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Absolutely poor or relatively poor: does is matter for social policy design ?Chris de Neubourg
Washington DC, November 2009
Maastricht Graduate School of Governance
1. Does it matter for priority setting ?2. Does it matter for identifying the poor?3. Does it matter for identifying the long term
poor ?4. Does it matter when setting levels and
eligibility of means tested benefits ?5. Does it matter when assessing the
incidence and adequacy for targeted and non-targeted benefits ?
Maastricht Graduate School of Governance
Basic data
• Poverty estimates for 15 EU countries and the USA for the period 1993 – 2000
• Using household surveys in the EU and the in the USA (ECHP and CNEF-PSID)
• Using relative poverty concept (Laeken) and an absolute concept (Orshansky) for the 16 countries
Maastricht Graduate School of Governance
Does is matter for setting policy priorities ?
Table 1: Poverty incidence (in % of individuals, in 1996 and 2000) Laeken (relative) poverty Orshansky (absolute) poverty
Maastricht Graduate School of Governance
Does it matter for identifying the poor? Netherlands United States
All1 O2 L3 4 All O L By: Gender - Female 50.4 49.4 43.7 51.8 54.5 54.5 - Male 49.6 50.6 56.3 47.8 45.0 45.0 By: Age groups - 0-15 20.1 29.5 26.4 23.3 33.7 31.0 - 16-24 10.7 21.6 18.9 12.2 16.2 14.2 - 25-49 38.6 34.3 34.9 37.0 29.5 32.6 - 50-64 17.6 9.9 16.010 15.6 8.4 9.5 - Above 65 13.0 4.7 3.8 11.5 22.0 34.6 By: Household type - Single adult 15.6 17.2 13.7 13.3 17.3 14.210 - Two adults 28.6 10.3 12.5 22.4 9.2 13.601 - Other adult households 8.3 5.9 13.7 8.1 3.9 4.3 - Two adults and children 27.9 23.0 34.0 23.6 12.9 20.301 - Other households with children 19.7 43.5 26.210 32.6 56.8 47.601 By: Main income source5 -Wage 70.3 47.2 63.910
82.1 52.9 79.101 - Self-Employment 3.1 2.1 4.5 - Pensions 15.9 6.8 8.2 11.3 17.1 17.0 - Unemployment benefits 0.7 0.9 1.2
2.8 21.3 2.301 - Other benefits 9.1 38.8 21.005 - Private income 1.0 4.3 1.210 3.9 8.8 1.601
Maastricht Graduate School of Governance
Does it matter for identifying the long term poor ?
Figure 1: Persons at persistent risk of poverty (long term poor) as a percentage of total number of poor for 2000; poverty estimated by a relative (EU-Laeken) and an absolute (Orshansky) poverty indicator.
0102030405060708090
100
Portugal
Greece
Luxem
bour
gIta
ly
United S
tates
Irelan
d
Austria
United K
ingdo
m
France
Spain
Belgium
German
y
Finlan
d
Denmark
Netherl
ands
Ove
rlap
(%)
Relative poverty Absolute poverty
Note: The overlap is calculated dividing the persistent poverty rate by the overall poverty rates; countries are ranked according to the share of persistent poverty using the relative poverty indicator. Source: Own calculations ECHP and CNEF-PSID
Maastricht Graduate School of Governance
Percentage of persistent “Laeken” poor who are also “Orshansky” poor , 2000
Ireland 48.5
The Netherlands 28.5
Austria 32.6
UK 41.8
USA na
Maastricht Graduate School of Governance
Does it matter when setting levels and eligibility of means tested benefits ?
• Means tested benefits in Europe implicitly set absolute poverty line in the form of minimum income guarantees
• Social assistance and social assistance plus• Are these implicit poverty lines de facto
similar to the (US)“Orshansky” poor ?
Maastricht Graduate School of Governance
Average social assistance level as percentage of “Orshansky” poverty line, 1993 - 2000
0
20
40
60
80
100
120
140
160
1993 1994 1995 1996 1997 1998 1999 2000
Belgium
Ireland
Sweden
Germany
UK
Maastricht Graduate School of Governance
Average social assistance level as percentage of “Orshansky” poverty line, 1993 - 2000
0
20
40
60
80
100
120
140
160
1993 1994 1995 1996 1997 1998 1999 2000
Denmark
Netherlands
Italy
Finland
Maastricht Graduate School of Governance
Average social assistance level as percentage of “Orshansky” poverty line, 1993 - 2000
0
20
40
60
80
100
120
140
160
1993 1994 1995 1996 1997 1998 1999 2000
France
Spain
Portugal
Austria
Maastricht Graduate School of Governance
Average social assistance level as percentage of “Orshansky” poverty line, 1993 - 2000
0
50
100
150
200
250
1993 1994 1995 1996 1997 1998 1999 2000
Denmark
Netherlands
Belgium
France
Ireland
Italy
Spain
Portugal
Austria
Finland
Sweden
Germany
UK
Maastricht Graduate School of Governance
Average minimum income guarantee as percentage of “Orshanky” poverty line
0
50
100
150
200
250
1993 1994 1995 1996 1997 1998 1999 2000
Denmark
Netherlands
Belgium
France
Ireland
Italy
Spain
Portugal
Austria
Finland
Sweden
Germany
UK
Maastricht Graduate School of Governance
Minimum income guarantee as percentage of “Laeken” poverty line, 1993 - 2000
0
50
100
150
200
250
1993 1994 1995 1996 1997 1998 1999 2000
Denmark
Netherlands
Belgium
France
Ireland
Italy
Spain
Portugal
Austria
Finland
Sweden
Germany
UK
Maastricht Graduate School of Governance
Average yearly minimum income guarantee 1993 – 2000 (in nominal euro)
0
5000
10000
15000
20000
25000
1993
1994
1995
1996
1997
1998
1999
2000
Maastricht Graduate School of Governance
Average yearly social assistance benefit and average yearly minimum income guarantee as percentage of “Laeken” (rel) and “Orshansky” (us) poverty lines, 2000.
0
20
40
60
80
100
120
140
160
180
200
socass%relpl
socass%ruspl
minincom%relpl
minincom%uspl
Maastricht Graduate School of Governance
Does it matter when assessing the incidence and adequacy for targeted and non-targeted benefits ?
Maastricht Graduate School of Governance
Table 4: Incidence of social transfers1 for different population groups (in % of individuals, 2000)
Old age pensions2
Family allowance
Other social insurance3
Social assistance Other benefits4
O5 L6 NP7 O L NP O L NP O L NP O L NP Netherlands 7.5 8.2 20.2 57.2 65.5 45.3 18.2 12.0 12.7 14.1 11.4 2.2 16.4 19.6 7.5 Wald test: O L8 L NP O NP
ns .01 .01
ns .01 .01
ns ns .10
ns .10 .01
ns .10 .01
Ireland 23.3 43.4 22.2 61.4 59.1 66.7 40.3 35.5 28.3 42.4 34.0 7.3 6.1 4.0 9.4 Wald test: O L L NP O NP
.01
.01 ns
ns ns ns
ns ns .05
ns .01 .01
ns ns .01
Austria 44.7 51.9 33.8 56.0 58.1 58.7 14.2 21.2 18.2 2.1 2.0 0.4 7.6 13.0 9.6 Wald test: O L L NP O NP
ns .01 .05
ns ns ns
ns ns ns
ns ns .10
ns ns ns
United Kingdom
28.0 41.6 28.6 53.8 52.0 46.5 25.6 21.3 17.2 na10 na na 36.4 33.2 16.9
Wald test: O L L NP O NP
.01
.01 ns
ns ns .01
ns ns .01
.
.
.
ns .01 .01
United States9
22.1 25.0 22.4 45.7 24.5 7.4
Wald test: O L L NP O NP
ns ns ns
.01
.01
.01
Notes: 1 The incidence rate represents the % of individuals living in households receiving income from a particular benefit category. 2 Pensions include social and private pensions. 3 Other social insurance includes unemployment and sickness/disability benefits. 4 Other benefits include education, housing and other allowances. 5 O = Laeken and Orshansky poor (using same equivalence scales). 6 L = Laeken poor but not Orshansky poor (using same equivalence scales). 7 NP = Not poor. 8 Wald test on difference between means of population groups (taking sample design into account). Indicated significance levels: 1% (.01), 5% (.05), 10% (.10) and not significant (ns). 9 For the United States we can only distinguish between pensions and other social transfers. 10 Not available or not calculated. Source: Own calculations ECHP and CNEF-PSID
Maastricht Graduate School of Governance
Figure 6: Incidence of social assistance (below median income, 2000)
050
10
0
LO
Netherlands
050
10
0
LO
Ireland0
50
10
0
LO
Austria
050
10
0
LO
United States
Pe
rce
nta
ge
Equivalent income
Maastricht Graduate School of Governance
Mean value of social assistance (below median income, 2000)
LO
LO
Netherlands
LO
LO
Ireland
LO
LO
Austria
LO
LO
United States
Eq
uiv
ale
nt
be
ne
fit
Equivalent income
Maastricht Graduate School of Governance
Incidence of family allowances (below median income, 2000)
050
10
0
LO
Netherlands
050
10
0
LO
Ireland0
50
10
0
LO
Austria
050
10
0
LO
UK (BHPS)
Pe
rce
nta
ge
Equivalent income
Maastricht Graduate School of Governance
Mean value of family allowances (below median income, 2000)
LO
LO
Netherlands
LO
LO
IrelandL
O
LO
Austria
LO
LO
UK (BHPS)
Eq
uiv
ale
nt
fam
ily a
llow
an
ce
Equivalent income
Maastricht Graduate School of Governance
Absolutely poor or relatively poor: Does is matter ?• For policy priorities• For identification of the poor• For identification of the poor at risk of
persistence poverty• For setting minimum income guarantee
levels• For assessing incidence and adequacy
of policy measures