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

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

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

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

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)

Measuring Poverty, Exclusion and Inequality EU Indicators 2000 Open 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

Looking in detail at the Indicators: Overarching Portfolio 1a Risk of Poverty 1b Intensity of Poverty Risk – Relative median poverty risk 2Income inequalities: EU S80/S20 3Health inequalities: Healthy life expectancy 4Education inequalities: Early school leavers 5Access to Labour Market: 6Financial sustainability of social protection systems: total public social expenditures 7Adequacy 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 9Improved standards of living from growth: at risk of poverty rate anchored at a fixed point in time (2005) 10Employment of older workers: Employment rate 11In-work poverty: In-work poverty risk 12Participation in the labour market: activity rate 13Regional cohesion: regional disparities coefficient of variation in employment rates 14Per capita health expenditure: total health expenditure per capita

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  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.

Continuing to develop new indicators to reflect multidimensionality of poverty  Early school leavers  Employment Gap of i mmigrants  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

OMC indicators – a major achievement but..  An impressive list of robust, useful indicators capturing the multidimensionalit y of poverty  But little visibility of 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.

RISK OF POVERTY THRESHOLD: < 60% MEDIAN INCOME  84 million Europeans (16%)  But strong differences across countries: % 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 OMC Data: Poverty, social exclusion and inequality (2008 data)

Europe 2020 and the Poverty Target  Poverty Target to reduce at least 20 million people in poverty and social exclusion by  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 ).

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)

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 – (16.5%) – highest rates in ES, GR, LI, BU, RO,LA – Severe Material Deprivation – (8%) highest rates in BU and RO (30%) – Low work intensity – (9%) – but some countries with high employment also high jobless households (DK, IE, UK)

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

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.

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