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- 1. Conference on deep poverty in Hungary and about the policy elements of a possible aid reform -Budapest 29 March 2012- Egbert Holthuis, DG Employment, Social Affairs & Inclusion Social Europe
- 2. Topics to be raised •Social Policy reforms in the crisis and beyond • Some background information on poverty and exclusion • Europe 2020 Strategy • National and EU targets • Measures to tackle poverty and inequality • Cohesion policy •EU policy on Roma integration •Concluding remarks Social Europe
- 3. At-risk-of-poverty rate: total, by age and by employment status; EU-27 The risk of poverty threshold is set at 60 % of the national median equivalised disposable income (after social transfers). % 50 45 40 35 30 25 20 15 10 5 0 2005 2006 2007 2008 2009 2010 All Children (less than 18 years) Elderly (65+) Employed Unemployed Source: Eurostat (November 2011) Social Europe
- 4. Inequality's many facets EU-27 (now) EC-9 (mid-1970s) GDP/head (PPS EU= 100) 45 to 133 92 to 113 (IE 56) Unemployment 4.0% to 23.3% 2.9% to 9.6% Gini 24 to 37 24 to 36 21% to 29% Soc. exp. (% of GDP) 11% to 30% (excluding IE and IT) • Education • early school-leavers: range from 4.9% (CZ) to 36.9% (MT); in ES 10 pp more males than females • Health • Unmet need for health-care: 5% in lowest quintile, 0.3% in top quintile • Life expectancy of tertiary-educated CZ male: 80 years against 62 years for CZ male with basic education Social Europe
- 5. EU response to poverty and exclusion Social Europe
- 6. Europe 2020: integrated strategy for smart, sustainable and inclusive growth Three EU targets relating to inclusive growth: •Raising employment rate (20-64 age group) to 75% •At least 20 million fewer people at risk of poverty or social exclusion •< 10% early school-leavers & at least 40% with tertiary education qualification Supported by three flagship initiatives: •Agenda for New Skills and Jobs •Youth on the Move •European Platform against Poverty and Social Exclusion (child poverty recommendation, social experimentation etc.) Social Europe
- 7. Annual growth survey 2012 in detail: protecting the vulnerable • Continue improving the effectiveness of social protection systems • Implement active inclusion policies • Ensure access to services to support integration into the labour market and society • Monitor distributional impact of reforms • Pay attention to the needs of the most vulnerable in any tax shift Social Europe
- 8. Discrepancy between EU headline and national targets: Employment Now: North-west versus the rest, EU-27 average: 69% Target: raise employment to 75% National commitments: 74% Social Europe
- 9. Poverty and exclusion Now: South/East divide, 115 million at risk of poverty or social exclusion Target: at least 20 million National commitments: 12 million Social Europe
- 10. Addressing poverty and inequality's causes or its consequences? Preventive policies •"Social investment" – education, health, social minimum •Impact on original income distribution • Labour market policy • Equal opportunities policy Remediation •Much spending (e.g. on health) is a consequence •Need to smoothe out inequality: taxation, redistribution Social Europe
- 11. Addressing the causes of inequality – social investment, in-kind services • Beyond disposable Distribution of in-kind benefits by quintiles income inequality: in-kind benefits reduce inequality by a further fifth • Education, training and health-care are also investments • Source: ESDE (2011) Social Europe
- 12. Addressing the causes: labour market polarisation Net job creation 1998-2007 Net job creation 2008q2-2010q2 9000 6000 8000 5000 7000 4000 6000 3000 5000 2000 4000 1000 3000 0 2000 -1000 1000 -2000 0 -3000 Source: Eurostat EU LFS, Fernández-Macías (2010) Source: Eurostat EU LFS, Fernández-Macías (2010) Low High Low High wages wages wages wages Before the crisis During the crisis More jobs created in low- More jobs lost in middle- and high-wage segments wage segments Source: Eurofound, ESDE Social Europe
- 13. Addressing the causes: in-work poverty Relative importance of factors for in- work poverty Labour market reasons for in-work poverty: - Low wages (LV) - Low participation, low work intensity (DE) Redistribution also matters: - benefits do not always compensate for cost of a child (ES) Source: DG EMPL calculations based on EU SILC 2009 Social Europe
- 14. Addressing more effectively – taxes and transfers • Correlation between social protection expenditure and redistributive effect of taxes and transfers • Similar expenditure can go with big differences in inequality reduction Social Europe
- 15. Cohesion policy after 2014 – potentially greater impact on inequality • Alignment on Europe 2020, including on: • Employment & labour mobility • Social inclusion & combating poverty • Education, skills & lifelong learning • Major role for European Social Fund: • Minimum 25% of cohesion funds • Social inclusion minimum 20% of ESF • More effective: closer focus on results • More efficient: simplification for beneficiaries Social Europe
- 16. EU policy on Roma integration • MS prepared National Roma Integration Strategies (March ’12) • Commission will make assessment to be published in Communication (Spring 2012) • MS asked to put in place national monitoring • Commission will monitor and report on progress Social Europe
- 17. EU policy on Roma integration: some first conclusions from NRIS • Some MS target specifically Roma others opt for broader social inclusion approach with explicit reference on Roma inclusion • Most NRIS cover 4 priorities: employment, education, health and housing • Several MS address human rights, anti-discrimination • Most MS do not reflect territorial targeting • MS with big Roma minorities have developed more substantial strategies Social Europe
- 18. EU policy on Roma integration: some first conclusions from NRIS (2) • Significant employment gap (non) Roma • Significant gender differences • Youth employment critical issue • Disadvantage of lower skills and less formal education (low paid, atypical jobs) • Measures often not specified or clear on funding and timing • Many MS consulted stakeholders (incl. civil society) Social Europe
- 19. Some concluding remarks • Employment and social situation still very serious with high level of long term unemployment and many youth without jobs with high risk of marginalisation and inequality • We need to consider all options to mitigate the impact of the crisis on the life of citizens • Fiscal consolidation needs to be growth friendly and smart and short term focus needs to be reconciled with longer term priorities within notion “social investments” • Investing in education, social inclusion and active ageing are sources of growth and can avoid larger economic/social costs in future Social Europe
- 20. Some concluding remarks (2) • Because of limited fiscal space we need to ensure cost- effective measures and active inclusion strategies • Poverty has a strong labour market dimension and inequalities link with various social issues • To tackle them we need a range of policies that address both the causes and the consequences: • Social investment in health, education and lifelong learning to create a level playing field • Inclusive labour markets • Important role for tax systems • Transparency, shared responsibility based on full involvement of stakeholders Social Europe
- 21. Thank you for your attention! Further information: Europe 2020 http://ec.europa.eu/news/economy/index_de.htm Social protection & social inclusion http://ec.europa.eu/social/main.jsp?langId=en&catId=750 Social Europe
Notes de l'éditeur
- When we speak of inequality, the focus is usually on income. This has some relevance – but it is not the only factor . There are also social gradients in health, education and employment . Various areas of life are inter - related and call for policy intervention . As Amartya Sen said, h aving a lower income than others, &quot; Relative deprivation in the space of incomes can yield absolute deprivation in the space of capabilities . &quot; And th e opposite is certainly true too : deprivation in capabilities, because of low quality education for instance , will result in deprivation in income. For example, disadvantages in childhood cast a long shadow over the individual's whole life. This is why we should be concerned about early childhood education - and about early school-leaving, as the slide shows - and the dramatic rate of youth unemployment in the EU today . Youth unemployment rates that range from 8% in Austria to almost 50% in Spain and Greece result in inequality in opportunities on an unacceptable scale. National averages also conceal huge disparities between regions within the Member States. Just compare Alto Adige and Calabria, or Catalonia and the South of Spain. In some parts of Europe a whole generation is in danger – while the elderly have been relatively well protected during the crisis. What is more, the various enlargement s have made the EU more diverse . This is reflected in wider differences in various social variables.
- After a few general remarks , I want to say something about the EU 's initiatives with an impact on inequalit y .
- (Education target is formally classified under smart growth.)
- Moreover, a major new point in the 2012 Annual Growth Survey involves protecting the vulnerable… Country - specific recommendations to be proposed soon…
- The second challenge involves the fact that the Member States sometimes lack ambition in action to implement the Europe 2020 Strategy, which could foster inclusion and help build a more equal society . As you see, the employment situation currently varies widely across the EU. So while the Europe 2020 headline target is to achieve a 75% employment rate, it is natural that the Member States set their own national targets . These national employment targets vary from 62.9 % in Malta to 80 % or over in Denmark and Sweden . But meeting the 75% EU headline target will call for a bigger commitment to substantial reform if we are serious about getting close to it. At present the figures do not add up. If all Member States met their national targets that they have set in their national reform programmes, the EU as a whole would still fall short of the 75% target by 1.0-1.3 percentage points. What is more , the crisis has not made it easier. Developments in 2011 have not brought us closer to our aim of getting more Europeans into employment. With the recovery stalling and overall employment growth only marginal during the first half of the year, the EU-27 employment rate for 2011 is likely to be only slightly above the 2010 level of 68.6% and should still be well below its pre-crisis high of 70.3%. So the challenge is there to get another 17.6 million people into employment between now and 2020.
- The picture for tackling poverty and social exclusion is even grimmer . The Europe 2020 headline target involves reducing the number of people at risk of poverty or social exclusion by 20 million by 2020 -- i.e. bringing it down from 23% of the EU population to 19%. T he variation is even greater here than in employment : t he percentage of the population at risk of poverty or exclusion is over 50% in three regions in Bulgaria and is 49% in Sicily – while it is 10% or l ess in Åland, Trentino, Navarre and Prague. Some Member States' n ational targets are not directly comparable with th e EU 's – and add up to a better life for only around 12 million people . So we will have to spur on the Member States to be more ambitious.
- The current period of fiscal consolidation calls for a stocktaking of our policies. Our policy instruments often help both to prevent inequalit y increasing too much at the start and to remedy existing inequalit ies . What we spend on education and health and on guaranteeing a social minimum are is social investment – investment in human capital that can drive growth and help reduce inequalit y . Equal opportunities policy can contribute to reducing inequality significantly: for example, empowering women and reducing the gender pay and employment gaps have had a great impact, as the OECD has shown. There is inequality in opportunity as a result of persistent discrimination. In suburbs in France, for instance, the youth unemployment rate is close to 40% for young males, which is much higher than the national average of 23.8%. Discrimination on recruitment, due to stereotypes and prejudice linked to ethnic origin and place of residence, seems to play a big role. Dealing with the consequences of inequalit y – such as poor health or anti-social behaviour -- entails expenditure that could have been spent better if there was less inequalit y . The tax and redistributive system plays a big part in reducing original income inequality.
- Education, health - care and other in-kind benefits result in significant transfers of consumption opportunities . However, st andard measurements of disposable income inequality do not account for the impact of in-kind benefits . Th ese are considerable - - g overnments spend a bout a s much on p ublic social services (education, health, care services, etc.) as they do on cash benefits – and this expenditure has an impact – they reduce disposable income inequality by about one fifth as measured by Gini . (ESDE, 2011 ) Politicans should bear in mind the importance of in-kind benefits when designing austerity measures … especially since in-kind benefits are a major investment in human capital, and can reduce persisten t inequalitie s, quite apart from their actual redistributive impact ,
- Leaving in-kind benefits aside, the labour market also plays a big role in efforts to address the causes of inequalit y . Wage inequalit y ha s been increasing fast , and has only been offset in part by the tax and redistributive system, according to the OECD. There is a limit to the equalisation effect of the tax and redistribution system. We may have to rely to a greater extent on influencing the primary allocation of income if we want to limit inequalit y . The graph illustrates this. I n the decade before the crisis, most jobs created were either low pa i d or highly paid. (The graph actually shows net job creation -- which is the difference between the number of jobs created and the number of jobs lost – expressed in thousands of jobs) Conversely, during the crisis, most of the jobs destroyed were middle-wage jobs. The crisis has exacerbated the polarisation that was occurring before the crisis . This polarisation is one of the main factors that has led to the increase in income inequality observed in a number of Member States over the past decad e. The conclusion is that we need more quality employment . Here the social partners' willingness to cooperate is crucial. For example, it was encouraging to see the c ollective agreement for Danish industry adopted recently : the workers accepted a loss in real wage s in exchange for an increase in training and jobs . Better cooperation between the social partners and a greater willing ness to compromise can help bring adjustment through in-work flexibility rather than dismissals . (This slide is based on Eurofound’s John Hurley and Donald Storrie's analysis of employment changes : they used Stiglitz' s jobs approach – allocated occupations (hundreds of them) to certain wage quintiles, and then monitored employment changes in those sectors.)
- Another example how labour market institutions can help reducing inequality i s dealing with in work poverty . This graph shows the relative importance of the main factors that contribute to in-work poverty. Two factors depend on the labour market : The wages p eople earn are too low (they would not escape poverty even if they worked full - time), the household as a whole does not work enough (e.g. because so me adult members do not work, or work part-time or on temporary contracts for only part of the year) The presence of children is another factor, as in many countries family benefits do not compensate for the cost of a child. So the solutions for in-work poverty can also come partly from the labour market, and partly, from redistribution. Making work pay and reducing the tax wedge on low - wage earners can both foster job creation and increase net earnings of workers. Also, introducing in-work benefits, minimum wages and improving wage-bargaining institutions can help. Just as enabling people to work more – e.g. through pre-school facilities and flexible working arrangements.
- While market income inequality has risen, redistribution through tax/transfers has become less effective in many countries , as the OECD noted in its report &quot; Divided we stand &quot; last December. This is not unavoidable – indeed, there are differences in how efficiently countries reduce original market income inequality through their tax and benefit systems. The existence of efficiency reserves is true even if the tax and transfer systems have objectives other than to reduc e income inequalities… (note: taxes reduce inequality significantly, so the design of the tax system matters. Size of social expenditure matters, but design as well – spending better is as good as spending more…)
- Cohesion policy seeks to achieve convergence and reduc e differences in development between the Member States . However, as you know, the European Social Fund, with a current annual budget of around 10 b illion euros , f inancess upskilling, improving employment conditions, and social inclusion. Each year it helps 9 million people – the vulnerable, the poor and the unemployed . This may well reduce inequality within countries . Last October t he Commission submitted its proposal for Cohesion Policy of the future. It includes a number of points with a potential bearing on inequalit y . First, Cohesion Policy will be aligned on Europe 2020 – and will provide full support for inclusive growth . To ensure this, the ESF should be meaningful . This means it should account for at least a quarter of Cohesion Policy funding , and focus more closely on social inclusion . 20% of its resources are to go towards social inclusion ( up from around 10% now ) . And the money would be spent more effectively and more efficiently.
- We are now living through a time of crisis. Such times call for even greater cohesion and a joint effort from all. In order to contribute to the consolidation effort, people have to feel that their contribution is fair and does not deprive large numbers of people of opportunities : the perception of fairness increases acceptance and ensuring good opportunities for all means better use of our human resources. This will mean more growth in the longer run. We have to do better than we have done so far, also in fairness to the younger generation – and research e.g. from Euromod tells us that we can do better. Inequality is both the result and the cause of various social malfunctions. Inequality is like a virus : it can turn into other types of inequality, and is often transmitted from one generation to the next. We need to address this protean phenomenon through a range of policies : education and training to equip people with the right skills to earn a good living; structural economic policies to remove obstacles so that more people can put their skills to good use; tax and benefit systems to compensate for unequal market outcomes and to support those who cannot work or are not expected to work (pensioners, people on parental, sickness or training leave). The EU seeks to promote better policies in all these areas, including such areas as employment policy, as you have seen earlier - although they are largely a Member State responsibility. What is more, such EU policies as cohesion policy contribute to reducing inequality. Social and territorial cohesion are part of the same thing. It is the responsibility of both national and European politicians to look for solutions that are both effective and fair . And insights from the scientific community , from you, the empirical evidence you produce, are very important in helping us to do our job well.
- We are now living through a time of crisis. Such times call for even greater cohesion and a joint effort from all. In order to contribute to the consolidation effort, people have to feel that their contribution is fair and does not deprive large numbers of people of opportunities : the perception of fairness increases acceptance and ensuring good opportunities for all means better use of our human resources. This will mean more growth in the longer run. We have to do better than we have done so far, also in fairness to the younger generation – and research e.g. from Euromod tells us that we can do better. Inequality is both the result and the cause of various social malfunctions. Inequality is like a virus : it can turn into other types of inequality, and is often transmitted from one generation to the next. We need to address this protean phenomenon through a range of policies : education and training to equip people with the right skills to earn a good living; structural economic policies to remove obstacles so that more people can put their skills to good use; tax and benefit systems to compensate for unequal market outcomes and to support those who cannot work or are not expected to work (pensioners, people on parental, sickness or training leave). The EU seeks to promote better policies in all these areas, including such areas as employment policy, as you have seen earlier - although they are largely a Member State responsibility. What is more, such EU policies as cohesion policy contribute to reducing inequality. Social and territorial cohesion are part of the same thing. It is the responsibility of both national and European politicians to look for solutions that are both effective and fair . And insights from the scientific community , from you, the empirical evidence you produce, are very important in helping us to do our job well.