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CSB WORKING PAPER centreforsocialpolicy eu June 2012 No 12 / 06 University of Antwerp Herman Deleeck Centre for Social Policy Sint-Jacobstraat 2 BE – 2000 fax +32 (0)3 265 57 98 Individual Employment Household and Risk Poverty in the EU A Decomposition Analysis Vincent Corluy & Frank Vandenbroucke NO Analysis1 (UA) (KU Leuven UA)2 Working Paper ABSTRACT In this paper we explore missing links between employment policy success (or failure) inclusion relying on Labour Force Survey (EU LFS) Income Living Conditions SILC) At side equation our focus is share individuals at risk poverty 20-to-59 age cohort The analysis proceeds two steps first step considers distribution individual jobs over households thus establishing a link rates household Following work by Gregg Scutella Wadsworth ‘polarization index’ defined terms difference one hand hypothetical living jobless assuming that distributed randomly across other actual Actual changes joblessness are decomposed (i) due to polarization (ii) changing structures second decomposes at-risk-ofpoverty basis risks (non-jobless) households; (iii) (changes would expect if no occur) (iv) proposed technique does yield interesting insights into trajectories welfare states have followed past ten years Keywords: work-poor at-risk-of-poverty rate convergence 1 Funding research was provided Net SILC2 Second Network EU-SILC (http://www essnet-portal eu/net-silc2) We thank Paul De Beer Bea Cantillon colleagues Brian Nolan participants seminar KU UvA precious comments usual disclaimers apply Correspondence vincent corluy@ua ac be INDIVIDUAL EMPLOYMENT HOUSEHOLD AND RISK OF POVERTY IN THE DECOMPOSITION ANALYSIS 3 Introduction Is best recipe against people working age? level citizens which they live participation labour market significantly diminishes financial However what seems evident less country Prior crisis Lisbon strategy could regarded as qualified field least assumes there been causal relationships agenda growing Europe On though largely failed deliver its ambitious promise concerning Notwithstanding generally higher well declining some Member States saw increase many standstill record Rather than general conversion anti-poverty overall picture national at-risk-of rates: increased where were traditionally low decreased high Hence it important understand those statistical apparatus Since an determined income belongs relation must all analyzed level; hence will establish measures As explain Section face difficult choice different conceptions Our time frame use SILC 2005 2008 refers observations 2004 2007 label these analyses ‘2004/5-2007/8’ This short linked data limitations but also per se want study refer year prior survey spans (except Ireland United Kingdom) ILObased definition realities observed immediately before whilst ‘work-poor’ (see 4) 12-month period To summarize complex construal 4 trajectory (24)4 during ‘good economic years’ 2004/5-2007/8 longer term present concerns frames: 1995-2008 (on LFS 1995 en 2008) 11 countries 2000-2008 23 inquiry should enable us verify empirically explanations disappointing trends era put forward Vleminckx (2011) wit outcome partly attributable failure reduce number or despite increasing evolution 2004/5 2007/8 then configuration (2008 2010) Changes can further shown below benchmark ‘random jobs’ applied not carry normative meaning message read follows understanding: extent positive avoidable signals suboptimal situation state (nonjobless) Thus integrate (the employment; poverty) single principle allow assess impact ceteris paribus practice make such integrated hard conclusions draw only tentative Bulgaria Romania Malta yet available 5 Although caveats warn simplistic interpretation decomposition pursued uncovers puzzling combination disparity within Convergence fundamental markets since albeit unequivocally outcomes (in 20 59) boom presumably upshot growth intergenerational shifts new decreasing Anglo-Saxon Scandinavian same evidence suggests social Polarization levels sizes constitute structural background features states; together with differences spending help their performance regard reduction cumulative incremental size structure play role pre-transfer performances priori plausible assume factors contributed significant lack test hypothesis; shows did noteworthy span except But diminish importance policy-makers attach presence numbers possibly problematic conditions based more subtle distinction ‘work-rich’ allows enrich set out 6 Employment: Alternative Definitions Stratification Sections using ILO concept According employed hour week member bracket 20-59 so cut ‘jobless rate’ ‘household joblessness’ conception distinguishing from Applying measurement intensity Eurostat framework 2020 consider it’s 50% latter notation wp0 former (joblessness) population reference group exactly 5: ’adults’ belonging excluding full-time students (that members aged 20-24 status inactive) Similarly checked underlying radically used survey; working-age For calculation made samples alas leading divergent results 7 contrast order calculate ratio total months (excluding students) worked theory them persons who reported having part-time estimate full-time-equivalent computed usually hours interview indicator calculated matter degree (no activity whatsoever versus limited activity) exclude full both when count (to classify ‘jobless’ ‘not jobless’) define considered ‘full students’ 18 24 ‘inactive’ whether comprised 22-year-old non-student adult depends nonstudent problem discussed Graaf appendix timeframe applied: whereas (income period) identified may no-one happened even experienced irregular spells before; metric Unsurprisingly average value under review : 9 5% 15 7% i e surprisingly (pwp0 ) while typically 5) lower Denmark Greece Norway France Estonia Two First measure comparable ILO-based pwp0 (i looking back twelve taking account do here) non-linear most countries: equal zero experience close nonzero (European Commission 2011 p 157 Chart 21) Prima facie fact includes substantial pensions prepensions 59; early-exit schemes better unemployment assistance benefits offer 8 appears influenced studied; preliminary here suggest groups considerably ‘early-exit generation’ 55-59 excluded Figure 1: At-risk-of-poverty non-jobless (ILO One reasons why chosen instead 20% focusses yields subgroup strictness takes frequency normal wanted sufficiently large safeguard significance analysing subdivisions European begins drop increases beyond explains Simultaneously (for adults) comes down adults exceeds ibidem) 0 10 30 40 50 60 70 80 90 EL DK NL FR SE PL AT IS HU SK IT IE FI RO LU SI ES PT CZ CY UK LT BG DE EE LV pwr (wi > 0) pwp = 2: work-rich (EU2020 Individuals Jobless Workpoor Households Who confronted (ILO-concept) intensity? probit EU-15 EU-10 reveals strong stratification seen distinguish old because might sociological post-communist societies today’s ‘old’ ‘new’ quite similar; apart associated being reflects deep-rooted disadvantages born come rather early lives underscores challenges activation strategies reach successfully 00 < >= 3: Marginal effects probability (ILO) unsurprisingly result part mere ‘mathematical’ effect absence pooling reveal singles run ‘household’ peers larger (peers gender education studied analysis) incur pooled children influence household: small negative cancelling each Whatever see disabled individuals11 whose educational attainment secondary With age-result intuition Compared 20-29 30-54 line given exit marginal refine ‘within’ ‘between’ conditional shed light question That specific subgroups instance variable captures person’s own perception main respondent indicates permanently or/and unfit -0 sex (male) (30-54y) (55-59y) marital (married) (medium) (tertiary) origin (non-EU born) wa hh child wp (eu2020) jl (ilo) very similar fine-grained 4: There profiles (jobless household) disability Also outspoken different: reduces (compared singles) relatively two-adult three-plus has smaller direction relates non-EU residents Their compared EU-born resident conclude ‘joblessness’ (wp0 ‘work poverty’ 50%) dynamics Some relationship cross-country correlate way 59 Table Cross-sectional correlations post- concepts Correlations post-transfer … (*) (ⱡ) 2006 ∆ – 08 58 51 48 34 housheolds 09 04 35 42 32 31 16 36 27 37 53 78 73 62 69 76 49 54 67 79 NOTE: These imply causality nor significance; merely serve work-poverty obviously opposite sign Given earlier assertion through surprising negatively show correlation covered Different prima counterintuitive correlates positively mitigated posttransfer prevailing ‘non-jobless’ weight Third comparison among (individual 13 other) segment Finally cash benefits; transfers Together elements pursue illustrates Contrary surveys rates; at-risk weakly inferred (a coefficient ∆wp0 focuses Trends referring Germany) diminished substantially sample decline percentage points improvements example Spain respectively much point households’ everyone work) ‘mixed declined Those explainable pure shares understanding stress [to elaborated] 14 reflecting completely illustrate Spanish case ‘mixed’ 17 dotted lines how consisted households: rise decrease household’ 21 spectacular somewhat quarter half (thus making employment’ median situation) essence mathematical corollary (measured points) ‘expected’ gap (6 expected 2-adult (11 calls additional ‘polarization’ provide examination (2-working age) exceptional Specific consistent range depending distributed; respect diversity prevails Distribution mixed (2008) propose counterfactual evaluate Like Lorenz curve predicted occur So fewer) random Formally (using ” simplify notification)
1   − with: ℎ    ℎℎ         ℎ    ℎℎ
 !! ”    !  #    ℎ  ℎ ℎ     !        100 1996 1997 1998 1999 2001 2002 2003 Share + Total Expected size= Obviously lead things noone Ceteris decreases distinguished ‘predicted function (X) (Y) presented If identical estimates appear diagonal Countries above encounter distance magnitude cardinal start Southern (most saliently Spain) Luxembourg had Negative theories division non-work (Danziger Katz 1996) added worker (Cullen Gruber 2000) All exhibited displaying Italy remained throughout entire approached became grew unequal Belgium display highest evenly 6: emphasize expression ideal context job opportunities ‘positive polarization’ kind ‘Matthew effect’: concentration advantage (say partner someone already employed) partners jobless); ‘negative appreciated form solidarity fair scarce either maximally ‘randomly cost: need supported cost sense equilibrium vein underscore ‘mathematically’ mean carries societal It means modernizing society mitigating (risk nonemployment) becomes progressively (percentage point) corresponds EU11 PTNL ‘probabilistic’ sense) examined Continental EU15 observes upward pattern beta-convergence catch-up process sigma-convergence dispersion values index 39 particularly By characterizing beginning reduced exception moving group) Why index? any diverges certain (defined size) Over divergences type change referred ‘within-household shift towards without itself; ‘between-household Combining insight assertions about determinants rates’ four terms: non-employment affect rate; argument illustrated simple hypothesis whole consists n implies n2 ‘individual wp/n (dwp/dn 2n) interpreted shares); elasticity ( dn dwp always reasoning etc Beta-convergence 81 initial 1995-2008; standard deviation sensitive outliers unlike Omission 66 35; Appendix combined region explanatory factor 19 between-household upon degrees polarization; within-household Such shift-share following (from 2008):
2 Observed ∑ ∆9 :0 5>9  @AB C 9DA (contribution n) >9:0  @A B structure) ∆>9[0 5
9 5F @AG ‘between polarization’) ∆F H:0 ‘within k K maximal πk wpk actually add up ‘predicted’ wpe (1) which: (unconditional) nonemployment -6 -8 -9 01 05 -5 29 97 -4 25 03 65 33 -3 02 26 -2 43 84 85 -1 75 41 72 46 68 74 95 96 64 44 07 91 99 (column column 5); 4); 7) fallen rising (Table 3) exert pressure strongly contribution workless component Most divergence stems increasingly skewed Moreover types Only equally notwithstanding suffering lone mothers inactivity traps tax- benefit systems 7: restricts consideration EU-27 minus Sweden Finland Malta) Between again beta (albeit robustly) eleven availability stretches real Members: (with 75) 25) onwards movement outspoken: (standard 88) 50) trend driven mainly female (cf power robust eliminating starting P signalling 71 EU-23 EU-11 elaborate elimination sustainability -12 -10 22 below) characterized 72); position still extended families overview shorter Romania) (Bulgaria Poland Slovakia) Latvia Slovenia demographic impact: boosted Kingdom Cyprus); Germany lesser Cyprus Netherlands Austria five clusters emerge 8: EU23 EU27 (exc MT) 55 89 56 38 82 94 77 61 93 86 83 45 63 92 dictated primarily useful cut-off describing accelerated after 2000; marked deceleration timing uniform evolutions pace women entered offers explanation Feminization Markets (and origin) three greatest approach gaining construction ‘conditional counterfactuals’ variety residence compare ‘unconditional only) various indices et al Subsequently (as percentage) absolute (again unconditional explained combinations predominantly applies regression techniques male seem reflect follow clear others displays neither proportion post-secondary (ISCED 5-6) increases); 0-2) every minimum 73% explained) 109% 97%) 1995-2008) cases: (2000-2008 61%) (1995-2008 62%; 67%) 146%) 57%; 64%) (1995- 128%; 223%) 82%) 70%) 59%) 104%; 106%) Portugal 51%) mildly Other ‘increased homogamy’ (increased matching couples partners) homogamy sees reality formed (not request) Integrated Risks preceding section described ‘upward Did convergence’ joblessness? Certainly relative (where rate) improvement employment) examine decomposing at-riskof-poverty written weighted (pwp dropping superscript (pwr) Labelling wr wp) write:
3   where: ”    ” 
ℎℎ ℎ
 as:
4   LLLLK  LLLLLK 
L LLLLLLK t=0 t=1 A M M A etcetera subcomponents contributory factors: work-rich; ii work-poor; iii (2007) long-term 1980 rightly stresses simply calculates decomposable 20-59) informing mechanical caution: accounting device subcomponent intrinsically reducing workpoor achieved deliberate stricter conditionality generosity Or push go Conversely become workrich accept end pay scale marginally group… Diverging implying categories play… examples invalidate caveat Using equations (2) (3) (4) possible equation:
5
∆ ∆ requires decompose rely considerable obtained de Graaf-Zijl circumspection called connecting 2005-2008 conceptual makes retrospective (setting zero) summarizes figures estimated 28 2004/5-2007/8: key (analysis 2005-2008) ∆pov wp2005 pwp2005 ∆wp pwr) ∆pov(60+) -7 -20 -19 avg st dev 2007/8; ∆pwr ∆pwp pwr)∆wp pwr)∆P *** ** * 47 (actually observed) 95% (***) 90% (**) 85% 9: 2004/5-2007/8; performed EU24 (“a” average) awr awp (apwp apwr) ∆wpE ∆P Conclusions sets exercise: upswing trajectories: Belgium: (based caveat18): neutralised progress significantly; German (SILC-)trajectory: offset presents case: protection UK: (helped reversal British market) (notably Slovakia Lithuania Czech Republic) led Lithuania) reinforced Importantly however last elderly sometimes employment- growthbased generational favour entertain serious doubts validity (Frick Krell They SOEP crucial components Hungary diverging begin hypotheses purely wrong describe truism ‘policy failure’ (although existence neglected discussions evaluations) How households? Differences explaining configurations rates? shaded bars disparate: slightly realised Republic Slovakia); notably checking occurred contrary apparently (but exist figures) short-term event say one-percentage-point structurally adds experiencing little certainly insignificant ‘structural’ unavoidable Policies policies patterns (non-)participation Ellwood Meyer Rosenbaum 2001; Grogger 2003) Rates Work pointed weak 1) constructed quadrants comparing 10: Overall identify Finnish rate;20 stark tempting indicated footnote refrain drawing -15 pov Irish risks; Polish finally Swedish Basis now formalized dividing provides basic Iceland graphical summary Wp2005 )∆wp 11: -apwr) atrisk-of-poverty varies Netherlands) Estonia) Correspondingly ranges around (∆wp0 +5 Hungary) diverse ranging +1 observation cross-sectional supra) highly diversified ∆pwp0 ∆pwr0 incorrect assert modest ‘main culprit’ board complicated contextualize segments reason incorporates 60+ (hereafter ‘the elderly’) Not catching-up weakened disregards Poland); regards sigmaconvergence disregarded) simultaneously diverse: 17) Sweden; just lost gained ground although work-rich) words witnessed shift; holds too changed hardly vis-à-vis cases remarkable ‘outliers’ twenty-six outlier sufficient paint picture: greatly dwarfed confirms figure 7b far 1990s 2000s concerned represented striking counts: (an points); resulted downside (of pwr0 recorded (none EU) rich (though 90%) cohort; opposed elderly) successful reaching Comparison Decompositions decompositions proceed caution Yet tell stories visual Figures readily gives greater diminishing (since hold Despite emerges confirmed General focussed proves relevant differentiating employment: shape forces modernization feminization markets… nevertheless individual/household including gradually negative: southern gains declines dependency familial enhanced additionally Experience US) prevalence ‘positive’ cannot ways attribute solely successes specifically ongoing multidimensional target exclusion work-intensity find justification ‘stand still’ coincides Both evolutions: clearly inegalitarian historically base assessment SILC); third effort emphasis (successful activation) (much generosity); fourth Economic socio-demographic dominant condition public (including benefits) refuel reconnect sound creation necessary complementarity inclusive References Brandolini Viviano E (August Extensive vs intensive margin: Changing Perspective Rate 31st Conference International Association Research Wealth St Gallen Switzerland paradox investment state: Journal 21(5) 432–449 Cullen J (2000) Does insurance crowd spousal labor supply? Labor Economics 18(3) 546–572 Danzinger L (1996) discrimination Behavior Organization 57–66 Dawkins Sctella R (2002) Growth Australia Australian Review 133–154 M deprivation 413-431 D T Impact Earned Tax Credit Reforms Marriage Arrangements National 53(4) 1063–1106 Developments Brussels: Joint Report Frick (2010) Measuring Panel Surveys Germany: SOEPpapers Multidisciplinary Data n° Berlin: DIW sides story: measuring inequality Royal Statistical Society: Series (Statistics Society) 171 857- 875 Reconciling Theory Britain Population 139-167 (2003) limits EITC female-headed Statistics 85(2): 394–408 (2001) Welfare earned tax credit supply Quarterly 1063–1115 OECD (2009) antidote poverty? In: Outlook Paris: Sala-i-Martin Regional Cohesion: Evidence Theories 1325–1352 Protection Committee Jobs Progress evaluation dimension Strategy F Disappointing trends: blame? 450–471 Indicators discuss existing definitions demarcations populations ranking Currently indicators wpα α list six and/or finds publications literature (LFS) Community (ECHP) (SILC) subset partition according limiting take calculating households) determine frequently jobless) potential “beneficiaries” whom indicator; consist overlap necessarily detail seemingly minor translate analytical entail differ ’employment’: ILO-concept recent scientific debates (a) (b) (c) (d) sources currently Definition I II ‘older’ online23 determines Students composed included Someone he/she paid self-employment Computation dependent retired persons) Additionally ordinal introduced III derived Wadsworth’s (20 24) (nominated) head retirement (60 over) IV developed 2010 introduces belong declared see: http://epp eurostat ec europa eu/tgm/table do?tab=table&plugin=1&language=en&pcode=tsis c090 http://ec eu/eurostat/ramon/nomenclatures/index cfm?TargetUrl=DSP_GLOSSARY_NOM_DTL_VI EW&StrNom=CODED2&StrLanguageCode=EN&IntKey=16624585&RdoSearch=CONTAIN&TxtSearch=work %20intensity&CboTheme=&IntCurrentPage=1 0-59 fulltime equivalent threshold V (ordinal) adopted Indicators’ Sub-Group (ISG) (SPC) breakdown ‘at intensity’ sum (without part-time) (aged 16-64 inactive youth 16-24) workable demarcated 16-24 VI uses delineations source sole replaces binary Looking (work flexible lowest learns stringent offering broader 64) propensity (both measures) controlling employees ranks (dependent source) intensity) Minor rankings discussion Besides evaluated respects produce know re-calculate adapting current EU2020 table 2011) Column website produced ourselves indicating correct (5) retain 2) perspective equals exceptions (6) alter (hardly) Netherland obvious potentially grow narrowing (7) adapted 18-59y 15-75y notable switch recently headline targets force adjustment causes Temporary captured prominent Any remaining (8) related observe cent Luxemburg purposes dedicated cause concern researchers interested look closely 0–59 poor ISG (definition V) VI) controls improve comparability 2009 findings arise Controlling confined prevalent exceed translated trade-off full-employment (0 <= wi Thirdly exceeding Consequently composition differs Because rudimentary detailed underrepresented (at Complementary fullemployment overrepresented demarcate overrepresentation strongest defintion (current week) (nbr year) continuous WI=0; 0