Potential of EU-wide research in tackling key societal challenges of EU countries

1. Potential of EU-wide research in tackling key societal challenges of EU countries 08 July 2014 Isabelle Engsted-Maquet DG Employment, Social affairs and Inclusion

2. How can EU-wide comparative research support a job rich and inclusive growth? • Debunkingmythsand bringing new ideas • Increasingvisibilityaccountability • Bringing social monitoring to a par withmacro-economic monitoring • Improving the diagnosis and identifying the policiesthatwork • How canresearch help?

3. 1.a Debunking myths

4. 1.b New ideas: after decades of rising inequality the policy debate took off recently

5. 2. Robust Indicators: accountability • "Whatis not counteddoesn't count" • Agreeing on concepts and measures and the need for comparable statistics • Monitoring Threeexamples: • Europe 2020 target on poverty • EMU scoreboard of employment and social imbalances • Povertymapping and small area estimation • Vulnerable groups (homeless, vulnerablechildren)

6. 31% 11% 8% Benefitdependency issues Deprivation prevails Relative poverty prevails 13% 10% 20% 19% 124 million Europeans living at risk of poverty or social exclusion 25% in 2012 Latvia Risk of poverty or Social exclusion 40% Italy Risk of poverty or Social exclusion 28% Ireland Risk of poverty or Social exclusion 30% At Risk of Poverty Severe Material Deprivation Jobless Households EU-28 23% 16% At risk of poverty 85 Mio Jobless households 38 Mio Severely materially deprived 50 Mio * 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.

7. ETHOS classification to measure homelessness

8. Poverty mapping: SILC vs. Small Area Estimation Romania: estimating poverty at the local level to improve the targetting of EU funds

9. 3. Bringing social monitoring to a par with macro-economic monitoring • Timeliness of social indicators • Social impacts of economicdevelopments and policies • Economic impacts of social developments and policies Twoexamples: • Nowcatsingpoverty and inequalitymeasures • Social EMU

10. Micro-simulation: Nowcasting at-risk of poverty to 2014 Nowcastestimates of at risk of poverty rates, selected Member States, 2011-13 • RED: Eurostat BLUE: Euromodnowcasts Source: Euromod – Employment and Social Situation Quarterly Review – March 2014

11. 3b. Social EMU

12. Social EMU Communication (2/10/2013) • Improve governance to anticipate & address serious employment & social problems in the EMU, taking account of • Social impacts of economicdevelopments and policies • (in macro-economicimbalanceprocedure: MIP scoreboard nowincludespovertyindicators) • Spill overs of serious social problems, alsobeyondborders • In European Semester: the scoreboard (UR, NEETs, GHDI, AROP, S80/S20) • EU level instruments • Better use of EU Funds, Labour mobility, Stepstowards a "fiscal capacity" for more solidarity and financial support… (EMU-UBS?) • Involvement of social partners in EMU governance

13. Growth, employment and household income Real growth in GDP, GDHI and employment growth (y-on-y), EU28 • - Gradual economic recovery • - GDP, employment and household incomes together on the rise first time since 2011 Source: Eurostat, National Accounts in Employment and Social Situation Quarterly Review – March 2014

14. Gross household income started declining, automatic stabilisation only in the early phase of crisis Real change in Gross Disposable Household Income by component in the Euro area (year on year; 2000 – 2013) Market incomes (from work and capital) Benefits and taxes GDP growth GHDI growth Source: Eurostat and ECB in Employment and Social Situation Quarterly Review – March 2014

15. Real growth in GHDI – by components • Germany • Spain Source: Eurostat and ECB in Employment and Social Situation Quarterly Review – March 2014

16. Micro-simulation: impact of fiscal consolidation on household incomes Contribution of different austerity measures to change in households incomes, overall (below) and at different points of the income distribution in selected Member States (right) Source: EUROMOD (cumulated impact of austerity measures on households disposable incomes). In Employment and Social Situation Quarterly Review – March 2014

17. Economic impacts of social problems • Unemployment, poverty and inequality undermine growth in the short to long term by • Lower consumption (aggravated by deleveraging need) depresses aggregate demand • Under-utilisation and erosion of human capital affects productivity and competitiveness • Political and confidence effects • Across borders • Through trade • "Contamination" • Undermine the legitimacy of the European project (Vandenbroucke) and capacity of governments to run the necessary reforms to strengthen EU • Undermine confidence and investment Source: Employment and Social Developments in Europe 2013

18. 4. Improving the diagnosis and identifying policies that work EXAMPLE OF ISSUES • Helping people back to work and escapingpoverty • Child poverty: assessing the effectiveness and efficiency of social transfers MAIN ANALYTICAL TOOLS • Comparative analysisbased on macro indicators • Longitudinal analysis: analysing transitions • Models (micro-simulation, typical cases) help assessing the theoretical performance of systems • Counterfactualevaluationmethods

19. 4a. What helps people back to work and escape poverty?

20. Taking up a job helps to get out of poverty… only in half of the cases Source: EU SILC, DG EMPL calculations Transitions 2008-2009 in Employment and Social Developments in Europe 2013

21. Unemployment benefits: better coverage & adequacy associated to higher returns to work Coverage Adequacy Source: Employment and Social Developments in Europe 2013

22. Unemployment Benefit recipients have greater chances to be working the year after, (propensity score matching) Source: Employment and Social Developments in Europe 2013

23. Country Specific Recommendations 2014 Italy Lithuania CSR 3 "Improve coverage and adequacy of unemployment benefits and link them to activation." CSR 4 "Ensure adequate coverage of those most in need and continue to strengthen the links between cash social assistance and activation measures." CSR 5 "Work towards a comprehensive social protection for the unemployed, […]. Strengthen the link between active and passive labour market policies. […] scale-up the pilot social assistance scheme, […] and strengthen the link with activation measures"

24. Counterfactual impact evaluation in Lithuania

25. 4b. Child poverty, effective and efficient social spending

26. What drives child poverty? Profiles of child poverty drivers • -25.4 million children at risk of poverty or social exclusion • -Greaterriskthanadults • -Main drivers: • - in-workpoverty of parents • - insufficient LM participation of parents • - ineffective benefits Source: ESSPROSS 2009, EU-SILC 2010, DG EMPL calculations. In ESSQR – June 2012

27. Assessing the efficiency of social spending: one dimensional approach Source: Employment and Social Developments in Europe 2012

28. Family benefits: An example of a broadened approach of effectiveness and efficiency Source: Employment and Social Developments in Europe 2013

29. Micro-simulation: policy swapping on family support Applying policy rules of 4 countries to Lithuania; design effects matter as much as size effects. Family Benefits & Tax Advantages from EE, HU, SI or CZ applied to Lithuania Source: Salanauskaitė L. and Verbist G.; Euromod working paper series Dec.2011

30. 4. What do we need? • Robust and more timely statistics • Comparable indicators based on common definitions • Monitoring framework and policy models • Reporting and visualisation tools • Link to macro-economic monitoring • Nowcasting • Distributional impacts of economic developments and policies • Better document economic impacts of social developments and policies • Methods and models to assess the effectiveness of policies (micro-simulation, evaluation methods, etc… )

31. 3 Main productshttp://ec.europa.eu/social/main.jsp?langId=en&catId=113 ESDE:Employment and Social Developments in Europe (Annual Review) Content: Key features + Thematics chapters ESSQR:Employment and Social Situation Quarterly Review Content: Recent trends + Special focuses Working papers Methodological papers (e.g. Social expenditure in the crisis, timely monitoring of social trends, etc )

32. Annex: Improving STATISTICS & MODELSTimelinessSILC and other sourcesData on social protection systemsModelling (Euromod)

33. Statistical Priorities and modelling (1) Improvingtimeliness • Improving SILC delivery, especially for materialdeprivation • Addingauxiliary data in LFS (monthlyincome) • Use models to producenowcasts • Use alternative sources: e.g. consumer surveys (financialdistressindicator) Upcoming SILC revision (with European Statisticalsystems) • Improving the measurement of materialdeprivation, • Improvingthe longitudinal component of SILC to better analyse the dynamics of poverty and exclusion • Improve data on access to services to bettermeasure the redistributive impact of in-kindbenefits • Better documentation of indicators

34. Statistical Priorities and modelling (2) Data on social protection systems • ESSPROS: Good identification of in-kindbenefits, means-testedbenefits, net expenditure • Data on benefitrecipients (Coverage rates, Take-up rates, Characteristics of the beneficiaries) Alternative sources • Special data collection efforts « extreme » poverty (homelessness, Roma): Poverty maps and Roma with World Bank and FRA Modelling • Euromodmicrosimulationto illustrate impact of reforms on poverty, budgets, labour market incentives or economic stabilisation • OECD/EC taxbenefit model • Small area estimation • Evaluation methods