TAKING PART & BEING ACTIVE – HOW ACTIVE INCLUSION CONTRIBUTES TO THE EUROPEAN SOCIAL MODEL

Minimum income, minimum wage and active inclusion

Some recent developments in Europe

HUGH FRAZER

National University of Ireland, MaynoothCoordinator, EU Network of Independent Experts on

Social Inclusion

Content

• Why income support and minimum wages are a key part of active inclusion

• Recent evidence showing the interdependence of active labour market policies, adequate income support schemes and quality social services

• Key issues and challenges in order to ensure a balanced approach

• An Irish lesson

Key Sources

• EU Social Protection and Social Inclusion OMC– Joint Reports, Peer Reviews, Exchange Projects– Task Force on Child Poverty and Well – Being in the

EU– EU Network of Independent Experts

• active inclusion• “feeding in” and “feeding out”• poverty and social exclusion of children

• Some recent Irish experience

Aim of Active Inclusion

• To support people’s integration into society, including, as far as is possible, integration into the labour market

• To ensure that everyone has the opportunities and resources necessary to lead a life of dignity and to participate as fully as possible in the society in which they live

• “It shapes an “active welfare state” by providing personalised pathways towards employment and ensuring that those who cannot work can live in dignity and contribute as much as possible to society.” [European Commission 2007]

• SO it is about ensuring that we have as far as possible socially inclusive and socially cohesive societies

Active inclusion is a holistic strategy which “combines income support at a level sufficient for people to have a dignified life with a link to the labour market through job opportunities or vocational training and through better

access to enabling social services.” [Commission Communication 2007]

THUS• more than active employment measures• recognises interdependence of employment, income

support and enabling social services• therefore adequate income support systems and

minimum wage legislation are an integral element of active inclusion

Why are income support schemes and an essential part of active inclusion?

• To make real the right of all to a life of dignity and to embed solidarity as a core value of our societies

• To break the link between low pay and poverty• To support the transition from unemployment to work• To make active employment measures more successful• To encourage greater security and thus openness to

increased flexibility in labour markets• To create paths of progression and development for

those distant from the labour market• To ensure that those unable to work can lead lives of

dignity• To prevent social problems arising and becoming deep-

rooted

Evidence from recent work on child and family poverty and social exclusion

• OMC work on child poverty in 2007 reinforces the importance and interdependence of 3 strands of active inclusion

• National performances put in perspective with: jobless households; in-work poverty; government intervention (impact of social transfers on at-

risk-of-poverty rates).

JOBLESSNESSAdults and children living

in jobless households (%), EU-27, 2006

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

EU25 LU SI GR CY PT ES LT IT DK NL FI LV AT EE MT CZ FR RO DE PL IE SK HU BE BG UK

Children (0-17) Adults (18-59 - not students)

% o

f tot

al p

opul

atio

n co

ncer

ned

WORK INTENSITYAt-risk-of-poverty rate by work

intensity (% of total pop. concerned), EU-25 average, 2005

IN WORK POVERTY

At-risk of poverty rates of children living in households at work, EU-25, 2005

0

5

10

15

20

25

EU25 FI SE DK DE SI BE CZ FR CY IE NL EE AT UK SK MT LV LU HU EL IT LT ES PT PL

% o

f ch

ildre

n liv

ing

in a

hou

seho

ld w

ith W

I>=

0,5

Source: SILC (2005) - income year 2004 (income year 2005 for IE and the UK). UK data provisional.

VITAL ROLE OF SOCIAL TRANSFERS

At-risk-of-poverty rate before and after social transfers: impact of social transfers (excluding pensions) on poverty risk for children and for the overall population (in % of the poverty risk including

all social transfers), 2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

EU25 EL ES BG* LT IT PT PL RO* MT LV EE CY SK BE IE LU NL CZ UK HU DE SI AT FR DK FI SE

Children aged 0-17 Total Population

Source: SILC (2005) - income year 2004 (income year 2005 for IE and the UK); except for BG and RO estimates based on 2005 national household budget survey; UK data provisional

“the countries achieving the best outcomes are those that are performing well on all fronts, notably by combining strategies aimed at facilitating access to employment and enabling services (child care, etc) with income support”

[Child poverty and well being in the EU: current status and way forward, SPC, 2008]

Relative outcomes of countries related to child poverty risk and main determinants of child poverty risk

Child poverty outcomesJoblessness: children living

in jobless householdsIn-work poverty: children

living in households confronted with in-work poverty

Impact of social transfers (cash benefits excl. pensions)

on child poverty

GROUP A

AT ++ + + ++

CY +++ + ++ -

DK +++ + +++ ++

FI +++ ++ +++ +++

NL + + + +

SE +++ (++) +++ +++

SI ++ +++ ++ ++

GROUP B

BE + -- ++ +

CZ - -- + +

DE ++ -- +++ ++

EE -- -- + -

FR ++ - ++ ++

IE - --- + +

GROUP C

HU - --- -- ++

MT - -- --- --

SK - --- - -

UK + --- - +

GROUP D

EL + +++ - ---

ES -- + --- ---

IT -- ++ --- --

LT --- + --- --

LU + +++ -- +

LV -- - - --

PL --- - --- --

PT -- + --- --

BG -- --- : :

RO -- -- : :

Minimum income still the poor relation in active inclusion

• “The need to guarantee adequate levels of minimum resources receives insufficient attention in many strategies (i.e. NRSSPSI)” [2007 Joint Report on Social Protection and Social Inclusion]

– trend in many Member States to increased conditionality of benefits and more sanctions

– most minimum income schemes do not reach poverty threshold (60% median) and some fall below 40%

– thus fall far short of “the recognition of the basic right of a person to sufficient resources and social assistance to live in a manner compatible with human dignity” [1992 European Council Recommendation]

Recurrent issues re Minimum Schemes

• Complexity – means tests - categorisation

• Coverage and low take up• How to define adequacy

– Very wide differences in EU (28 euros in Latvia, 1130 euros in Denmark)

– minimum for dignity & social integration v subsistence minimum• Indexing• Integration with other allowances (e.g. housing)• Coordination with active labour market measures

– little mention of role of minimum income schemes in IRNRP• Disincentives

– Risk of lowering income support and increasing poverty

Positive approaches to making work pay

• Improving minimum wages • Reducing taxation on low paid• Tax credits • In work benefits• Tapering reduction of benefits• Work friendly child income support• Reducing costs of working

– child care; transport• Reducing irregular and atypical work• Raising skills

Ireland – a good example of the need for a balanced approach to active inclusion

• Historical focus on growth and jobs but persistent high at-risk-of-poverty levels

• In spite of economic and employment success long way to go especially on child and family poverty

– Low level of labour market participation of lone parents– Too high proportion of income from benefits – but inadequate– Low in-work poverty– High costs of work child care, housing, transport

• Moving towards a more integrated and consistent approach– Increased income support – More child friendly (improved universal child benefit, reducing child care costs)– Systematic activation: reintegrating and preventing long term unemployment; raising skills

(Back to Education allowance)– Making work pay

• increasing minimum wage • tax policy in favour of low paid • in-work benefits (family income supplement)

– Investing more in services (health, education, social services – but from v. low base)

Conclusion

• A comprehensive and joined-up approach is essential:– Improve minimum income schemes to ensure

the right of all to a life with dignity– Ensure that work pays and lifts people out of

poverty– Coordinate better labour market activation

measures, minimum income schemes and access to quality social services