Poverty and employment from a dynamic perspectiveRodolfo Gutiérrez Palacios

(rgutier@uniovi.es) Aroa Tejero

(tejeroaroa@uniovi.es)Department of Sociology

University of Oviedo

1. Introduction

Cross-sectional indicators often show an image of high stability in poverty

levels. The at-risk of poverty rate has varied just slightly more than half a point in all

EU-15 countries since the availability of the European Union Survey on Income and

Living Conditions (EU-SILC); it has recorded a top rate of 8 points in 2008 and 2009,

and a minimum one of 7,3 in 2005.

Also the frequency of in-work poverty situations is very stable in the majority of

countries, so the differences in this indicator across countries are also regular. In Spain,

one of the European countries with higher levels of working poverty, the in-work

poverty rate remained around 10,5 between 2004 and 2008, although in the last two

years it increased to 12,7 in 2010. In the United Kingdom, a country with medium

levels of poverty and working poverty, this indicator keeps on a similar behavior, albeit

in the opposite direction respecting to Spain along last years: the at risk of working

poverty maintained at 8 points in the early years and has decreased during the last years

of crisis to 6,8 in 2010. Likewise, in France, one of the countries with lower levels, the

in-work poverty rate has maintained very stable around 6 points, without changing

significantly in recent years.

The differences across countries, each of them representative of different welfare

regimes variants, are not only about working poverty, but about working poverty

profiles as a function of the basic mechanisms that cause it (Fraser, et al., 2011). In the

case of Spain, its highest level of working poverty is mainly associated with two types

of mechanisms: labor participation of the households, due to the frequency of

households with only one member occupied, or by the instability of that labor

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participation related to the frequency of temporary work; and the household

composition, so there is a higher working poverty risk in households with several

children (Goerne, 2011; García-Espejo y Gutiérrez, 2011). In the United Kingdom, their

medium level of working poverty is related both to labor participation factors, mainly

part-time work, and the frequency of single member households because of the earlier

emancipation of the youth; in this case, in-work benefits have a significant effect in the

reduction of poverty risk. In France, their in-work poverty level has to do primarily with

the low intensity of labor participation, as the minimum wage and in-work benefits

reduce that risk of poverty for households with adult members occupied (Goerne, 2011;

Alegre, 2011).

Cross-sectional indicators provide a limited information about working poverty.

It is well-known that there is a high turnover in the lower levels of the income

distribution. Only a small portion of poverty situations are persistent or chronic. The

majority of poverty spells use to be short and not extended beyond one year. It may also

be higher the frequency of returning to poverty after leaving it for a year. As a

consequence, the frequency which some households are suffering poverty situations

within a period of several years is usually much higher than the proportion of people

affected by poverty in a specific year. The mobility, the recurrence and persistence in

poverty are central aspects of this phenomenon and they cannot be captured by cross-

sectional indicators.

On the other hand, the dynamic perspective has been applied in the study of

poverty in recent years thanks to the availability of new and improved data bases that

permit an analysis like this. The EU-SILC allows to study from this perspective because

it has information on both household incomes, working situation of the individuals and

different key features of both. For this survey, households and individuals are followed

during four year periods and, therefore, the longitudinal perspective can only be

implemented in the medium term.

The dynamic perspective is particularly interesting for answering two types of

questions: on one hand, whether the differences in the in-work poverty levels across

countries respond to different patterns of persistence or/and mobility; on the other hand,

what basic mechanisms of risk poverty may be associated to among the different

patterns of mobility/persistence in countries with diverse institutional settings.

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This paper argues, first, the importance of applying the dynamic perspective to

the analysis of the relation between poverty and employment to revise then the main

international results about its dynamics and determinants. Then, the peculiarities of the

EU-SILC data for the dynamic analysis are presented, while are presented the main

operative concepts that are going to be used. The results of the paper are included in the

three following sections. The first one to compare transiency and persistence profiles of

working poverty situations in France (continental regime), United Kingdom (liberal

regime) and Spain (mediterranean regime). The following section analyzes the possible

trivial character of the transitions into and from working poverty, in order to see

whether these poverty transitions occur from income levels more or less near the

poverty line. Finally, they will be presented the different events associated with

transitions to each side of the poverty line, to determine the basic mechanisms that

cause the entries and exits of working poverty in the different national contexts.

2. National patterns of poverty mobility and determinant factors

The study of poverty has traditionally relied on the analysis of cross-sectional

data, aiming at quantifying and characterizing the composition of poverty in a particular

moment in time (Cantó, 2010). However, the measurement of poverty involves

measuring the standards of living of households, this is, the balance between their needs

and resources. Looking at those resources (different income sources of households) and

those needs (different composition and characteristics of households), it could be said

that those factors are not stable, but changing along the time. From this point of view,

poverty is the result of a longitudinal process of accumulation of these resources and

needs (Layte and Whelan, 2002).

Data from cross-sectional perspective show a clear stability of poverty rates, but

this does not mean that, below the same cross-sectional rate during several years, are the

same people (Headey et al., 1997). Thus, in Europe, 8,4% of those who have been

working mostly during 2010 are in poverty, according to data provided by Eurostat.

Looking at a broader period of years Spain, France, United Kingdom and Europe have

rates fairly stable during the last decade, standing the at-risk of poverty risk percentage

around 20%, 13%, 19% and 15% respectively, and the working poverty rate around

12%, 6%, 7% and 8% respectively.

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Therefore, poverty and working poverty, in recent years, either have experienced

an upward tendency or, at least, have not decreased, maintaining a clear stability, at the

same time that a expansive cycle of economy has been occurring (Gutiérrez et al.,

2011). This poverty rates stability is what has led many researchers to raise whether

poverty is a phenomenon as stable as shown by static analysis. The new data sources,

some of which allows to follow the same people during a period of time, have permitted

the implementation of longitudinal perspectives which, subsequently, allow to analyze

the dynamic component of poverty and notice if it is a phenomenon as static as it seems

through the observation of cross-sectional data.

The main researches that have applied the dynamic perspective to study poverty

have focused on the study of mobility and persistence or chronicity of poverty

(Gutierrez et al., 2011; Cantó, 2010). On the one hand, mobility of poverty has been

analyzed, looking at entry and exit rates of low income situations and the characteristics

of these movements; another part of the literature has focused mainly on what might be

called 'the chronic or persistence of poverty', focusing on the duration of poverty spells

and in their recurrent or transitory character (namely, repeated poverty spells). Also the

factors that affect both the mobility and the chronicity have been analyzed.

These studies show there is a high mobility among people who spend some time

in poverty and also that most of poverty spells are generally short of duration. However,

many of those who leave poverty return relatively quickly to it, meanwhile a substantial

minority experience poverty persists (Fourage and Layte, 2005). This produces a

paradox where poverty is presented, at the same time, as a fluid phenomenon, with high

mobility, a situation experienced by many people, and also as a persistent situation that

produces trapping for some people that, even though they are not the majority, suffer a

more severe situation (OECD, 2001).

Data provided by the OECD (2008) about poverty mobility reveal in their last

publication that the media of poverty entries rate for the OECD countries is 5%, while

poverty exit rates is 40%. In other words, almost half of the population changes its

poverty state from one year to the next one. Moreover, the report notes that mobility is

high, but there are substantial differences between countries, ranging Spain in an

intermediate position with a poverty entry rate around 6-7% and with a exit poverty rate

around 40-42% (Cantó et al., 2009).

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From poverty perspective, mobility of poverty can lead to observe that the

greater the mobility or volatility of income is over a certain period of time and the lower

the poverty spells, the greater the prevalence of poverty will be: the larger the period of

observation, the bigger the amount of people will be in poverty. If there is little income

mobility is more likely these people will be kept in poverty and the poverty prevalence

over time will be the same as cross-sectional poverty rates (and, therefore, the dynamic

analysis would lose importance). Conversely, if mobility is high and poverty is suffered

in short spells for the majority of the population, then the probability of being poor will

be more equably distributed (Fourage and Layte, 2005; Muffels et al., 2000).

The use of a cross-national perspective to the study of poverty dynamics has

highlighted that, as it happens with the national differences in poverty and working

poverty (Fraser et al., 2011; Lohmann, 2006), the institutional context is also a

determinant factor in the explanation of the national differences in poverty dynamics

(Layte and Whelan, 2002) because the relationship between current standard of life and

factors that influence the level of disposable resources in the household vary

systematically among countries, in line with the welfare regime theory (Esping-

Andersen, 1991). And this importance relies on, on the one hand, the fact that different

welfare regimes affect directly to the amount of resources that households and

individuals receive (Layte and Whelan, 2002) and, on the other hand, the government

influence on the final income distribution through income redistribution mechanisms

(Headey et al., 1997).

Even so, this pattern in terms of welfare regimes theory is more diffused and

difficult to apply with panel data (Gutierrez et al., 2011; Fritzel, 1990). The

socialdemocratic welfare regime, whose social protection systems are universal, with

high benefit incomes and extended in the population, is characterized by a lower cross-

sectional poverty rate and shorter poverty spells, which would result in a lower

frequency of persistence and transiency (Gutierrez et al., 2011). The counterintuitive

result that might be derived from the analysis of the persistence in this countries is that

the persistence that is expected to be is relatively high as the higher, more generous and

universal benefits of these countries may lead in lower level of incentives to improve

the situation and, given the greater income stability that they have, persistence may

appear as a relatively more common situation than expected (Fritzel, 1990).

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Countries with continental welfare states have less redistributive impact than

socialdemocratic ones, although higher than in the Liberal and Mediterranean traditions.

They are characterized by a poorer universal coverage of social protection systems,

where becomes important the degree of participation in the labor market and, therefore,

the more protected persons will be those who have a broad and stable employment

history, against those who have a more irregular career (temporary, part-time job, etc.).

Cross-sectional poverty rates are medium level in these countries and it is expected that

persistence and mobility poverty rates also are placed somewhere between the

socialdemocratic countries and the mediterranean ones. The results are less precise for

these countries, comparing with the substantial differences founded between the

countries of northern and southern Europe.

Liberal and mediterranean countries are the worst at fighting poverty. These

countries, apart from employment policies tend to be passive rather than active and,

subsequently, have a less protective social protection system with a less coverage

intensity. This implies that in these countries both the cross-sectional, transitory and

persistence poverty rates are higher than those of the other regimes considered. So

poverty is a more frequent situation and, at the same time, with more probabilities of

becoming a persistent situation. In mediterranean welfare regimes the social protection

systems would be less effective in promoting transitions from poverty at early stages,

but the higher incentives (given the low level of social benefits) would lead to a

relatively high poverty exit rates. However, the liberal countries, with their more wage

dispersion, would lead to a lower poverty exit rates (Fritzel, 1990).

Besides the importance of national context in explaining poverty experiences,

individual and household factors are also influent in a complex way (Layte y Whelan,

2002). In general terms, the literature that has traditionally studied the factors that

trigger entries and exits of poverty has associated to the labor changes, such as salary

reduction or occupation change with poverty transitions in United States. However, in

Europe, this mobility would be more conditioned by the demographic changes, the

household labor participation and the receipt of social transfers (Gutierrez et al., 2011).

Recent research in Europe outstands that poverty exits and entries are produced

mainly by changes in resources (in this case earnings) instead of changes in needs

(Layte and Whelan, 2002; Eurostat, 2001), being the labor incomes the more important

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in determining positions of people with regard to poverty (Jenkins, 2011). Apart from

labor incomes, transfers also play an important role in poverty mobility (Eurostat,

2011). Although it should be also highlighted that influence of both income resources

are different depending on the country (welfare regime) to which reference is made.

Regarding social transfers, they are more important in socialdemocratics, but

very little for the southern countries, standing the corporatists in an intermediate

position. Looking at the different impact of these incomes on poverty entry and exit

rates, it would be expected that these incomes would have more importance for exits

than for entries (since it is supposed that social transfers offset decline in other

incomes). This pattern of social transfers influence is very clear for entries, and quite

consistent with welfare regime theory, while it is maintained in exit rates, but in a more

diffuse way (Layte y Whelan, 2002).

Employment earnings show an inverse situation to that deduced from the picture

of social transfers. In this case, this income is very important in the poverty transitions

in southern European countries, little for socialdemocratic ones and displays medium

importance in continental regimes. Again this pattern is much clearer for entries than for

exit rates (Layte and Whelan, 2002). Therefore, and given the results, it is expected that

the importance of labor incomes in poverty transitions will be higher in the United

Kingdom and Spain than in France, and that the first have more importance of social

transfers comparatively on the French one.

There are very different poverty experiences depending on their length and level

of changes in income and living standards. There will be people who have just entry

into poverty and whose living standards are almost identical to last year (because they

were located near the poverty line) and, therefore, poverty does not mean a significant

drop in their living standards (Layte and Whelan, 2002). On the other hand, there will

be people who fall into poverty suffering a large descent in their incomes and, therefore,

in their living conditions. This approach arises to question whether the entry and exit

transitions are trivial or effective, whether people that transit to either side of poverty

line experience a great decrease in their living standards.

A study focused on OECD countries (OECD, 2008) shows that many of the

poverty exits occur to positions near the poverty line and, therefore, they should be

7

considered trivial (not effective) exits given that they do not suppose, on the one hand, a

substantial increase in the standards of living and, on the other hand, a effective

transition so that it does not move people far from the risk of falling back in poverty. In

the case of Spain, by observing the poverty entry rate, it may be also concluded that

they take place near the poverty line; if poverty exits are watched, there is a group who

move to points near the poverty line and another which manage to overcome, in some

cases, the median of incomes. The majority of transitions that are produced to points

above this datum come from the positions of most severe poverty, while those who are

near the poverty breakdown move continuously from one to other side of the line.

Observing the precedent position, the results show that 40% of households which are

situated in poverty in any given moment and 45% of those who exit from it, do so

coming from positions very close to the poverty threshold (Cantó et al, 2003; Bárcela

and Cowell, 2006).

3. Data and concepts

The European Union Survey on Income and Living Conditions (EU-SILC) is a

tool for the study of income distribution and social exclusion. Indeed, it is a survey that,

since 2004, all European countries have implemented with the same structure and the

main goal of collecting information about households and individuals in the European

Union, obtaining results which can be easily compared and represent a real help for a

better understanding of the current economic situation and living conditions of people.

The EU-SILC is a semi-panel sample, namely, a quarter of the sample is

renewed annually. This is what is called a rotating panel of four rotations. So a

household, or an individual, could be in the sample only four years and, therefore, the

data presented in this paper, although delimitated for the 2004-2009 period, refer to

three subperiods of four years each: 2004-2007, 2005-2008 and 2006-20091.

Turning now to the operational concepts used in the paper, the concept of

working poor holds two different realities, namely, have two dimensions, individual and

household level. A working poor will be a person who works and lives in a poor

household. There are too many ways of measuring both dimensions, however, for

1 When aggregated results are presented 2004-2009, it corresponds to de media of the three subperiods (two in the case of United Kingdom, wich period is 2005-2009).

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methodological reasons, in this paper it will be used the definition offered by Eurostat

and which is capable to be used in all European Union countries: a worker is a person

who, during the reference year, have worked at least seven months, during at least 15

hours a week. And a poor household is defined on the basis of the composition and

incomes of the household, namely, it is taken into account the household median

disposable income with the OECD modified scale. In this sense, a poor household

would be those situated below the 60% of the median equivalent income threshold.

The concept of poverty persistence presented is included in the Laeken

Indicators, which consider persistent poor all of those household which are in poverty in

a given year, having been in the same situation at least two of the three previous years.

Regarding the prevalence of poverty, since a dynamic point of view, it refers to the

number of people who have been in poverty at least one year (of the four possible) in

working poverty. The entry rates are expressed on the whole population basis and the

exit rates are based on the number of people that are poor in the first year of the

transition (OECD, 2008).

4. Persistence or mobility of in-work poverty?

This section discusses the persistence, mobility and prevalence of working

poverty over a four year period. The main purpose is to check if working poverty

follows the same pattern outlined by the studies of poverty dynamics; observe whether

the in-work poverty is articulated as a mobile or persistent phenomenon or, by contrast,

holds the paradox that shows poverty as a situation of high mobility and persistence at

the same time (OECD, 2001). In addition to it, a comparison between the countries

object of our study is made in order to see if the welfare state pattern remains or not.

Figure 1 presents the working poverty persistence rate for the available years

(2007, 2008 and 2009) according to the Laeken indicator proposed in the Lisbon

Strategy. It confirms the importance of welfare regimes theory in line with the results

obtained by Jenkins and Van Kerm (2011) where the persistence rates vary in function

of the welfare regime to which the specific country belongs to. Thus, Spain, the

mediterranean welfare variant, demonstrates the worst in-work poverty persistence rate,

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being the working poverty in France and United Kingdom very little persistent (only

around 1% of working poor are persistent).

On the evolution over time, stands out the increase in the Spanish in-work

poverty persistence rate from 2008 to 2009, varying from 4,4% to 6,2% and, therefore,

the Spanish working poor tend to suffer higher persistence risk in the last years. The

rates of France and United Kingdom are stable and, considering their low level, the

experimented changes can not be interpreted as significant.

Figure 1. In-work poverty persistence (Laeken Indicator)

2007 2008 20090

1

2

3

4

5

6

7

España Francia Reino Unido

Source: EU-SILC longitudinal microdata, own calculations.

Table 1 shows the mobility of in-work poverty through the analysis of the in-

work poverty entry and exit rates over the studied period. It confirms the high mobility

as a characteristic of the working poverty, as in all countries more than a half population

change their situation from one year to the next. However, there are differences between

countries, so the working poverty in France and United Kingdom is more mobile

(especially because of their high in-work poverty exit rates). This may be related to the

low persistence of working poverty in these countries, and thus their high exit rates and

their relatively lower entry rates makes poor population move more from one side to the

other of the poverty line and have less probabilities of persistence. The other end is

Spain with its lower exit and greater entry rates which confirm the higher probability of

persistence in the Spanish working poor.

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Table 1. In-work poverty entry and exit rates

  In-work poverty entries  2004-05 2005-06 2006-07 2007-08 2008-09 Mean of the periodSpain 5,2 5,8 6,3 6,4 6,5 6,0France 3,2 3,2 3,3 4,6 : 3,6United Kingdom : 4,1 4,5 4,2 4,5 4,3  In-work poverty exits  2004-05 2005-06 2006-07 2007-08 2008-09 Mean of the periodSpain 56,0 54,9 49,6 49,1 48,9 51,7France 73,0 64,0 62,9 55,9 : 64,0United Kingdom : 63,2 60,6 67,2 63,9 63,7

Source: EU-SILC longitudinal microdata, own calculations.

One of the advantages of dynamic perspective in the analysis of poverty is,

confirming a high mobility, the fact that it allows seeing how there actually are more

people experiencing poverty than shown by static rates. Figure 2 shows this tendency in

working poverty. In Spain 22,4% of workers is at least one year in poverty over the four

observed, being France and United Kingdom countries with lower prevalence, 11,7%

and 12,9% respectively. In the case of Spain and France this finding means twice the

datum. That static rates reflect. The higher mobility of working poverty in France and

United Kingdom, in this case, would not be leading to a higher prevalence comparing to

Spain, where the high prevalence of in-work poverty over time is due both to a certain

degree of mobility and a relatively high in-work poverty persistence rate.

Figure 2. In-work poverty persistence rate

España Francia Reino Unido0

5

10

15

20

25

Source: EU-SILC longitudinal microdata, own calculations.

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Therefore, it can be said that the working poverty is also configured as a mobile

and persistent phenomenon at the same time, and it highlights that work is not enough

to avoid the worst poverty situations, the uncertainty generated by the high mobility and

the persistence situations that produce a clear decrease in the accumulated resources

and, therefore, in the future opportunities. The high mobility shows that there are more

people living in poverty than what might be expected observing the data. Finally, the

national differences have shown Spain, representative of the mediterranean welfare

regime, as the worst country fighting persistence and mobility of working poverty, as

could be predicted. By contrast, United Kingdom and France present A more similar

situation than expected, given that, on the whole, they fight poverty in different ways.

5. Proximity of in-work poverty mobility

After having seen the importance of mobility in working poverty, this section

focuses in the effectiveness of working poverty exits and the severity of working

poverty entries observing from and to what point of the distribution move workers

experiencing transitions to either side of poverty line. Thus, Tables 2 and 3 introduce

the descriptive results of the level of origin and destination of the working poverty

entries and exits, the proportion of entries and exits in working poverty by origin

position and the entry and exit rates also by origin position. This analysis points to the

2004-2009 period (for United Kingdom from 2005). Workers are distributed in

percentiles respect to the median equivalized income (on which poverty line is

calculated) based on their income in the first year of transition (t-1) and the last (t).

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Table 2. Income level at origin and destination of in-work poverty entries , 2004-2009

SPAIN  % of the

median in t-1

Proportion by procedence

% of median at tEntry rate

[≥0, ≤30] [>30, ≤40] [>40, ≤50] [>50, ≤60]

[>60, ≤70] 25,1% 14,3% 12,0% 29,8% 43,9% 28,0%[>70, ≤80] 19,4% 21,5% 12,2% 18,6% 47,7% 17,3%[>80, ≤90] 13,1% 21,1% 15,4% 22,0% 41,6% 10,9%[>90, ≤100] 8,8% 16,2% 15,5% 34,5% 33,7% 7,2%[>100] 33,6% 39,6% 7,0% 19,1% 34,4% 2,9%

FRANCE  % of the

median in t-1

Proportion by procedence

% of median at tEntry rate

[≥0, ≤30] [>30, ≤40] [>40, ≤50] [>50, ≤60]

[>60, ≤70] 34,2% 4,0% 0,9% 23,4% 71,6% 24,9%[>70, ≤80] 19,3% 6,1% 8,4% 14,2% 71,4% 10,1%[>80, ≤90] 10,7% 2,3% 15,1% 13,8% 68,8% 4,6%[>90, ≤100] 9,3% 14,7% 6,8% 22,3% 56,3% 3,4%[>100] 26,4% 15,3% 14,1% 18,9% 51,7% 1,4%

UNITED KINGDOM  % of the

median in t-1

Proportion by procedence

% of median at tEntry rate

[≥0, ≤30] [>30, ≤40] [>40, ≤50] [>50, ≤60]

[>60, ≤70] 18,0% 15,6% 11,8% 21,4% 51,2% 16,4%[>70, ≤80] 16,4% 9,0% 12,2% 28,1% 50,6% 10,9%[>80, ≤90] 11,5% 24,5% 6,1% 25,4% 44,1% 6,9%[>90, ≤100] 12,5% 28,6% 14,7% 30,1% 26,6% 7,7%[>100] 41,7% 25,6% 15,6% 22,1% 36,7% 2,4%

Source: EU-SILC longitudinal microdata, own calculations.

Looking at entries in poverty according to their position of origin, in the three

countries analyzed, the majority of people that fall into poverty do so from positions

over 70% of median equivalent income and, therefore, they would not be considered as

the more likely population to suffer transitions into poverty. In Spain, only 25% of

people fall into poverty from just above the poverty line, being 34% in France and

18% in United Kingdom. There also are a proportion of people that, being above the

median of incomeS and, therefore, being a less vulnerable group, transit into poverty,

being this percentage higher in Spain (33,6%) than in France (26,4%), and specially

striking in the United Kingdom (41,7%). Therefore, the falls into poverty are not trivial

and suppose an important decrease in the household incomes and in their living

standards, being this tendency sharper in United Kingdom and Spain than in France.

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A common feature, consistent in the three analyzed countries, is that the entry

rate by origin position seems to be determined by the position of the household in the

distribution of incomes. This exit rate decreases from 28% in Spain, from 24,9% in

France and from 16,4% in United Kingdom whose workers are those that stand just

above the poverty line, to 2,9%, 1,4% and 2,4% who, respectively, entry into poverty

from positions above the median equivalized income.

Looking at the transitions of entry into poverty and the positions reached, the

majority of them (more than 50%) get to some position between 40% and 60% of

median equivalent income, being this proportion higher the lower the origin income

level of the transition is, which may be due to many of the movements of people

standing in the higher part of the income distribution do not appear reflected as they do

not involve a entry into poverty, however the closer to the poverty line one would be,

the more probability that income change involve entry into poverty will be (Cantó et al.,

2003).

A distinguishing feature, especially between France and Spain and United

Kingdom, is that between 25,6% and 39,6% of those who come from positions above

the median in Spain and United Kingdom, respectively, are situated, after the transition,

in the lower end of the distribution, highlighting the increased volatility of incomes in

these countries and their possible seasonal component. France, however, produces more

trivial entries into poverty, so more than a half of those who fall in poverty (regardless

of their origin position) do so to positions near the poverty breakdown.

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Table 3. Income level at origin and destination of in-work poverty exits, 2004-2009

SPAIN% of the

median in t-1

Proportion by procedence

% of median at t Exit rate[>60,

≤70][>70, ≤80]

[>80, ≤90]

[>90, ≤100] [>100]

[≥0, ≤30] 22,9% 17,5% 14,9% 11,5% 10,8% 45,3% 48,4%[>30, ≤40] 10,4% 21,5% 22,3% 10,4% 6,3% 39,5% 38,5%

[>40, ≤50] 24,4% 20,5% 19,7% 15,5% 10,3% 34,1% 46,8%

[>50, ≤60] 42,3% 27,5% 20,5% 15,6% 9,6% 26,8% 58,3%

FRANCE% of the

median in t-1

Proportion by procedence

% of median at t Exit rate[>60,

≤70][>70, ≤80]

[>80, ≤90]

[>90, ≤100] [>100]

[≥0, ≤30] 5,3% 11,9% 2,5% 6,2% 10,9% 68,6% 42,8%[>30, ≤40] 10,6% 17,7% 26,2% 13,5% 8,3% 34,1% 53,4%

[>40, ≤50] 22,2% 23,8% 25,1% 16,6% 15,0% 19,5% 55,9%

[>50, ≤60] 62,0% 33,5% 21,7% 15,1% 6,9% 22,8% 67,9%

UNITED KINGDOM% of the

median in t-1

Proportion by procedence

% of median at t Exit rate[>60,

≤70][>70, ≤80]

[>80, ≤90]

[>90, ≤100] [>100]

[≥0, ≤30] 16,4% 11,3 18,8 5,0 14,8 50,0 62,7%[>30, ≤40] 12,4% 16,2 14,8 12,7 12,6 43,8 61,9%

[>40, ≤50] 24,5% 24,6 23,5 9,3 8,4 34,1 60,7%

[>50, ≤60] 46,7% 25,8 17,5 14,2 8,1 34,4 67,8%

Source: EU-SILC longitudinal microdata, own calculations.

Regarding in-work poverty exits, they show that they do not need substantial

increases of incomes, so the majority of the exits start from positions immediately

below the poverty line, between the 50% and 60% of median equivalized income. This

is more evident in France, where 62% of entries do so from that position and, although

in a softer way, there also are a significant proportion in United Kingdom, 46,7%, and

Spain, 42,3%. The in-work poverty exits which are produced from positions below 30%

of the median equivalent income are quite high in Spain and United Kingdom (22,9%

and 16,4% respectively), taking these groups poverty exit rates quite similar at the rest

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of the groups (48,4% and 62,7% respectively). This suggests that these groups either

have seasonal incomes or registered low incomes only occasionally (Cantó et al, 2003).

Exit rates do not show a clear dependence of the origin in the income

distribution, especially in United Kingdom, where the exit rates do not vary a lot in

function of the initial position (from 61% to 68%), and in Spain, where they vary from

38,5% and 58,3%, but without a clear pattern. Therefore, the exits in both countries

would be more conditioned by demographic or labor events that some member of the

household experiment (Cantó et al., 2003). In France, by contrast, the exit rate decrease

when the initial position is lower in the distribution, from 67,9% to 42,8% gradually.

An analysis of exits in function of the position that is reached at the end of

transition does not show patterns as clearly as for the entries. However, there is a group

which, starting from the lowest positions in all countries, manages to overcome the

median equivalent income (45,3% in Spain, 68,6% in France and 50% in United

Kingdom). At the same time, and in general, from any origin position, more than 20%

(and ranging to 68,6% mentioned in France) also transit to positions above the median

of income. This seems to confirm the seasonal character of some incomes or possible

errors in income measurement (Cantó et al., 2003).

It can be concluded that in-work poverty mobility implies higher changes in

living standards of spanish and british workers, what can be explained by the greater

income volatility of their income distributions. The mobility in these countries,

therefore, is more important so this rapid and extensive changes in the living standards

may lead to the aforementioned household instability, something less present in France.

6. Events associated with in-work poverty mobility

In this last section the descriptive results of events associated with in-work

poverty entries and exits are presented. Tables 4 and 5 show the results for in-work

poverty entry and exit rates respectively. It has been taken into account both

demographic events (increases and decreases in the number of dependent and adults in

the household), labor events (increase and decrease of working people in the household)

and events related to incomes (increases and decreases of salaries and social transfers

16

received). The data presented are for transitions between 2004 and 2009 (2005 for

United Kingdom).

Table 4. In-work poverty entries by demographic, labor and income events (2004-2009) 2

Spain France United Kingdom

Increase the number of dependent in the household 1,3 0,4 0,3

Decrease the number of dependent in the household 0,1 0,0 0,0

Increase the number of adults in the household 3,2 2,6 0,6

Decrease the number of adults in the household 1,8 0,9 0,2

Total of demographic events 6,4 3,8 1,1

Increase the number of occupied in the household 2,6 0,2 0,5

Decrease the number of occupied in the household 9,1 2,2 5,9

Total of labor events 11,7 2,4 6,4

Increase in the social transfer received 0,6 13,2 6,7

Decrease in the social transfer received 6,3 16,4 13,0

Increase of salary 6,8 11,2 7,4

Decrease of salary 35,4 34,5 51,7

Total of income events 49,1 75,3 78,7

Unidentified events 32,9 18,4 13,8Source: EU-SILC longitudinal microdata, own calculations.

Comparing the importance of demographic versus labor events, it is clear that

last of them are more important in Spain and United Kingdom than the demographic

events, going the opposite in France. Spain and United Kingdom, in this respect, show

results closer to what could be expected to happen in United States instead of Europe,

where demographic events are supposed to be more influent. Anyway, the demographic

events, are also very important in Spain, highlighting the high cost of having dependent

children in these poor households.

2 Para todas las tablas de cambios, en el Reino Unido el periodo de análisis es del 2005-08, y para Francia 2004-2007.

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The majority of the entry transitions are produced at the same time of an income

event, especially a labor income event. Taking into account the different welfare

regimes described along this description, the importance of this theory is confirmed

observing the in-work poverty entries. Although labor incomes are the more important

events, the importance of a decrease of social transfer is also highlighted: 16,4% of

entries are produced at the same time of a decrease of this income in France, following

by United Kingdom, 13%, and Spain, 6,3%, so the different redistributive impact of the

welfare regimes makes that social transfers are less important in Spain than in United

Kingdom and France.

The impact of earnings do not follow the expected pattern (with earnings being

more important in mediterranean welfare regime, followed by the liberal and continental

ones) so results reflect the same importance of this income in France and Spain, with a

clear distance from United Kingdom where the in-work poverty entries are produced at

the same tame as a decrease in wages in 51,7% (being around 34-35% in Spain and

France). It is remarkable, also, the high proportion of entries produced at the same time

as an unidentified event (32,9% in Spain, 18,4% in France and 13,8% in United

Kingdom).

In-work poverty exits show a picture slightly different of what it has been seen

in the entries analysis and what we would expect regarding the results of other poverty

dynamics research, although consistent with other results of in-work poverty mobility

(Gutierrez et al., 2011). Again it is Spain where the largest importance of labor events

appears, comparing with demographic events: the same happens in United Kingdom,

although less sharply. The high importance of the increase of earnings in Spain (12,4%

in contrast with 2,1% in France and 3,7% in United Kingdom) confirms the importance

of labor participation of all the members in the household as a factor to avoid the risk of

poverty.

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Table 5. In-work poverty exits by demographic, labor and income events (2004-2009)

Spain France United Kingdom

Increase the number of dependent in the household 1,1 0,3 0,4

Decrease the number of dependent in the household 0,2 0,0 0,0

Increase the number of adults in the household 1,6 1,7 1,5

Decrease the number of adults in the household 1,5 0,5 0,4

Total of demographic events 4,5 2,5 2,2

Increase the number of occupied in the household 12,4 2,1 3,7

Decrease the number of occupied in the household 4,0 1,1 2,9

Total of labor events 16,3 3,2 6,6

Increase in the social transfer received 1,1 10,7 14,0

Decrease in the social transfer received 2,7 17,9 13,2

Increase of salary 37,2 44,7 23,9

Decrease of salary 6,1 8,1 18,2

Total of income events 47,1 81,4 69,2

Unidentified events 32,0 12,9 22,0Source: EU-SILC longitudinal microdata, own calculations.

The income events are again the most produced in the in-work poverty exits.

And the same pattern of importance of social transfers is confirmed, being they much

more important in France (around 30% for in-work poverty exits in France and United

Kingdom and 3,8% in Spain). Among the events associated with social transfers

changes in France and United Kingdom, they occur both whit an increase or decrease in

this income (indicating they have triggered the transition) and with a decrease of social

transfers, highlighting, in this case, that social transfers works as a substitute of other

incomes which could be decreased.

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Labor income events do not follow the expected pattern according to the welfare

regime theory. 44,7% of the exits from working poverty in France happens at the same

time as an increase in the salary, being this rate lower in Spain (37,2%) and United

Kingdom (23,9%), when the expected situation would be the contrary. Also in the in-

work poverty exits it have been found an important amount of movements that do not

correspond with any of events took into account (32% in Spain, 12,9% in France and

22% in United Kingdom).

The analysis of events associated with working poverty transitions, therefore,

shows an image slightly different to what have been concluded by the main research on

poverty dynamics. There is great importance of income events and, therefore, of the

importance in changes in resources instead of needs, as expected. Within this, the labor

events are the most important although the pattern is contrary to what can be expected

and derived from the poverty dynamics welfare regime theory: this are less important in

the mediterranean regime, than in the liberal and continental ones. The importance of

social transfers reflect that continental welfare regimes are fighting better against

poverty through the social transfers, followed by liberal and mediterranean ones (where

this kind of events have little importance).

7. Conclusions

This study presents a first dynamic analysis of working poverty from a cross-

national perspective from three European countries, representative of a welfare regime

variant each of them. The first objective was to observe whether the dynamic working

poverty follow the same patterns shown by dynamic analysis of poverty in general.

With a view to that, we have analized the in-work poverty mobility and persistence

during last years, at the same time that we have tried to determine whether in-work

poverty dynamics suppose substantial income changes. And, finally, we have analized

the possible factors that are conditioning the movements to either side of the poverty

line.

It was confirmed that in-work poverty is a mobile and persistent phenomenon at

the same time. This supposes that working poor faced the most challenging and severe

faces of poverty: the uncertainity generated by the income mobility and the depletion of

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accumulated resources and the future chances as a result of this persistence situation.

This analysis has shown the prevalence of working poverty over a 4 year period is

higher than displayed by cross-sectional poverty rates. In turn, Spain, so the

mediterranean welfare regime, is the one with the higher in-work poverty persistence

rates. However, this pattern of persistence do not reflect significative differences

between France and United Kingdom, suggesting that there is little difference in the

dynamics of poverty in two very different institutional environments.

The analysis of mobility and proximity of in-work poverty shows that the

movements are both short and long range; in some cases, the in-work poverty

transitions are accompanied by substantial changes in incomes. These changes are

greater in Spain and United Kingdom than in France, reflecting the more flexible labor

markets and greater income volatility of the income distribution that exists in these

countries and that makes a less stable pattern of poverty.

Finally, just as happens with poverty dynamics in general, when events that

trigger into transitions of poverty are taken into account, it has been confirmed the

major importance of income events, compared with demographic and labor ones.

However, the tendency of this influence is not what was expected so these incomes are

more important in France, followed by United Kingdom and Spain. The importance of

social transfers do ratify the more redistributive character of the social protection system

in France and United Kingdom where some of the transitions occur with a change in

this incomes, when these are just important in the Spanish working poverty.

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