Presentation by Istvan Vanoylos, Policy officer, European Commission, DG EMPL D.2 on the occasion of the EESC hearing on European minimum income and poverty indicators (Brussels, 28 May 2013)

1. Minimum income protection in the
EU: policy developments
DG Employment, Social Affairs
and Inclusion, European
Commission
European Economic and Social
Committee opinion on
minimum income
Brussels, 28 May, 2012

2. The active inclusion approach
Target group
“people excluded from the labour market” [Art, 153(1)(h) of TFEU]: working-age population
suffering from multiple disadvantages (at-risk-of-poverty or social exclusion as a proxy):
approximately 115,5 million people in the EU-27 in 2010)
Strategy:
1)Adequate income support
2)Inclusive labour markets
3)Access to quality services which are essential to supporting active social and economic
inclusion policies: social assistance services; employment and training services; housing support
and social housing; childcare; long-term care services; health services.
Key steps:
- Council Recommendation 92/441/EEC
- Recommandation on Active Inclusion 2008/867/EC
- Council Conclusions 17 December 2008
- European Parliament Resolution – May 2009
- COM (2010) 2020 – Europe 2020 – A strategy for smart, sustainable, and inclusive growth
- COM(2010) 758 – The European Platform against Poverty and Social Exclusion

3. Adequate income support
• The focus of the adequate income support strand in the
active inclusion strategy is on minimum income (MI)
schemes for working-age people across EU Member
States. These schemes provide cash benefits aimed at
ensuring a minimum standard of living to individuals
and their dependants having no, or insufficient, other
means of financial support (including contributory cash
benefits and support from other family members).
• MI schemes are "schemes of last resort". They
provide a safety net, aimed at preventing destitution of
people not eligible for social insurance benefits or
whose entitlement to such benefits has expired. In this
sense, they play an even more important role in a
context of the crisis.

4. Minimum income schemes
• Challenges of minimum income schemes:
• Adequacy
• Coverage
• Non-take up
• Work disincentives
• Various definitions on adequacy:
• European Parliament calls for 60% of the median
household income
• EAPN - Anne van Lanker: Framework Directive on
Minimum Income
• Few Member States have that level; little political
willingness to discuss
• Moving beyond rhetoric; finding a common ground

5. Summary of main policy characteristics on
active inclusion (CSWD 39 of SIP)
First pillar Second pillar Third pillar
Unemployment benefits
first level of safety nets
Other benefits
second level of safety nets
Inclusive labour markets Access to services
Group A
CZ FR NL
AT SI SE
(CY PL)
High coverage (SI)
Medium to high generosity
Long duration (CY)
High disincentives
High coverage
Medium to high generosity
High disincentives (especially for
second earners)
Low segmentation (FR)
High activation (SI, AT)
No low wage trap
High childcare use (NL, AT)
High participation in
educ/training (FR)
Group B
BE DK DE
FI UK
Very high coverage (UK)
High generosity
High disincentives (UK)
Long duration (UK)
High coverage
High generosity
High disincentives (especially for
second earners) UK
High activation (UK)
Low wage trap
High childcare (UK)
Medium participation in
educ/training
Group C
Ireland
Medium coverage?
Very high generosity
High disincentives
High coverage?
Very high generosity
High disincentives
Low activation
Low child care
Low participation in
education and training
Group D
BG HU
IT MT PL
Medium coverage (BG, PL)
Low generosity
Low disincentives
Low coverage (MT, HU)
Low generosity
Low disincentives
High segmentation
Very low activation (IT, MT, PL)
Low wage trap especially for
2nd earner
Low childcare
Low participation in
education and training (PL)
Group E
EE ES LV
LT PT SK
Low coverage
Low generosity
Low disincentives (LT LV)
Low coverage
Low generosity (except LT for
lone parents)
Low disincentives (except for
2nd earners in LT, LV)
High segmentation
High activation
No low wage trap
Medium childcare (SK)
Medium participation in
educ/training (PT ES)
Group F
EL RO
Very low coverage
Very low generosity
Low disincentives
Very low coverage
Very low generosity
Low disincentives
Low activation (RO)
No low wage trap
Low childcare use
Very low participation in
education and training

6. The level of net social assistance in EU-27*
countries – 2010
Single household
Source: Eurostat and OECD
*Cyprus and Italy not included

7. Minimum income in the context of
the Social Investment Package
• The SIP Communication calls on Member States to: "Set
reference budgets that ensure adequate livelihoods by
considering consumption patterns, costs of living, different life
situations and types of households on the basis of the
methodology designed by the Commission in cooperation with
the SPC. Progress should be reflected in the NRPs."
• The Communication further states that "the implementation
of the Active Inclusion Recommendation and Guidance is key
in this respect. Measures must match the need of the
individual rather than be tied to the nature of the benefit or
the “target group” a person happens to be in. One stop shops
and individual contracts are examples of a simplified
approach that matches people's needs. Setting reference
budgets are part of this."

8. Reference budgets
• What are reference budgets?
Reference budgets contain a list of goods and services that a family of a specific size
and composition needs to be able to live at a designated level of wellbeing, along with the
estimated monthly or annual costs thereof. Reference budgets are usually tailor-made –
taking into account the family composition, living environment, age, etc.
Reference budgets better reflect the diversity of consumption patterns and costs of
living across the Member States than minimum incomes set as a certain percentage of
the median household income (such as 50 or 60%).
Reference budgets can be used to more meaningfully compare minimum income
support across Member States
Reference budgets can act as catalysts for policy debates on adequacy of income
support – especially in Member States with very low minimum income support
Reference budgets also face challenges. A 2011 Commission study suggests that
methods based on the mobilisation of experts and focus groups usually produce quite
„generous‟ baskets of goods, leading to thresholds "to be at or above relative poverty
thresholds."
• Possible approaches
• Expert-based (data-driven, looks at consumption patterns)
• Focus group approach (based on self-assessment, negotiation)
• Others

9. Building on accumulated knowledge
• In 2009, in the framework of a project financed by the European
Commission, the European Consumer Debt Network has developed
reference budgets for nine countries (Austria, Belgium, Bulgaria, Spain,
Finland, Germany, Ireland, Sweden, and the UK). See:
www.referencebudgets.eu.
• Peer review in Belgium 2010: Using reference budgets for drawing up
the requirements of a minimum income scheme and assessing
adequacy
(http://ec.europa.eu/social/main.jsp?catId=1024&langId=en)
• In the framework of the FP7-SSH Research Project ImPRovE (Poverty
Reduction in Europe: Social Policy and Innovation - http://improve-
research.eu/) a common methodology for the construction of cross-
nationally comparative reference budgets will be developed and applied
to five EU member states.

10. Suggested policy option for the
implementation of adequate livelihoods
• In the framework of the Social Investment Package: coverage,
take-up, and link to activation (through individual
contracts) and enabling services are also crucial for an
effective strategy, as well as, implementation of one-stop-
shops.
• Designing reference budgets:
• Use of common methodology across all EU-27. This will allow
meaningful comparison at European level.
• Reference budgets should be developed for all Member States. There
have been a number of past initiatives that developed reference budgets
for specific regions, or limited number of countries.
• Reference budgets should focus on adequacy while avoiding creating
disincentives to work. Thus, the role of other benefits (such as
unemployment), as well as, of the minimum wage should be taken into
consideration.
• The adopted methodology should allow for easy and timely updates.
• Reference budget calculators should allow the interested parties to
assess, compare various scenarios on a user friendly interface
(Examples: in Flanders: http://www.menswaardiginkomen.be/index.php,
and in Ireland: http://www.misc.ie/)