Public policy and European society University of Castellanza

1
Public policy and European societyUniversity
of Castellanza

• Session 3(b)
• Income inequality and poverty
• November 12 2009

2
Gradients of Inequality

• Income distributions
• Growing inequality
• Poverty

3
Defining income

• Different sources of income
• Primary employment
• Property income
• State transfers
• Inputed income (e.g. state education)
• Before or after tax
• Unit Individual or household
• Sources surveys, tax returns

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Income distributions

• Continuous distribution
• Groups are statistical not social
• Measuring Income inequality
• Gini coefficients
• 0complete equality, 1 complete inequality
• Percentages of units (people/ households)
• What is the income of (e.g.) the poorest 10?
• Percentages of income
• What percentage of units have (e.g.) less than
  50 of the average (mean or median) income?

5
Income inequality within EU Gini coefficients
The Gini coefficient is the simplest measure of
inequality of any distribution 0 means total
equality (everybody is equal) and 1 total
inequality (1 person has everything). The chart
suggests there is little relationship between
economic growth, overall wealth and the extent of
inequality.
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Growing inequality in USA
Source Ryscavage, p59.
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Gender equality and social inequality.
Source Ryscavage. P.98. Chart shows during the
1960s and 1970s this initially means growing
equality amongst women (the period when women
began to enter the workforce), but then from the
late 1970s inequality amongst women increases.
By contrast inequality amongst men has been
rising since the early 1970s.
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Growing inequality

• Globalisation
• Falling demand for unskilled labour
• Competition for unskilled jobs through
  outsourcing and/or mass immigration
• Sectoral and structural change
• Fewer well-paid male manual jobs
• Service sector polarised
• Mass unemployment
• New impact of womens labour force participation
• Earnings inequality within sectors
• Privatisation marketisation
• Lower demand for unskilled
• Winner takes all job market
• Political
• Tax cuts and changes benefit rich
• Reduced income support and welfare
• Decline of trade unions

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Defining poverty

• Absolute poverty
• Minimum necessary for survival (Rowntree, early
  20c)
• USA poverty line 1963 minimum needed to purchase
  bare necessities
• BUT social definitions of minimum the same in
  Calcutta and London, even Warsaw and Dublin?
• Relative poverty
• Related to normal income in society
• Frequently linked to notions of social
  participation and inclusion
• People are poor wholack the resources to
  obtain the type of diet, participate in the
  activities and have the living conditions which
  are customary, or at least widely recognised or
  approved, in the societies to which they belong
  (Townsend 1979 31 quoted in Mingione 19968).
• This assumes a cut off point in income below
  which people are excluded which in principle
  can be empirically located
• Assumes social consensus on what is normal
  which may itself be more plausible in relatively
  egalitarian societies!
• The EU has agreed a poverty line for each
  Member State of 60 of the median income in that
  Member State.
• Using this definition we can see how many people
  are in relative poverty, we can even attempt
  to abolish poverty.

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Measuring poverty

• Headcount
• Number of people below a specific level of income
• Depth of poverty
• Attempt to measure how many poor are very poor-
  i.e. their distance from the poverty line
• Risk of poverty
• Income poverty does not necessarily mean poor
  living standards (housing, already purchased
  consumption goods etc)
• Movement in and out of poverty people may only
  be poor for very short periods

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Poverty rates in the EU 2003
At risk of poverty rate by country 2003 at
risk of live in households where household
income is below 60 of the national equivalised
income. Source Joint Report on Social Protection
and Social Inclusion 2006 data from Eurostat.
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At risk thresholds EU 25 2005
Illustrative values for a household of two adults
with two dependent children (under 14) threshold
is 60 of the median income in the specific
Member State
13
Poverty in the EU c2007
Children and old people are usually more likely
to be in poverty
In EU27 16 of the population are in poverty
ranging from 10 in the Czech Republic and the
Netherlands to 21 in Latvia
14
Children in poverty EU 2005
Some countries are much more effective than
others at reducing poverty in single parent
households
Chart shows of all children and of children in
different households who are at risk of poverty
in the different EU member states from Sweden at
the lowest to Poland at the highest. Source
Joint Report on Social Inclusion....2008.
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National or European standards?

• Taking those with less than one third of average
  income in EU as in extreme poverty
• For total population of EU15 (1997)
• Total 2.7
• Luxembourg 0.4
• France 2.1
• Greece 9.4
• EU22 (EU25 less Latvia, Lithuanian and Slovakia)
• France 1.9
• Poland 34.6
• Estonia 51.8
• EU27
• France 1.8
• Bulgaria 63.6
• Source Schmitter Bauer (2001)

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National or European standards?
The median income in Romania is far less than
the poverty threshold in most EU states
Source Fahey (2007) using 2001 EU indicators
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New welfare state?

• New demands
• Choice - those who have least choice are usually
  poorest
• Empowerment Potentially these can drive up
  standards and above all reduce capture of
  welfare systems and services by providers (e.g.
  education, health, social work)
• Recognition of diversity and lifestyle change
  (e.g. family form)
• New risks
• Growing changes over life course, especially but
  not only in employment, often unpredictable
• New state
• From remedial to enabling (e.g. Life Long
  Learning)
• From passive to active support (e.g. Active
  Labour Market Policies)
• Reconciliation of social diversity with social
  solidarity (Rights and duties)
• Criticism
• Risks under-estimating growing income inequality
  and poverty (e.g. new working poor in Germany)
• Undermines public ethos in state services