Defining and Measuring Poverty, Social Exclusion and Inequality – in the EU

1. Defining and Measuring Poverty, Social Exclusion and Inequality – in the EU EAPN Induction Training for New Members of Statutory and Working Groups Leuven 19-21 May 2011 Sian Jones EAPN Policy Coordinator

2. Outline of Presentation • Defining poverty and social exclusion • Social and Economic Inequality • Measuring Poverty, Exclusion and Inequality – the OMC indicators • Europe 2020 – the new poverty target

3. Relative and Absolute Poverty – What is the difference? • Absolute or Extreme Poverty: refers to severe deprivation of basic human needs – housing, water, sanitation.. (World Summit on Social Development 1995/Millenium Development Goals). • Relative Poverty: “when people’s income and resources are so inadequate as to preclude them from having a standard of living acceptable in the society in which they live’’ (European Council 1975)…economic, political and cultural participation.. • Measures different aspects of poverty • Absolute poverty: lack of access to specific rights, goods or services. • Relative Poverty: measures the capacity to participate on equal terms in the society in which we live

4. Social exclusion is used as a multi-dimensional concept that refers to a process of loss of integration or participation from the individual in society, in one or more of these fields: EU prefers mixed approach: Poverty and Social Exclusion

5. Inequality • Economic inequality – disparities in the distribution of monetary resources (assets and income) – gap between rich and poor • Social Inequality – lack of equal social status and access to rights to basic services (education, health, housing etc) and power. • Inequality is a key structural cause of poverty • Growing evidence that “more equal societies not only benefit the poor, but provide a better life for all” (Wilkinson R, Pickett K 2008)

6. Measuring Poverty, Exclusion and InequalityEU Indicators • 2000Open Method of Coordination on Social Inclusion Social OMC) – a voluntary process of cooperation between MS to achieve common objectives, to make a decisive impact on the eradication of poverty (2000) • Key elements: common objectives, common indicators, national and joint reporting, mutual learning and funding • In 2001, 18 Common EU Indicators were adopted by the Laeken European Council in December 2001 adopted • In 2006, the Social OMC was ‘streamlined’ bringing together social inclusion, pensions, health and long-term care – with 1 overarching set of indicators and one set for each pillar. • In 2009, updated and new indicators added

7. 1a Risk of Poverty 1b Intensity of Poverty Risk – Relative median poverty risk Income inequalities: EU S80/S20 Health inequalities: Healthy life expectancy Education inequalities: Early school leavers Access to Labour Market: Financial sustainability of social protection systems: total public social expenditures Adequacy of Pensions: Median relative income of elderly people and aggregate replacement ratio 8. Inequalities in access to health care: self reported unmet need and care utilisation 9 Improved standards of living from growth: at risk of poverty rate anchored at a fixed point in time (2005) 10 Employment of older workers: Employment rate 11 In-work poverty: In-work poverty risk 12 Participation in the labour market: activity rate 13 Regional cohesion: regional disparities coefficient of variation in employment rates 14 Per capita health expenditure: total health expenditure per capita Looking in detail at the Indicators:Overarching Portfolio

8. The "at-risk-of poverty gap" measures how poor are the poor (graduation). The "persistent at risk-of poverty rate" measures the extent to which individuals have been in poverty for a long period of time, or temporarily. The poverty rates at different thresholds (40%, 50%, 60%) help illustrating the depth of poverty by measuring the percentage of people on very low income. Inequality is measured by the Gini co-efficient or the 20/80% quintile. EU OMC indicators covers key aspects of poverty, exclusion and inequality • The "at-risk-of poverty rate" measures relative poverty at a point in time in a country; • The "poverty thresholds" illustrate the variations in living standards of the poor across the EU and • The "anchored poverty rate" illustrates the variation in the living standards of the poor across time. • In-work poverty shows people in poor jobs

9. Continuing to develop new indicators to reflect multidimensionality of poverty • Early school leavers • Employment Gap of immigrants • Material Deprivation rate • Housing: high housing costs( 40% of disposable income and % living in overcrowded conditions. • Health: Self reported unmet need for medical care • Care utilisation • Child well-being – to be developed

10. OMC indicators – a major achievement but.. • An impressive list of robust, useful indicators capturing the multidimensionality of poverty • But little visibilityof results, little use made of data • Not all MS adopted EU indicators at national level • Increasing challenges to relative poverty indicator, • it measures inequality more than access to rights and resources • It doesn’t adequately reflect the low living standards in newer MS • Political concern- no progress on poverty since 2000 • Indicators are a useful instrument, but can’t replace political will to defend social rights and standards.

11. OMC Data: Poverty, social exclusion and inequality (2008 data) RISK OF POVERTY THRESHOLD: < 60% MEDIAN INCOME • 84 million Europeans (16%) • But strong differences across countries: • 10-12 % in CZ, NL, SE, AT, HU, SL • 19-21% in RO, UK, EL, PT, ES, LV • Value of the threshold ie 1546 EU a month in LU to 98 in BU • 19% of children, 20% older people, 20% youth (18-24) • 34% of single parents • 8% of working population (in-work poverty) • Social protection reduces poverty by over 1/3 • Lack of strong progress in poverty eradication over last decade • Increase in income inequality (between top and bottom 20%), from 4.5 to 4.8% from 2000 to 2007

12. Europe 2020 and the Poverty Target • Poverty Target to reduce at least 20 million people in poverty and social exclusion by 2020. • Initial Commission proposal – 25% of at risk of poverty (relative poverty), but not agreed • Final agreement (June Council) – a compromise with a new definition of poverty and social exclusion based on 3 indicators: • At risk of poverty • Severe material deprivation • Jobless households (low work intensity).

13. Key Definitions • Risk of Poverty (Relative poverty) Share of persons with disposable income below 60% of national household income • Severe Material Deprivation (more absolute) Share of population living in households lacking at least 4 of following 9 items: Household can’t afford: 1) unexpected expenses 2) one week annual holiday away from home 3) to pay for arrears 4) a meal with meat, chicken or fish every second day 5) to keep home adequately warm, 6) a washing machine 7) a colour TV 8) a personal car. • Jobless – Low work intensity households Proportion of people living in households with low work intensity (low number of people in the household working) (18-59)

14. AROPE: People at risk of poverty and social exclusion (Europe 2020) – the new data • 113, 752,000 people (At risk of poverty and exclusion) (23.1%) • At risk of poverty – 80.199 (16.5%) – highest rates in ES, GR, LI, BU, RO,LA • Severe Material Deprivation – 39.802 (8%) highest rates in BU and RO (30%) • Low work intensity – 34.213 (9%) – but some countries with high employment also high jobless households (DK, IE, UK)

15. Conclusion • Poverty and social exclusion are a multidimensional phenomena • Measuring absolute and relative poverty, as well as inequality is essential • OMC has built a good common indicator system -but not known and used. • New Europe 2020 multiple indicators - risk undermining full set of OMC indicators and focus on relative poverty and inequality • Indicators – a support, not a substitute for political will and action to combat poverty

16. Group Exercise • Aim: To practice analysing together EU comparative data on poverty based on OMC indicators. • Activity: • Divide into groups of 4-5 groups • Choose a note taker who can report back. • Analyse the tables given looking at: • At risk of poverty before and after social transfers – how much difference do social transfers make? • Material deprivation • In-work poverty • Find the data for your own country • In the group, rank the data (worst to best) • Discuss the conclusions? What surprises you? What do you think the reasons are for the differences? How can you use this data at national level? • Report back to plenary.

17. A Year when everybody renewed their commitment to make a differenceFor more info: Contact sian.jones@eapn.eu