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The EU approach

The EU approach. Measuring poverty and social exclusion in support of policy making. Outline of the presentation. How did the EU concept of poverty and social exclusion develop? Europe 2020 and the EU target to reduce poverty and social exclusion Implementing Europe 2020

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The EU approach

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  1. The EU approach Measuring poverty and social exclusion in support of policy making

  2. Outline of the presentation • How did the EU concept of poverty and social exclusion develop? • Europe 2020 and the EU target to reduce poverty and social exclusion • Implementing Europe 2020 • Governance and monitoring framework • Implementing Europe 2020: More country specific analysis • A new impetus to measurement and analysis: building up the evidence base • Improving the measurement of poverty and exclusion • Identifying the drivers and assessing the impact of policies

  3. 1. How did the EU concept of poverty and social exclusion develop?

  4. Social policy: a shared competence • Social policy is still and will remain a Member State’s competence • Policy coordination process between Member States • based on common objectives, indicators, regular reporting, joint assessment and mutual learning (Social Open Method of Coordination) • EU laws and tools that can contribute to poverty reduction • Charter of fundamental rights (1989) • Anti-discrimination directives • Laws on social and employment standards • EU Funds (ESF, European Globalisation Adjustment Fund, PROGRESS) • Food aid programme (1987) • Europe 2020 provides an integrated framework and aims to bring together all available instruments

  5. Poverty and social exclusion How did the concept develop in the EU? • in support of a policy coordination process • in a diverse and changing Europe • through social policy statements, activities and agreements at EU level (Commission, Council) • drawing on developments in academia • through the way they are measured • in connexion with EU level statistical developments

  6. An increasingly diverse EU

  7. Statements by the Council 1975: Common definition of poverty the poor are "individuals or families whose resources are so small as to exclude them from the minimal acceptable way of life of the member state where they live". 2000: “Laeken” indicators for the EU social inclusion strategy 18 indicators of social inclusion including headline indicator “at-risk-of poverty” rate => focus on relative poverty 2010: Europe 2020 strategy: smart, sustainable and inclusive growth. • Ensuring that the "benefits of growth are widely shared and that people experiencing poverty and social exclusion are enabled to live in dignity and take an active part in society". • New definition of people "at-risk-of poverty or social exclusion" based on 3 indicators

  8. Poverty and “social exclusion” Warning! • R. Walker (1995): “Social exclusion means different things to different people” and this ambiguity permits “a continuing dialogue about matters that some would equate with, or at least include within, the concept of poverty” National variations of the concept (R. Atkinson – 2000): • France: Societal solidarity ensuring participation of all in a common moral and social order (incl. social and cultural dim) • Germany, Netherlands: reintegration on the labour market of the welfare dependant • Scandinavian: reintegration on the labour market + deviant behaviour • UK: Labour government’s agenda: Opportunities for all and welfare to work agenda (T. Blair’s definition)

  9. A multi-dimensional concept • beyond the satisfaction of basic needs, having command over the resources needed to live in dignity, to access rights, to ensure full participation in society and the economy. • beyond the lack of income, it covers the areas of work, health, education, or social and cultural participation. • a temporal and dynamic phenomenon requiring solutions to durably escape poverty (labour market integration, equal opportunities and anti-discrimination) • Poverty is graduated; the most severe forms of poverty and exclusion also need to be taken into account. • There is also a need to reflect “absolute” differences in living standards across the EU, as well as changes over time.

  10. Indicators of social inclusion (2001-2010)

  11. Indicators of social inclusion (Continued)

  12. Statistics: EU-SILC, HBS, ESSPROS EU harmonised Survey on Income and Living Conditions • Yearly • EU Regulation: legallybindingsince 2005 • Output based harmonisation: detaileddefinition of variables • Qualitycriteria (achievedsample size) • Panel dimension (rotating panel) • Modules on specifictopics (housing, social participation, etc) Householdbudget surveys (every five years) • Gentleman agreements ESSPROS • Social protection expenditure and receipts, yearly

  13. Methods used at national level • Relative income poverty: at-risk-of poverty rate at 60% (or other level) • Anchored poverty • Relative poverty based on consumption threshold • Material deprivation and consistent poverty • Regulatory thresholds: set by law (subsistence level, minimum income, etc) – with embedded uprating mechanisms or not • Budget standards • Food-ratio poverty lines • (Subjective poverty)

  14. 2. Europe 2020 and the EU target to reduce poverty and social exclusion

  15. The Europe 2020 strategy Three overarching objectives • Smart, sustainable and inclusive growth Five headline targets • Employment (75 %); • R&D (3% of GDP); • Climate/energy ("20/20/20“); • Education (ESL < 10% and TD > 40%); • Poverty and social exclusion (- 20 million)

  16. Risk of poverty or social exclusion 115 million 23% SMD 8% AROP 16% 3 indicators to describe poverty and social exclusion Risk of poverty • People living with less than 60% of the national median income • Poverty lines vary from 200€/month to more than 3000€ • « resources so low as to exclude them from the way of life of the MS » People living in households with very low work intensity (“jobless households”) • long-term exclusion from the labour market for workers and dependant family members • Households where people aged 18-59, not students have no work or worked less than 1 day / week on average during the year Severe material deprivation • A non monetary measure of living conditions • at least 4 out of 9 deprivations: pay the rent, keep home warm, eat meat or protein every second day, enforced lack of a car, a washing machine... • Single European threshold, reflecting different living standards across the EU JLH 10% Source: Eurostat EU SILC 2010

  17. Facets of poverty and social exclusion Severe Material Deprivation Jobless Households At Risk of Poverty SMD 6% AROP 15% JLH 20% JLH 10% JLH 12% AROP 21% AROP 18% SMD 27% Italy AROPE 24% Ireland AROPE 26% SMD 7% Labour market exclusion prevails Deprivation prevails Relative poverty prevails Latvia AROPE 38 % 17 Source: Eurostat EU SILC 2010

  18. Dynamics of the components also vary Source: Eurostat EU SILC

  19. Poverty or exclusion targets estimates People living in poverty or social exclusion (in %) Population at risk of poverty or social exlusion* in 2010 2020 target** * 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 indicator which does not directly translate into a comparable indicator at the EU level. Source: European Commission

  20. 3. Implementing Europe 20203a. Governance and monitoring framework

  21. 1) The European Semester MS Commission Annual Growth Survey Social Protection Committee Employment Committee Draft Joint Employment Report SPC Annual Report EPSCO Debate / orientations Joint Employment Report (IG 10) Spring European Council Policy guidance MS January March May June National Reform Programs+ National Social Reports In-depth review Country examination Submits Country Specific Recommendations EPSCO Discussion/adoption CSR

  22. 2) Europe 2020 priorities 2011 AGS priorities Prerequisites for Growth: A rigorous fiscal consolidation Correcting macro economic imbalances Stabilityof the financial sector Mobilising Labour Markets: Making work more attractive Reforming pensions systems Getting the unemployed back to work Balancing security and flexibility Frontloading Growth: Tapping the potential of the Single Market Attracting private capital Cost-effective access to energy 2012 AGS priorities • Pursuing growth-friendly fiscal consolidation • Restoring normal lending to the economy • Promoting growth and competitiveness • Modernising public administration • Tackling unemployment and the social consequences of the crisis • Mobilising labour for growth • Support employment, esp of the young • Protect the vulnerable 22

  23. 3) Europe 2020 priorities Further improvethe effectiveness of social protection systems Implement active inclusion policies Ensureaccess to services to support integration to the labour market and society Monitor distributional impact of reforms Pay attention to the needs of the mostvulnerable in any tax shift 2012 in detail: … protecting the vulnerable

  24. 4) Reporting • National Social Reports (At the same time as NRPs) • More detailed strategies for poverty targets • Cover all social OMC strands (inclusion, pensions and health) • SPC Annual Report (Mid - January head of spring Council) • Monitoring of target + Reporting on indicators • Analysing NSR • Crisis monitoring • Thematic focus (2013: Child poverty and Pensions)

  25. 5) Monitoring and assessment Monitoring Europe 2020 and the social OMC • Joint Assessment Framework (JAF) • Diagnosis tool based on key indictaors (see example) • Shared by MS and Commission analysts • Supports the work on Country Specific Recommandations • Social performance monitor • Summary of MS progress towards their national targets • And of key challenges identified through the JAF • Target: remaining issues • national ambitions do not match EU ambition • How to monitor targets based on national indicators/sources? • OMC indicators covering inclusion, pensions and health used in thematic reporting by SPC

  26. 3. Implementing Europe 20203b. More country specific analysis

  27. Joint Assessment Framework identifying country specific challenges Poor labour market performance, especially for the weakest workers: e.g. segmentation, long-term unemployment Inactivity due to care responsibility Poverty and exclusion Jobless households Very low impact of social transfers Child poverty

  28. Child poverty drivers by country Diagnosis of main drivers by country • United Kingdom: • generous benefits but • many children in jobless households • high inactivity due to care responsibility • => design of benefits • => lack of child care • Bulgaria • High poverty and material deprivation • In-work poverty • Low impact of transfers • => improve economic and labour market conditions • => improve family support Source: ESSPROSS 2009, EU-SILC 2010, DG EMPL calculations.

  29. Extracts from the Commission CSRs for Bulgaria and the UK (not yet adopted by Council) BULGARIA To alleviate poverty, improve the effectiveness of social transfers and the access to quality social services for children and the elderly and implement the National Roma Inclusion Strategy. UNITED KINGDOM Step up measures to facilitate the labour market integration of people from jobless households. Ensure that planned welfare reforms do not translate into increased child poverty. Fully implement measures aiming at facilitating access to childcare services.

  30. 4. A new impetus to measurement and analysis: building up the evidence base

  31. Building up the evidence base Poverty and social exclusion • measurement of POVERTY AND SOCIAL EXCLUSION: material deprivation, « extreme » poverty (homelessness, Roma), regional dimension(Poverty maps and Roma with World Bank and FRA) • DYNAMICS of poverty and exclusion (longitudinal component) • Mid-term review of targets in 2015 (e.g. mat. dep. Comp.) • TIMELINESS Poverty drivers and impact of policies • Do growth and jobs help reducing poverty and exclusion? • REDISTRIBUTIVE IMPACT OF SOCIAL SPENDING, (incl. in-kind benefits) – identify efficiency gains • What is the impact of fiscal consolidation? Social spending vs. Economic efficiency • Illustrating the working of automatic stabilizers

  32. Understanding poverty Who is in the poverty target? Focus on the working age population (18-59), by activity status Sources: DG EMPL calculation from EU-SILC (2009) -

  33. Understanding poverty What are the jobless households living on? Gross income composition by work intensity of the household Share of jobless households by income quintile Sources: DG EMPL calculation from EU-SILC (2009)

  34. Understanding poverty New indicator of material deprivation for mid-term review of EU target Items beingdiscussed (not adoptedyet) being able to afford: • some new clothes, • two pairs of shoes, • a meal with meat, chicken or fish every second day, • to keep home adequately warm, • to pay for arrears (mortgage/rent, utility bills, hire purchase instalments), • to face unexpected expenses, • a personal car if needed, • a computer with an internet connection, • to replace worn-out furniture, • some money for oneself, • regular leisure activity, • getting-together with friends/relatives for a drink/meal monthly, • one week annual holiday away from home.

  35. Timeliness Financial distress in lower income households Reported financial distress in households by income quartile of household • Share of households experiencing financial difficulties steadily increasing since beginning of 2011 • Two lowest income quartiles: from mid 2008 financial stress is well above long term average • Upper quartile: financial stress remains below long term average

  36. Are people covered, by what benefit? PT Timeliness Number of benefit recipients (unemployment insurance and social assistance) vs number of unemployed in 1000 in 1000 DE NL Number of unemployed ILO Benefitsrecipients (UB I + UB II) Social assistance recip U benef recip Number of unemployed ILO Social assistance recipients Disability recipients (left axis) Shorttimework in 1000 Substitution: decrease in unemployment benefits increase in social assistance: NL, SE, HU, EE, CZ Combined pressure on safety nets in SI, IE Downward trends in social benefit recipients in line with unemployment trend in DE PT: Number of recipients UB/SA decreasing even through unemployment continue to increase – gap in coverage rising Number of unemployed ILO Social assistance/integration income beneficiaries ? Disability benefits (Unempl+social u) benefits 36 Sources: data on number of unemployed from Eurostat (ILO definition; thousands of persons, seasonally adjusted); data on number of benefit recipients collected through the SPC questionnaire.

  37. Inclusive growth? Economic and employment growth, jobless households and in-work poverty

  38. Inclusive growth? Declining wage share Germany, France, Italy and Spain EU-15 and the US 38

  39. Inclusive labour market? Labour market polarisation Before the crisis More jobs created in low and high wages segments Source: Eurostat EU LFS, Fernández-Macías (2010) Source: Eurostat EU LFS, Fernández-Macías (2010) During the crisis More jobs lost in the middle wages segments Source: Eurofound, ESDE

  40. Inclusive labour market? Segmentation: are temporary contract stepping stones or dead ends? • Austria • Mainly voluntary • Stepping stones • Low wage penalty • Spain and Poland • Mainly involuntary • Low probability to move to a better job • High wage penalty Source: Eurostat EU LFS 2010, RWI study based on SILC, DG EMPL calculations on SES 2006 40

  41. Inclusive labour market? Drivers of in-work poverty Relative importance of factors for in-work poverty Labour market reasons for in-work poverty: - Low participation, low work intensity (DE) - Low wages (LV) Redistribution also matters: - benefits do not always compensate for cost of a child (ES) Source: DG EMPL calculations based on EU SILC 2009

  42. Policy response? Redistributive role of social transfers: room for efficiency gains Povertyreduction impact of social transfersdepends on size and design Potential for efficiency gains Efficiency not a direct function of the level of targeting of cash transfers

  43. Policy response? Modeling: Redistributive impact of in-kind services Beyond disposable income inequality: in-kind benefits reduce inequality further by one-fifth Education, training, healthcare is also investment Distribution of in-kindbenefitsbyquintiles • Source: ESDE (2011)

  44. Policy response? Microsimulation: Impact of austerity measures Estimated impact of austerity measures on households by income quintile: changes to income components and VAT increases • Measures affecting disposable income of households have been progressive in Greece, regressive in Portugal and relatively neutral in Estonia • Taking VAT increase into account, the picture especially changes for Greece, making austeritymeasures less progressive • The effect of the crisis itself on household income, potentially very significant and regressive, is not represented in the graphs • Source: Sutherland et al, 2011

  45. Stabilizing the economy Automatic stabilizers and stimulus helped sustaining gross household disposable income – but not in all countries Changes in grosshouseholddisposableincome (GHDI) and in social spending % changes over 2 periods (2007/2009 and 2009/2012 – projections) Despite large economicshocks automaticstabilisershelpedsustaininghouseholdincomes in Denmark and Germany But not in Italy and Greece, where the impact of budgetarycutsafter 2010 isalso visible Social spending Social spending Social spending GHDI GHDI GHDI Social spending GHDI Source: European National Accounts

  46. Stabilizing the economy What would have happened with constant social benefits and taxes Impact of automatic stabilizers and stimulus measures –% changes in GDHI (household income) 2007-2009 Source: Jenkins, Bardolini et al., 2011 Estimates for Greece refer to one year change, 2007-8, only. 46

  47. Employment vs. size of the welfare state Social spending vs. Economic efficiency? Countries with relatively high social protection expenditure are not necessarily those with the lowest employment rates (data: average 1995 – 2010) 47 Source: Eurostat

  48. Deficit vs. size of the welfare state Social spending vs. Economic efficiency? Countries with relatively high social protection expenditure are not necessarily those with the highest budget deficits (data: average 1995 – 2010) 48 Source: Eurostat

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