Europe 2020 Targets: Poverty and Social Exclusion Active Inclusion Strategies

Edited by; Ellen Kalisperati –Sociologist

Poverty and social exclusion are major obstacles to the achievement of the Europe 2020

objective of inclusive growth. Given the multi-faceted nature of poverty, integrated

strategies are needed to effectively support those at risk of poverty, so they can fully

participate in the economy and society. The 2012 Annual Growth Survey invited the

Member States to protect vulnerable members of society by further improving the

effectiveness of social protection systems and implementing active inclusion strategies

encompassing inclusive labor market measures, adequate income support and access to quality services.

Poverty and social exclusion occur in a variety of situations throughout

the EU. 23 % of the EU’s population is considered to be at risk of poverty or social exclusion.

This means that they are affected by at least one of the conditions measured by the three

indicators defining the EU poverty and exclusion headline target. These indicators are the atrisk- of-poverty rate, the severe material deprivation rate and the share of people living in households with very low work intensity. They reflect the many factors underlying poverty and social exclusion, as well as the diversity of challenges for Member States.

While the percentage of the population at risk of poverty or social exclusion is above 40 % in Bulgaria (41.6%) and Romania (41.4%), it ranges between 38.1% and 29.9% for Latvia, Lithuania, Hungary and Ireland, remains above the EU average for Poland, Greece, Spain, Portugal, Italy and Cyprus and falls below 20% for 10 Member States (Germany, France, Slovenia, Denmark, Luxembourg, Finland, Austria, the Netherlands, Sweden and the Czech Republic). The top performers are the Czech Republic (14.4%), Sweden (15%) and the Netherlands (15.1 %).

Looking at the three indicators, Figure 2 shows that 16.4 % of the EU’s population is at risk of poverty, meaning they live in a household with an income below 60 % of the national median income after social transfers (this indicator is primarily a measure of relative income poverty). The highest at-risk-of-poverty rates are observed in Latvia (21.3 %), Romania (21.1 %), Bulgaria (20.7 %) and Spain (20.7 %), and the lowest in the Czech Republic (9 %), the Netherlands (10.3 %), Slovakia (12.0 %), Austria (12.1 %) and Hungary (12.3 %).

8.1 % of EU households (Figure 3) are severely materially deprived. This means that they

cannot afford at least four of the following: (1) unexpected expenses; (2) one week’s annual holiday away from home; (3) to pay for arrears; (4) a meal with meat, chicken, or fish every second day; (5) to adequately heat their home; (6) a washing machine; (7) a colour TV; (8) a telephone; (9) a personal car. The share of the population that is severely materially deprived varies significantly across Member States, ranging from 0.5 % in Luxembourg and 1.3 % in Sweden to 35 % in Bulgaria and 31 % in Romania.

Some groups are on average at greater risk of poverty than the total population, in particular

children (with an at-risk-of-poverty rate of 20.5 %), women (17.1 %) and young people

(21.2 %), people living in single-parent households (36.8 %) or large families (25.9 %). The poverty risk for the unemployed is particularly high at 45.2 %. People with a migrant

background, Roma and people with disabilities are also particularly at risk (comparable EUwide data are not available for each of these groups). Homeless people face an extreme form of poverty. With regard to children, those who are most at risk are those living in households with very low work intensity (this is the case for 9.1 % of children, and they have an at-risk-of-poverty rate of 68.8 %) and those growing up with a single parent or in a large family (37 % of single-parent households and 26 % of households with two adults and at least three children are at risk of poverty). The poverty risk for older people aged 65+ (15.9 %) varied from 48.6 % in Cyprus to 4.1 % in Hungary. While lower than the poverty risk for the population aged 0-64 in 13 Member States, it is significantly higher in some others (e.g. Belgium, Bulgaria, Denmark, Cyprus, Malta, Austria, Finland, Slovenia, United Kingdom). Single women are at substantially higher risk of poverty than single men (M/W 65+: 12.9/18.2), notably older women (M/W 75+: 14.3/20.5).

Automatic stabilisers and limited discretionary measures have played an important role in

supporting household incomes and aggregate demand during the crisis.2 However, almost 2 million more people were at risk of poverty or social exclusion in 2010 compared to 2009.3 While relative poverty has increased significantly only in a minority of Member States (e.g. Spain and Slovenia), its gravity has increased greatly in some, with people at risk of poverty dropping further to the bottom of the income distribution scale. An increase in relative poverty has been mitigated to some extent by a decline in median income, which has decreased in all but six Member States; the sharpest decreases were observed in Lithuania and Latvia, followed by Estonia, Malta, Spain and Slovenia.

2. Assessment of the main challenges in the Member States

Challenges facing the Member States can be analysed with reference to three aspects:

adequate income support, inclusive labour markets, and access to quality services. These are the three pillars of a comprehensive strategy to fight against poverty that the European Commission has identified in its Recommendation on active inclusion.

Improving the efficiency and effectiveness of income support through social


Providing the right kind and level of support is still very challenging for too many Member

States. Minimum income schemes face a number of challenges. These relate to the

adequacy and coverage of benefits, disincentives to work and the difficulty of linking income support to the other two pillars of active inclusion. Currently, the minimum income level of only a few countries is set at 60 % of the median household income (often regarded as a common criterion for adequate income support). In several Member States, a significant percentage of people in need still have no access to minimum income support or do not exercise their rights. Usually, people do not exercise their rights on account of the complexity of rules and legislation governing the distribution of social assistance, and the stigma attached to some benefits. The crisis has exerted pressure on income support expenditure in different ways. In the

absence of financial data on the active inclusion strategies implemented by Member States, the amount of money spent on social assistance can be a good indicator. The early years of the crisis were notable for increased spending on social assistance benefits to stimulate the overall economy, with spending on social protection economically stabilising and supporting demand. However, with the aggravation of the sovereign debt crises, a number of Member States (Ireland, Belgium, United Kingdom, Slovenia) have reversed their spending pattern and pursued a more stringent fiscal policy characterised by reduced spending and restricted access to benefits. Further pressure on social assistance expenditure comes from people who are no longer eligible for unemployment benefit and therefore turn to social assistance for income as a last resort.

Addressing labour market exclusion and tackling in-work poverty

Access to employment is regarded as the optimal way out of poverty and social exclusion.

However, the last decade has seen the persistence of groups who remain outside or on the margins of the labour market, often facing multiple entry barriers (low skills, care

responsibilities, age, migrant background, disability and other discriminatory factors, etc.). Ireland, United Kingdom, Belgium, Latvia, Hungary, Germany and Denmark have above-EU average levels of jobless households and households with very low work intensity.4

However, having a job is not always a sufficient safeguard against poverty and social

exclusion, especially in the current context of high labour market segmentation. 8.5 % of EU workers are currently at risk of poverty, with above-EU average rates in Romania, Greece, Spain, Lithuania, Poland, Luxembourg, Portugal, Latvia, Italy (see Figures 6 and 7). In-work poverty is in most cases linked to low skills, low wages, precarious employment and low work intensity, as well as the presence of children. Those on temporary contracts and in part-time work are also particularly at risk of in-work poverty.

Access to quality services

Access to basic services — healthcare, childcare, housing — contributes to the reduction of

inequality and to the fight against poverty. For instance, access to quality early childhood

education and care is key to giving all children the best chances in life, regardless of their

social background. Yet evidence shows that the most vulnerable children (e.g. children from

low-income families or families that are furthest from the labour market, Roma children,

children from migrant backgrounds) have generally lower rates of participation. This can be attributed to a range of factors such as availability and access, in particular in rural areas, affordability, eligibility, and parental choice.

Access to high quality healthcare from an early age is indispensable for people to grow and live in a healthy condition that enables them to contribute to society. Poverty and inequalities in access to healthcare translate into illness, disability to work, dependency and more poverty. (In the poorest EU regions, the chance of a child dying before its first birthday is over 5 times higher than in the richest regions and the gap in life expectancy between poor people and the well off reaches 10 years in some Member States). Investing in health for all and bridging inequalities in access to healthcare is key to enabling people to work and contribute to the economy.

Provision of services for the homeless is also crucial. Better figures are needed, but it is clear that homelessness has been increasing due to the social stress of low growth, rising unemployment and fiscal austerity. Yet more worryingly, a new profile of homeless people is emerging which consists of families with children, young people and people with a migrant background.