Working poor in Western Europe: What is the influence of welfare state provisions and labour market institutions? Henning Lohmann University of Cologne “Conference of the EuroPanel Users Network (EPUNet-2006)” 8-9 May 2006, Barcelona (Universitat Pompeu Fabra), Spain

1.Introduction

welfare state reform: one aim is to bring the workless poor into the labour market: activation, strengthening of work incentives, workfare  re-commodification (see e.g. Haveman 1997, Lødemel/Trickey 2000) against this background increasing interest in working poor in Europe work in comparative perspective: Marx/Verbist 1998, Strengmann- Kuhn 2003, Peña-Casas/Latta 2004, Bardone/Guio 2005 studies in single European countries: especially France, Switzerland, Germany, Ireland however: not much work on the explanation of country differences in in-work-poverty 1 1.Introduction

Welfare states and in-work-poverty: availability and level of transfers  direct reduction of poverty and implicit minimum wages (de- commodification; Esping-Andersen 1990/99, Scruggs/Allan 2006) dual-earner policies  higher number of earners per household (de-familisation/female autonomy; Lister 1994, Orloff 1993, O’Connor 1993) family solidarity  care and protection for family members, but negative consequences for needs of households of workers (de-familisation/young or old- age dependence; McLaughlin/Glendinning 1994, Millar/Waxman 1996, Hantrais 1999) 2 1.Introduction

Labour market institutions and in-work-poverty: bargaining centralisation and coordination influence wage distribution and extent of low-wage work (Lucifora 2000, Blau/Kahn 1996, Wallerstein 1999) minimum wages secure a lower wage bond: influence on poverty depending on level of minimum wage (Lucifora 2000) however: personal earnings are only one source of income, earnings of other household members and transfers are also relevant 3 1.Introduction

Hypotheses (I): higher level of de-commodification  lower level of in- work-poverty higher level of de-familisation  lower level of in-work- poverty but: higher needs of households of workers protection of (younger) low-wage workers via family solidarity centralisation of wage bargaining  lower in-work- poverty 4 1.Introduction

Hypotheses (II): higher level of de-familisation (female autonomy)  lower in-work-poverty of families with small children lower level of de-familisation (young age dependence)  lower in-work-poverty of younger workers centralisation of wage bargaining  lower in-work- poverty of low-skilled workers 5 1.Introduction

2.Data and indicators

micro: European Community Household Panel (includes all EU countries before Eastern enlargement, Sweden had to be dropped)  14 countries observation period: , 5-8 years of observation for each country macro: various sources (OECD, Golden-Lange-Wallerstein 2006, European Industrial Relations Observatory, Künzler et al. 1999) observation period: around Data and indicators

poverty rate: relative income poverty 60 percent of median equivalised monthly net household income (using non-modified OECD scale) based on current household income sample: working population in working age (17-64) ‘working’ defined on the basis of current employment status 7 2.Data and indicators

independent variables (macro) de-commodification: net unemployment benefit replacement rate (in % of wage of average production worker) de-familisation I: children under 3 years in childcare per 100 children de-familisation II: number of household members 16+ years (country average) wage bargaining: centralisation (plant-level  national level) and number of union members as a % of all employees (trade union density) 8 2.Data and indicators

3.Descriptive results

9 Figure 1: Poverty rate by country (working age population, years) Source: ECHP 2001, own calculations.

4.Multivariate analysis

10 modelling strategy I.panel regression models with fixed country effects (random effects, ) micro perspective: needs, resources and restrictions II.multilevel models with macro variables (two levels, random intercept, 2001) micro + macro perspective: de-commodification, de-familisation and wage bargaining

4.Multivariate analysis (I)

11 Table 2: Coefficients (log-odds) from random-effects logit models on probability of being poor (working population, years) (continued)

4.Multivariate analysis (I) 12 Table 2 (continued) Source: ECHP , own calculations. Notes: significant at p < 0.1 (***), < 1 (**), < 5 (*).

4.Multivariate analysis (I) 13 poverty risks (summary of model 2): young age / old age low education living in larger households divorce / separation part-time work self-employment / low-wage work living in single earner household (second earner working part-time already reduces poverty risk) agricultural occupations

4.Multivariate analysis (I) 14 M3socio- demographic age, age squared, gender, marital status, education M4household- composition number of persons in household by age group (0-2, , 15+ years) M5household- composition and employment number of persons in household by age group (0-2, , 15+ years), number of employed persons in household by working time, working time of individual M6self- employment/low- wage work employment status + low wage work M7occupation8 occupational categories Models with subsets of variables of model 2

4.Multivariate analysis (I) 15 Figure 5: Absolute change in country coefficients in comparison to model 1 Notes: Information on full model (M2) see table 2. Results from other models not reported.

4.Multivariate analysis (II)

16 Table 3: Coefficients (log-odds) from multilevel logit models on prob. of being poor Source: ECHP , macro indicators see appendix, own calculations. Notes: significant at p <0.1 (***), <1 (**), <5 (*), <10(+). MXa: controlling for age/age-squared, sex, no of children in hh (under 3/6 years), marital status, year. MXb/c: additionally controlling for education, no of children (under 15 years), no of persons 15+ years, working time, working time of household members (instead of no of additional workers in hh), occupation.

4.Multivariate analysis (II) 16 Table 3: Coefficients (log-odds) from multilevel logit models on prob. of being poor Source: ECHP , macro indicators see appendix, own calculations. Notes: significant at p <0.1 (***), <1 (**), <5 (*), <10(+). MXa: controlling for age/age-squared, sex, no of children in hh (under 3/6 years), marital status, year. MXb/c: additionally controlling for education, no of children (under 15 years), no of persons 15+ years, working time, working time of household members (instead of no of additional workers in hh), occupation.

5.Conclusion

There is large variation of in-work-poverty in Europe. These differences are reduced by controlling for country differences in individual and household-related characteristics. However, differences in composition are not exogenous. The incidence of low-wage work has an influence on the extent of in-work-poverty but there are other, partly more important factors. At the macro level such differences are a bit hard to grasp, but there is evidence that de-commodification, de- familisation and wage-setting play a role. Changes in welfare state and labour market institutions  changes in in-work-poverty? 18 5.Conclusion

Working poor in Western Europe: What is the influence of welfare state provisions and labour market institutions? Henning Lohmann University of Cologne “Conference of the EuroPanel Users Network (EPUNet-2006)” 8-9 May 2006, Barcelona (Universitat Pompeu Fabra), Spain