1. Public policy and European society University of Castellanza
Session 3(b)
Income inequality and poverty
November

2. Gradients of Inequality
Income distributions
Growing inequality
Poverty

3. Defining income Different sources of income Before or after tax
Primary employment
Property income
State transfers
Inputed income (e.g. state education)
Before or after tax
Unit: Individual or household
Sources: surveys, tax returns

4. Income distributions Continuous distribution
Groups are statistical not social
Measuring Income inequality
Gini coefficients
0=complete equality, 1 = complete inequality
Percentages of units (people/ households)
What is the income of (e.g.) the poorest 10%?
Percentages of income
What percentage of units have (e.g.) less than 50% of the average (mean or median) income?

5. Income inequality within EU: Gini coefficients
The Gini coefficient is the simplest measure of inequality of any distribution: 0 means total equality (everybody is equal) and 1 total inequality (1 person has everything). The chart suggests there is little relationship between economic growth, overall wealth and the extent of inequality.

6. Growing inequality in USA
Source: Ryscavage, p59.

7. Gender equality and social inequality….
Source: Ryscavage. P.98.
Chart shows during the 1960s and 1970s this initially means growing equality amongst women (the period when women began to enter the workforce), but then from the late 1970s inequality amongst women increases. By contrast inequality amongst men has been rising since the early 1970s.

8. Growing inequality Globalisation Sectoral and structural change
Falling demand for unskilled labour
Competition for unskilled jobs through outsourcing and/or mass immigration
Sectoral and structural change
Fewer well-paid male manual jobs
Service sector polarised
Mass unemployment
New impact of women’s labour force participation
Earnings inequality within sectors
Privatisation & marketisation
Lower demand for unskilled
Winner takes all job market
Political
Tax cuts and changes benefit rich
Reduced income support and welfare
Decline of trade unions

9. Defining poverty Absolute poverty Relative poverty
Minimum necessary for ‘survival’ (Rowntree, early 20c)
USA poverty line 1963 ‘minimum needed to purchase bare necessities’
BUT social definitions of ‘minimum’ – the same in Calcutta and London, even Warsaw and Dublin?
Relative poverty
Related to ‘normal’ income in society
Frequently linked to notions of social participation and ‘inclusion’
[People are poor who…]lack the resources to obtain the type of diet, participate in the activities and have the living conditions which are customary, or at least widely recognised or approved, in the societies to which they belong (Townsend 1979: 31 quoted in Mingione 1996:8).
This assumes a ‘cut off point’ in income below which people are excluded – which in principle can be empirically located
Assumes social consensus on what is ‘normal’ which may itself be more plausible in relatively egalitarian societies!
The EU has agreed a ‘poverty line’ for each Member State of 60% of the median income in that Member State.
Using this definition we can see how many people are in ‘[relative] poverty’, we can even attempt to abolish poverty.

10. Measuring poverty Headcount Depth of poverty Risk of poverty
Number of people below a specific level of income
Depth of poverty
Attempt to measure how many poor are very poor- i.e. their distance from the poverty line
Risk of poverty
Income poverty does not necessarily mean poor living standards (housing, already purchased consumption goods etc)
Movement in and out of poverty: people may only be ‘poor’ for very short periods

11. Poverty rates in the EU 2003
At risk of poverty rate by country 2003; ‘at risk’ of live in households where household income ‘is below 60% of the national equivalised income.
Source: Joint Report on Social Protection and Social Inclusion 2006; data from Eurostat.

12. ‘At risk thresholds’ EU 25 2005
Illustrative values for a household of two adults with two dependent children (under 14); threshold is 60% of the median income in the specific Member State

13. Poverty in the EU c2007
Children and old people are usually more likely to be in poverty
In EU27 16% of the population are in poverty – ranging from 10% in the Czech Republic and the Netherlands to 21% in Latvia

14. Children in poverty EU 2005
Some countries are much more effective than others at reducing poverty in single parent households
Chart shows % of all children and of children in different households who are ‘at risk’ of poverty in the different EU member states: from Sweden at the lowest to Poland at the highest. Source: Joint Report on Social Inclusion

15. National or European standards?
Taking those with less than one third of average income in EU as in extreme poverty
For total population of EU15 (1997)
Total 2.7%
Luxembourg 0.4%
France 2.1%
Greece 9.4%
EU22 (EU25 less Latvia, Lithuanian and Slovakia)
France 1.9%
Poland 34.6%
Estonia 51.8%
EU27
France 1.8%
Bulgaria 63.6%
Source Schmitter & Bauer (2001)

16. National or European standards?
The median income in Romania is far less than the poverty threshold in most EU states
Source: Fahey (2007) using 2001 EU indicators

17. New welfare state? New demands New risks New state Criticism
Choice - those who have least choice are usually poorest
Empowerment Potentially these can drive up standards and above all reduce ‘capture’ of welfare systems and services by providers (e.g. education, health, social work…)
Recognition of diversity and lifestyle change (e.g. family form)
New risks
Growing changes over life course, especially but not only in employment, often unpredictable
New state
From remedial to enabling (e.g. Life Long Learning)
From passive to active support (e.g. Active Labour Market Policies)
Reconciliation of social diversity with social solidarity (Rights and duties)
Criticism
Risks under-estimating growing income inequality and poverty (e.g. new ‘working poor’ in Germany)
Undermines public ethos in state services