeritymeasures on households disposable incomes).