1 Material Deprivation, the EU 2020 Poverty Target and the Development of Social indicators Brian Nolan*, Chris Whelan* and Bertrand Maître** *University College Dublin **Economic & Social Research Institute

2 Outline The new EUI 2020 poverty target The new EUI 2020 poverty target Identifying the target population via three criteria Identifying the target population via three criteria The impact of each element on the size and composition of the target group The impact of each element on the size and composition of the target group How satisfactory is the approach taken? How satisfactory is the approach taken? Is there a more satisfactory alternative? Is there a more satisfactory alternative?

3 The EU’s 2020 Poverty Target Europe 2020 Strategy for jobs and smart and sustainable and inclusive growth Europe 2020 Strategy for jobs and smart and sustainable and inclusive growth Has 5 headline targets to constitute shared objectives guiding the actions of the MS and Union Has 5 headline targets to constitute shared objectives guiding the actions of the MS and Union Promoting employment Promoting employment Improving the conditions for innovation, R&D Improving the conditions for innovation, R&D Meeting climate change and energy objectives Meeting climate change and energy objectives Improving educational levels, and Improving educational levels, and ‘Promoting social inclusion in particular through the reduction of poverty’ ‘Promoting social inclusion in particular through the reduction of poverty’

4 The EU’s 2020 Poverty Target Poverty target: to reduce the number in EU at risk of poverty and social exclusion by 20 million Poverty target: to reduce the number in EU at risk of poverty and social exclusion by 20 million Target population for this purpose defined as those in households either: Target population for this purpose defined as those in households either: “at-risk-of-poverty” – below relative income threshold of 60% of country median “at-risk-of-poverty” – below relative income threshold of 60% of country median “material deprivation” – at or above 4 on index of 9 non-monetary deprivation indicators “material deprivation” – at or above 4 on index of 9 non-monetary deprivation indicators “Jobless/low work intensity” – working-age persons in household spent < 20% of available months in work in year “Jobless/low work intensity” – working-age persons in household spent < 20% of available months in work in year

5 The EU’s 2020 Poverty Target Target population identified in this way with EU- SILC data is 120 million Target population identified in this way with EU- SILC data is 120 million Distinctive features of this target population: Distinctive features of this target population: The 3 indicators/elements used are already among the EU’s Social Inclusion (Laeken) Indicators set The 3 indicators/elements used are already among the EU’s Social Inclusion (Laeken) Indicators set But first time they have been combined in this way But first time they have been combined in this way Plus material deprivation threshold has been raised from 3 to 4 Plus material deprivation threshold has been raised from 3 to 4 And joblessness threshold introduced And joblessness threshold introduced

6 Exploring the Implications Initial Commission proposal was to use “at-risk- of-poverty” relative income poverty indicator to identify target population – of 80 million Initial Commission proposal was to use “at-risk- of-poverty” relative income poverty indicator to identify target population – of 80 million How much difference does adding each of the other two elements – material deprivation and then joblessness – make to the size of the target population? How much difference does adding each of the other two elements – material deprivation and then joblessness – make to the size of the target population? Increases to 120 (115) million, but major differences across countries Increases to 120 (115) million, but major differences across countries

7 Elements of EU Target by Country

8 Exploring the Implications How much difference does adding each of the other two elements – material deprivation and then joblessness – make to the composition of the target population? How much difference does adding each of the other two elements – material deprivation and then joblessness – make to the composition of the target population? Focus on social class, measured using ESeC, compressed to 7 categories Focus on social class, measured using ESeC, compressed to 7 categories

9 Social Class Composition of Elements of EU Poverty Target Group (population weighted) Below 60% of Median Income (%) Above Deprivation Threshold 4+ but not Below 60% of Median Income (%) Work Intensity < 0.20 but Not Above Deprivation Threshold 4+ or Below 60% of Median Income (%) Higher Salariat (ESeC Class 1) Reference Category 5414 Lower Salariat (ESeC Class 2) 6714 Higher Grade white & blue collar (ESeC classes 3 & 6) Petit Bourgeoisie (ESeC Class 4) 1556 Farmers (ESeC Class 5) 1172 Lower Grade white & blue collar (ESeC classes 7 & 8) Semi & non-skilled workers (ESeC class 9) Total

10 Breakdown of All Persons by EU Target Indicators by Welfare Regime Soc D CorLib S Eu PS Corp PS Lib Res Not in target group Below 60% of Median Income Threshold Only Above 4+ Deprivation Threshold Only Below Work Intensity Threshold 0.20 only Below 60% of Median Income + Above 4+ Deprivation Threshold Below 60% of Median Income + Below Work Intensity 0.20 Below 60% of Median Income + Below Work Intensity Above 4+ Deprivation + Below Work Intensity Below 60% of Median Income + Above 4+ Deprivation + Below Work Intensity Total 100

11 Exploring the Implications Do those brought into the target population by each element exhibit high levels of self-assessed economic strain Do those brought into the target population by each element exhibit high levels of self-assessed economic strain Difficulty “making ends meet” Difficulty “making ends meet”

12 Stepwise Logistic Regression of Economic Stress on Relative Income Poverty, Material Deprivation and Joblessness Odds Ratio Income Poverty at 60% Median EU Deprivation Index Work Intensity < Nagelkerke R N541,327

13 Exploring the Implications The way material deprivation is measured in identifying target pop has distinctive features: The way material deprivation is measured in identifying target pop has distinctive features: Threshold of 4+ is used, whereas EU’s own material deprivation indicator uses 3+ Threshold of 4+ is used, whereas EU’s own material deprivation indicator uses 3+ 9-item index (Guio) not only option – 7-item “consumption deprivation” index can also be derived from EU-SILC 9-item index (Guio) not only option – 7-item “consumption deprivation” index can also be derived from EU-SILC Would alternative ways of measuring material deprivation be better in identifying target pop? Would alternative ways of measuring material deprivation be better in identifying target pop? Use threshold of 3+ rather than 4+ with (somewhat) different index? Use threshold of 3+ rather than 4+ with (somewhat) different index? Or just 3+ on EU’s index? Or just 3+ on EU’s index?

14 Social Class Composition for Groups Classified by 3 EU Target Indicators and Consumption Deprivation Not in EU Target Group and Consumption Deprivation Below 3+ In EU Target Group But Consumption Deprivation Below 3+ Consumption Deprivation 3+ But Not in EU Target Group Both in EU Target Group and Consumption Deprivation 3+ Higher Salariat (ESeC Class 1) Reference Category Lower Salariat (ESeC Class 2) Higher Grade white & blue collar (ESeC classes 3 & 6) Petit Bourgeoisie (ESeC Class 4) Farmers (ESeC Class 5) Lower Grade white & blue collar (ESeC classes 7 & 8) Semi & non-skilled workers (ESeC class 9) Total % of EU-27 Population Dissimilarity Index

15 Multinomial Regression of EU Indicator & Consumption Typology on HRP Social Class (reference group neither in EU Target Group Nor Above Threshold on Consumption Deprivation Index) In EU Target Group and Above Consumption Deprivation Threshold Above Consumption Deprivation Threshold but Not In EU Target Group In EU Target Group but Below Consumption Deprivation Threshold Higher Salariat (ESeC Class 1) Reference Category Lower Salariat (ESeC Class 2) Higher Grade white & blue collar (ESeC classes 3 & 6) Petit Bourgeoisie (ESeC Class 4) Farmers (ESeC Class 5) Lower Grade white & blue collar (ESeC classes 7 & 8) Semi & non-skilled workers (ESeC class 9) Nagelkerke Reduction in Log Likelihood 4,672 Degrees of freedom 18 N453,598

16 Multinomial Regression of EU Indicator & Consumption Typology on HRP Social Class (reference group neither in EU Target Group Nor Above Threshold on Consumption Deprivation Index)

17 Social Class Composition by EU Deprivation and Consumption Deprivation Indicator Deprived on neither measure EU Deprivation 3 + only Consumption Deprivation 3+ only Deprived on Both Measures Higher Salariat (ESeC Class 1) Reference Category Lower Salariat (ESeC Class 2) Higher Grade white & blue collar (ESeC classes 3 & 6) Petit Bourgeoisie (ESeC Class 4) Farmers (ESeC Class 5) Lower Grade white & blue collar (ESeC classes 7 & 8) Semi & non-skilled workers (ESeC class 9) Total % of Relevant Population Index of Dissimilarity

18 An Alternative Approach? The “either” income poor or deprived or jobless approach is problematic The “either” income poor or deprived or jobless approach is problematic Including jobless where neither low income or deprived highly questionable Including jobless where neither low income or deprived highly questionable Material deprivation could be better captured Material deprivation could be better captured But more broadly, including those on low income even if not deprived and vice versa may be questioned But more broadly, including those on low income even if not deprived and vice versa may be questioned Is there a better way of using low income and deprivation to identify target population? Is there a better way of using low income and deprivation to identify target population? Intersection rather than union – low income and deprived and jobless? Intersection rather than union – low income and deprived and jobless?

19 Percentage Meeting Poverty Target Criteria on All 3 Individual EU Indicators by Country

20 An Alternative Approach? What about just low income and deprived? What about just low income and deprived? Alternative formulations Alternative formulations below 60% of country median and 4+ on EU common material deprivation indicator below 60% of country median and 4+ on EU common material deprivation indicator below 60% of country median and 3+ on alternative consumption deprivation indicator below 60% of country median and 3+ on alternative consumption deprivation indicator below 60% of country median and country-specific weighted consumption deprivation indicator below 60% of country median and country-specific weighted consumption deprivation indicator

21 Alternative Consistent Poverty Measures by Country, EU-SILC 2008

22 Consistent Poverty Indicators by Welfare Regime (%) EU Material Deprivation 4+Consumption Deprivation +3 National Relative with Consumption Deprivation Social Democratic Corporatist Liberal Southern European Post Socialist Corporatist Post Socialist Liberal Residual

23 Consistent Poverty Indicators by Welfare Regime (%)

24 Dissimilarity Rates for Social Class Composition for Consistently Poor v Non-Poor by Types of Measure by Welfare Regime With Common Consumption Deprivation, Threshold 3+ With National Relative Consumption Deprivation Social Democratic Corporatist Liberal Southern European Post Socialist Corporatist Post Socialist Liberal Residual

25 Dissimilarity Rates for Social Class Composition for Consistently Poor v Non-Poor by Types of Measure by Welfare Regime

26 Odds Ratios for Economic Stress for Consistently Poor v Non-Poor by Types of Measure By Welfare Regime Common Consumption Deprivation 3+ National Relative Consumption Deprivation Social Democratic Corporatist Liberal Southern European Post Socialist Corporatist Post Socialist Liberal Residual

27 Odds Ratios for Economic Stress for Consistently Poor v Non-Poor by Types of Measure By Welfare Regime

Conclusion The way the EU 2020 poverty target identifies its target population via three criteria – relative income poverty, deprivation and household joblessness – is problematic in terms of: The way the EU 2020 poverty target identifies its target population via three criteria – relative income poverty, deprivation and household joblessness – is problematic in terms of: Inclusion of household joblessness Inclusion of household joblessness The way material deprivation is measured The way material deprivation is measured Inclusion of all those meeting any of the three criteria Inclusion of all those meeting any of the three criteria Those both below 60% of median income and deprived (measured differently) could constitute a priority group Those both below 60% of median income and deprived (measured differently) could constitute a priority group