1. Measuring poverty and social exclusion in support of policy making
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?3

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
Social policy is a shared competence of the Member States and of the EU, and its main instruments (e.g. social protection) are in the hands of Member States. Over the years, a number of legal and financial instruments became available at EU level. The laws on social and employment standards, the anti-discrimination directives, the Charter of fundamental rights as well as the EU funds (the ESF, the European Globalisation Adjustment Fund, or PROGRESS) have contributed to the reinforcement of the social dimension of the EU.
In this context, the fight against poverty grew more prominent. Important steps included the adoption of a common definition of poverty in 1975, which reflected, at that time, a convergence of views among Member States on the nature of the phenomenon they had to fight. Between 1975 and 1993, successive anti-poverty programs focused mainly on advancing research in the field and on the exchange of good practices. At the end of the 1990s, the Amsterdam and Nice treaties provided the basis for policy coordination in the field of employment (through the definition of EU guidelines) and of social policies.
In March 2000, in Lisbon, EU heads of State and governments concluded that “The number of people living below the poverty line and in social exclusion in the Union is unacceptable. Steps must be taken to make a decisive impact on the eradication of poverty by setting adequate targets to be agreed by the Council by the end of the year.”
Since then, Member States have worked together and shared experiences within the Open Method of Coordination (OMC). They have defined common objectives and agreed on indicators to orient their policies for social inclusion and the modernisation of their social protection systems. The Social OMC has supported mutual learning, promoted stakeholders’ involvement, and deepened the understanding of old and new social risks.
However, the commitment to set adequate targets was not acted upon for a decade, and the reference indicators show that until 2008 – despite economic and employment growth - on average, poverty in Europe was not reduced.

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
Variations in
1975
2000
Today
GDP per capita (PPS)
92(56) to 113
70 to 116 (212)
45 to 131 (271)
Unemployment
2.9% to 9.6%
2.3% to 13.8%
4.3% to 20.4%
Gini coefficient
24 to 36
22 to 36
24 to 37
Social spending (% of GDP)
21% to 29% (IE, IT missing)
22% to 31%
11% to 30%

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)
Dimension
Indicators
Income
At risk of poverty rate (60% of median) + thresholds
Persistent at risk of poverty rate (2 out of 3 years in poverty)
Poverty gap: Distance between median income of the poor and the poverty threshold
Anchored poverty risk
Material deprivation
Severe material deprivation rate: missing 4 out of 9 items
Material deprivation depth
Housing deprivation, cost, overcrowding
Labour
Long term unemployment rate
Population living in jobless households
In-work poverty
Education
Early school leavers
Low educational attainment
Low reading literacy performance

11. Indicators of social inclusion (Continued)
Dimension
Indicators
Health
Healthy life expectancy by Socio-economic status
Unmet need for health care
Social protection
Social protection expenditure, current and projected
Social protection expenditure, by function
Risk of poverty before social transfers (poverty reduction impact of social transfers)
Specific groups
Child deprivation
Employment gap of migrants

12. Statistics: EU-SILC, HBS, ESSPROS
EU harmonised Survey on Income and Living Conditions
Yearly
EU Regulation: legally binding since 2005
Output based harmonisation: detailed definition of variables
Quality criteria (achieved sample size)
Panel dimension (rotating panel)
Modules on specific topics (housing, social participation, etc)
Household budget 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 exclusion14

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. 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
Risk of poverty or social exclusion
115 million
23%
JLH
10%
AROP
16%
RISK OF POVERTY
Headline indicator at EU level to measure poverty since more than 10y.
It is a relative definition of poverty
It reflects closely the 1975 definition of the European Copuncil, defining as poor thos whose resources are so small as to exclude the from the minimum acceptable way of life of the Member State in which they live.
AROP : 16% of the EU
FROM 9% in CZ TO 20-21% in LV, RO, BG, LT
SMD
Living conditions constrained by a lack of resources,
8.1% of the EU population ; from 1% in LU,SE to 35% in BG
LWI
10% in the EU
From 5% in LU to 12% in LV and even reached 20% in IE in 2009)
SMD 8%
Source: Eurostat EU SILC 2010

17. Facets of poverty and social exclusion
Latvia
AROPE 38 %
Italy
AROPE 24%
Ireland
AROPE 26%
JLH
12%
SMD 6%
JLH
10%
SMD
27%
AROP
21%
AROP
18%
AROP
15%
JLH
20%
SMD 7%
Relative poverty – reflects inequalities
Severe material deprivation reletes to GDP per capita, poor material conditions, especially in new Member States
JLH – benefit dependency, mainly in countries with well developped welfare systems (NL, DE)
Labour market exclusion prevails
Deprivation prevails
Relative poverty prevails
At Risk of Poverty
Severe Material Deprivation
Jobless Households
Source: Eurostat EU SILC 2010 17 17

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**
Source: ECFIN calculation
* 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 19

20. 3. Implementing Europe 2020 3a. Governance and monitoring framework

21. 1) The European Semester
Commission MS
Annual Growth Survey
Social Protection Committee
Employment Committee
Draft Joint Employment Report
SPC Annual Report
Joint Employment Report
(IG 10)
Spring European Council
Policy guidance MS
January March May June
EPSCO
Debate / orientations
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 2012 AGS priorities
Prerequisites for Growth:
A rigorous fiscal consolidation
Correcting macro economic imbalances
Stability of 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
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. 2012 in detail: … protecting the vulnerable
3) Europe 2020 priorities
2012 in detail: … protecting the vulnerable
Further improve the effectiveness of social protection systems
Implement active inclusion policies
Ensure access to services to support integration to the labour market and society
Monitor distributional impact of reforms
Pay attention to the needs of the most vulnerable in any tax shift 23 23

24. National Social Reports (At the same time as NRPs)
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. Monitoring Europe 2020 and the social OMC
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 2020 3b. More country specific analysis26

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 27

28. Child poverty 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
Diagnosis of main drivers by country
Altogether, children in Europe are at greater risk of poverty or social exclusion than the rest of the population
The main drivers of child poverty identified are
- the low participation of parents in the labour market,
- in-work poverty
- the weakness of social transfers in compensating the cost of raising a child.
The analysis identifies three groups of countries depending on which of these factors prevail in each country.
- A first group gathers countries performing well on all fronts, DIANOSIS = Maintain the balance between income support and work and family reconciliation
- a second group with countries facing high levels of children growing up in jobless households, DIANOSIS = Enhance access to quality jobs for those parents furthest away from the labour market
- a third group of countries where the poverty reduction impact of social transfers is low and in-work poverty is high, either due to low wages or insufficient labour market participation within the households. DIANOSIS = Support families' income, both in and out of work, and facilitate access to quality jobs, especially for second earners.
Note: LU and MT have not been introduced in the classes as they appear as outliers.
Countries with names in brackets (BE) are to be considered as on the edge of the group.
The right hand side arrows indicate the national recent trend in risk of poverty or social exclusion of children. A decreasing trend is to be considered as a positive outcome and is colored in green.
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)
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 base30

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. Who is in the poverty target?
Understanding poverty
Who is in the poverty target?
Focus on the working age population (18-59), by activity status
Within the population at risk of poverty
or social exclusion, four adults in
ten of those aged are inactive
but not retired, compared to one in
five within the whole population, with
the share being significantly higher
than in the population as a whole
in Denmark (61 % vs. 18 %), Sweden
(43 % vs. 14 %), the United Kingdom,
France, and Finland (see Chart 14).
Sources: DG EMPL calculation from EU-SILC (2009) -

33. What are the jobless households living on?
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
joblessness is higher for people living in lowest income quintiles
jobless households more benefit dependants
Reading note: incomes from work represent 17% of the gross income of the household for people living in low work intensity households and 112% of the gross income of the rest of the population. Old age - related incomes (pensions, old age benefits, survivor's benefit) represent 30% of the gross income of the household of people living in low work intensity households and 5% of the income of the rest of the population. For both populations (living or not living in a low work intensity household), the sum of the components is equal to 100%
Sources: DG EMPL calculation from EU-SILC (2009)

34. New indicator of material deprivation for mid-term review of EU target
Understanding poverty
New indicator of material deprivation for mid-term review of EU target
Items being discussed (not adopted yet) 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. Financial distress in lower income households
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
Analysis based on consumer surveys
The share of households experiencing financial difficulties across the EU has been steadily increasing since the beginning of 2011, particularly among the lower income quartile groups, while people running into debt are back up to around levels observed in late There is, nevertheless, quite marked divergence in developments in aggregate household financial situations across countries.
Focusing on developments in financial distress for households in different income quartiles, there has been a noticeable recent rise in financial difficulties across the two lower income groups since spring 2011, which may now also be starting to show for the upper income quartiles. Nevertheless, for the upper quartile the level of financial stress remains below its long term average, while for all other groups it is currently well above their respective long term averages.

36. Are people covered, by what benefit?
Timeliness
Are people covered, by what benefit?
Number of benefit recipients (unemployment insurance and social assistance) vs number of unemployed
in 1000
in 1000 DE NL
Number of unemployed ILO
Benefits recipients (UB I + UB II)
Social assistance recip
U benef recip
Number of unemployed ILO
Social assistance recipients
Disability recipients (left axis)
Short time work PT
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. 36

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

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

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

40. Segmentation: are temporary contract stepping stones or dead ends?
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. Drivers of in-work poverty
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. Redistributive role of social transfers: room for efficiency gains
Policy response?
Redistributive role of social transfers: room for efficiency gains
Social protection benefits expenditure (excluding pensions) and poverty reduction impact of social transfers
Source: Eurostat, EU-SILC (income year 2009) and ESSPROS 2009
Poverty reduction impact of social transfers depends on size and design
Potential for efficiency gains
Efficiency not a direct function of the level of targeting of cash transfers

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

44. Microsimulation: Impact of austerity measures
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 austerity measures 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 gross household disposable income (GHDI) and in social spending
% changes over 2 periods (2007/2009 and 2009/2012 – projections)
Despite large economic shocks
automatic stabilisers helped sustaining household incomes in Denmark and Germany
But not in Italy and Greece, where the impact of budgetary cuts after 2010 is also visible
Social spending
Social spending
Social spending
GHDI
GHDI
GHDI
Social spending
GHDI
Source: European National Accounts

46. What would have happened with constant social benefits and taxes
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)
Source: Jenkins, Bardolini et al., 2011
Estimates for Greece refer to one year change, , only. 46

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