Social Europe 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

Social Europe How can EU-wide comparative research support a job rich and inclusive growth? 1.Debunking myths and bringing new ideas 2.Increasing visibility accountability 3.Bringing social monitoring to a par with macro-economic monitoring 4.Improving the diagnosis and identifying the policies that work 5.How can research help?

Social Europe 1.a Debunking myths What we may think (largely based on theory)… (Empirical) research shows that "Inequality is inevitable or even good for growth" "Too high inequalities may undermine growth" "Focus on growth and jobs…""There is no trickle down…" "Generous benefits discourage people from working" (making work pay) "higher coverage and adequacy of benefits are associated with higher returns to employment… if well designed and linked to activation" "More targeted benefits means more efficient spending…" "Efficiency of spending depends on how you spend it and on what" (social investment)

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

Social Europe 2. Robust Indicators: accountability "What is not counted doesn't count" Agreeing on concepts and measures and the need for comparable statistics Monitoring Three examples: Europe 2020 target on poverty EMU scoreboard of employment and social imbalances Poverty mapping and small area estimation Vulnerable groups (homeless, vulnerable children)

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

Social Europe ETHOS classification to measure homelessness Housing situations Roofless1. Living rough 2. In emergency accomodation Houseless3. In accomodation for the homeless 4. In women's shelters … Insecure8. Insecure accomodation 9. Risk of eviction … Inadequate11. Temporary or unconventional accomodation 12. Unfit accomodation

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

Social Europe 3. Bringing social monitoring to a par with macro-economic monitoring Timeliness of social indicators Social impacts of economic developments and policies Economic impacts of social developments and policies Two examples: Nowcatsing poverty and inequality measures Social EMU

Social Europe Micro-simulation: Nowcasting at-risk of poverty to 2014 Nowcast estimates of at risk of poverty rates, selected Member States, RED: Eurostat BLUE: Euromod nowcasts Source: Euromod – Employment and Social Situation Quarterly Review – March 2014

Social Europe 3b. Social EMU

Social Europe Social EMU Communication (2/10/2013)  Improve governance to anticipate & address serious employment & social problems in the EMU, taking account of Social impacts of economic developments and policies  (in macro-economic imbalance procedure: MIP scoreboard now includes poverty indicators) Spill overs of serious social problems, also beyond borders  In European Semester: the scoreboard (UR, NEETs, GHDI, AROP, S80/S20)  EU level instruments  Better use of EU Funds, Labour mobility, Steps towards a "fiscal capacity" for more solidarity and financial support… (EMU-UBS?)  Involvement of social partners in EMU governance

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

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

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

Social Europe 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

Social Europe 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

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

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

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

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

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

Social Europe Country Specific Recommendations 2014 Italy 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" 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."

Social Europe Counterfactual impact evaluation in Lithuania

Social Europe 4b. Child poverty, effective and efficient social spending

Social Europe What drives child poverty? million children at risk of poverty or social exclusion -Greater risk than adults -Main drivers: o - in-work poverty of parents -- insufficient LM participation of parents -- ineffective benefits Profiles of child poverty drivers Source: ESSPROSS 2009, EU-SILC 2010, DG EMPL calculations. In ESSQR – June 2012

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

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

Social Europe 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

Social Europe 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… )

Social Europe 3 Main products 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 )

Social Europe ANNEX: IMPROVING STATISTICS & MODELS Timeliness SILC and other sources Data on social protection systems Modelling (Euromod)

Social Europe Statistical Priorities and modelling (1) Improving timeliness Improving SILC delivery, especially for material deprivation Adding auxiliary data in LFS (monthly income) Use models to produce nowcasts Use alternative sources: e.g. consumer surveys (financial distress indicator) Upcoming SILC revision (with European Statistical systems) Improving the measurement of material deprivation, Improving the longitudinal component of SILC to better analyse the dynamics of poverty and exclusion Improve data on access to services to better measure the redistributive impact of in-kind benefits Better documentation of indicators

Social Europe Statistical Priorities and modelling (2) Data on social protection systems ESSPROS: Good identification of in-kind benefits, means-tested benefits, net expenditure Data on benefit recipients (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 Euromod microsimulation to illustrate impact of reforms on poverty, budgets, labour market incentives or economic stabilisation OECD/EC tax benefit model Small area estimation Evaluation methods