Determinants of child poverty and policy responses in the European Union András Gábos TÁRKI Social Research Institute 8th ESPAnet Conference 2010 Social Policy and the Global Crisis: Consequences and Responses Stream 2 Poverty and Social Exclusion Budapest, 2-4 September 2010

The „Study on child poverty” project Commissioned by: DG Employment of the European Commission, Unit E2 Consortium: Tárki Social Research Institute, Budapest Applica sprl, Brussels Steering Committee: Terry Ward (chair)Applica Michael F. FörsterOECD Hugh FrazerNational Univ. of Ireland Petra HoelscherUNICEF Eric MarlierCEPS/INSTEAD Holly SutherlandUniversity of Essex István György Tóth TÁRKI

Tasks within the project Task 1. „An in-depth empirical analysis of child poverty and the related key challenges for each Member State, starting from the analytical framework developed up by the EU Task-Force report.” Task 2. „An assessment of the effectiveness of policies for combating child poverty and promoting social inclusion among children and the identification of policy mixes that seem to be most effective in tackling the specific factors underlying child poverty.” Task 3. Recommendations for a limited set of child well-being indicators

Aim and methodology Aim of the paper: to provide international benchmarking and to identify key challenges for each Member State to assist national policy practices Methodology (building on EU Task-Force 2008) To assess the performance of countries in the field of child poverty relative to the national average/adult population the EU-average Four dimensions Child poverty risk outcomes Joblessness In-work poverty Impact of social transfers

Poverty among children, in general, is higher than that of the overall population Every fifth child is at-risk- of-poverty in the EU-27 Child poverty is specifically high in RO Much higher than the population average: HU, also in CZ, LU, RO, SK Lower than the population average in: DK, EE, CY, FI The severity of poverty is more similar to the population as a whole Relatively high in: BG, RO Relatively low in: FR, CY, NL At-risk-of-poverty rates: overall population and children, EU-27, 2008 Source: EUROSTAT

Child poverty outcomes – country clusters Indicators included in this task: at-risk-of-poverty rate relative median poverty gap both based on EU-SILC z-scores based on the difference between the national figure for children and the overall national figure the difference between the national figure and the EU average for children z-scores added together, without weighting Six clusters to maximise the “steps” between the groups to minimise the variations within the groups Good performers: Northern countries, DK, CY, FR, SI Bad outcomes: BG, RO, Southern countries, PL, LT

Almost 1 children in 10 in the EU lives in jobless households Reasons for joblessness can be found on both the supply and demand side Lack of or inadequate human capital of parents Counter-incentives of income supports Shortage of childcare Regional and/or ethnic segregation Children in jobless households are likely to live in lone parent families: BE, EE, IE and the UK Children in large families are affected in HU Share of children (0-17) and adults (18-59 – not students) living in jobless households, EU-27*, 2008 (%) Source: EUROSTAT (EU-LFS) *Data for Sweden are from EU-SILC (WI=0)

Joblessness – country clusters Input indicators : share of children in jobless households based on EU-LFS z-scores based on the difference between the national figure for children and the overall national figure the difference between the national figure for children and the EU average for children z-scores added together, without weighting Six clusters to maximise the “steps” between the groups to minimise the variations within the groups Good performers: Northern countries, SI, LU, EL, DK, FI Bad outcomes: UK, HU, IE

In-work poverty Similar share of children in in-work (WI>=0.50) households across countries Large variation in the risk of poverty High in RO, Southern countries, Baltic States, LU, PL Reasons behind Low wages Not full participation in the labour market Only one parent in employment Part-time work Shortage of childcare Social norms Source: own calculations based on EU-SILC 2008 *No data available for Malta. Data for France are from 2007 In-work (WI>=0.50) poverty in the EU-27*, 2008

In-work poverty – country clusters Input indicators: in-work poverty: at-risk-of- poverty rate for those living in hhs with WI>=0.50, based on EU-SILC z-scores based on the difference between the national figure for children and the overall national figure the difference between the national figure for children and the EU average for children z-scores added together, without weighting Six clusters to maximise the “steps” between the groups to minimise the variations within the groups Good performers: DK, SE, FI, SI, CZ, DE Bad outcomes: RO, ES, IT

Social transfers reduce the proportion of children at risk of poverty by 38% in the EU as a whole The effectiveness of transfers reflects both the scale of expenditure level and the extent of targeting Highest impact in: DK, FI, SE, as well as in DE, FR, HU, AT, SI Lowest: EL, ES, IT Serious limitations of the EU-SILC No behavioural responses are considered No full account of taxes and social contributions No account of transfers via the tax system Hard to identify child- contingent payments Effects are likely to be over- estimated Source: EUROSTAT, own calculations based on EU-SILC 2008 (version ). The effectiveness of social transfers (excl. pensions), EU-27, 2008

Impact of social transfers Input indicators: at-risk-of poverty rate after and before social tranfers (excl. pensions), poverty reduction effect of transfers based on EU-SILC z-scores based on the difference between the national figure for children and the EU average for children z-scores added together, without weighting Six clusters to maximise the “steps” between the groups to minimise the variations within the groups Good performers: Northern countries, AT, HU, CZ, IE Bad outcomes: BG, RO, Southern countries, Baltic States

Relative outcomes of countries related to child poverty risk and main determinants Group A: good performers in all dimensions Child poverty risk outcomesJoblessness In-work poverty Impact of social tr. Group A DK+ + + EE+ + +– FR+++ CY – NL+ + AT SI FI SE

Determinants and policies in place in Group A countries High levels of economic activity and employment generally – high share of dual earner families in most countries The Netherlands: the second earner being in part-time job is predominant Austria: the single earner model is dominant, high earnings and income support compensating for the lack of a second earner; the model featuring one full-time earner and a part-time earner is also considerable Extensive and affordable childcare provision Cyprus: informal childcare arrangements Adequate income support DK, SE, FI: high level of universal income support and extensive support for parents to enter/re-enter employment Slovenia: high level of support targeted on low-income families in SI Income support narrowly targeted, focus on maternity benefits in France

Relative outcomes of countries related to child poverty risk and main determinants Child poverty risk outcomesJoblessness In-work poverty Impact of social tr. Group B BE+–+ CZ+– DE+ – IE+– HU–– BG– – ––+ Group B: joblessness is key challenge

Determinants and policies in place in Group B countries Large number of children living with lone parents (BE, DE, IE) Children with migrant background are at high risk and count for a large share of those at risk of poverty in most of these countries Relatively effective income support Inadequate childcare provision – limited in number of place, opening hours and affordability Low level of support to help women with children into employment Inflexible working hours

Relative outcomes of countries related to child poverty risk and main determinants Child poverty risk outcomesJoblessness In-work poverty Impact of social tr. Group C LV––– LT– – – SK–––+ UK–– – ––+ RO– – –– – Group C: relatively bad performance in all dimensions

Determinants and policies in place in Group C countries The cluster is fairly unstable across the period Poor outcomes are rooted in the inadequate labour market participation of families with children inadequate income support to prevent children to a large extent from staying poor SK, UK: better outcomes compared to the others, mostly due to relatively effective benefits

Relative outcomes of countries related to child poverty risk and main determinants Child poverty risk outcomesJoblessness In-work poverty Impact of social tr. Group D EL– + + +– – – – ES– +– – – IT– + – – –– LU–+ + +– + PL– + – PT– + – Group D: in-work poverty is key challenge

Determinants and policies in place in Group D countries Low levels of income support, especially for older children Support narrowly targeted – in PL on very poorest or lone parents (6% of children), in EL on large families (10%) Lack of childcare provision Traditional reliance on extended family for childcare in IT, ES+EL Employment rates low generally and support policies limited; fixed term jobs common except in IT No minimum wages in EL or IT and set at low level in PL But in ES especially, signs of change – reduction in fixed-term jobs, rise in minimum wages, new child tax allowances

Determinants and policies in place in Hungary Key challenge: large number of children in jobless and low work intensity households Main characteristics of the poverty profile: large families (two parents with 3+ children) are affected most the role of education is very strong the settlement gradient exists important regional inequalities strong effect of the ethnic background Income supports are effective in a cross-EU comparison There are important obstacles for parents to enter the labour market: high costs of searching jobs, regionally unequal demand, the lack of adequate human capital, inadequate childcare opportunities, counter- incentive effect of income supports

How to go ahead with the analysis? To extend the analysis using multilevel modelling: to take into account additional dimensions on the explanatory side at individual (hh) level (hh composition, socio-economic status of parents, settlement, migrant status) national level institutional variables to better differentiate between countries in terms of policy effectiveness and efficiency Microsimulation

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