Poverty as a social phenomenon; policies of social security European Social Policy course

Poverty as a social phenomenon; policies of social security

European Social Policy course

Poverty and social security 2

Poverty and social security

Social context of poverty How to understand and measure poverty

and the distribution of wealth Incidence of poverty How to fight poverty Systems of social security


Social context of poverty Cultural context of poverty (example of Indian rural women or

St. Franciscus) Association with the concepts of

life chances (Ralf Dahrendorf 1979) Social exclusion/inclusion Social marginalization Social differentiation, stratification… Social cohesion, social trust, (… social capital)

Relevant contexts: Labour market Family Living area Responsiveness of public/social policies / efficiency of states Individual history, phase of the life course Social protection


Risk of poverty and social status – EU 15Source: Joint report on social inclusion (2004)


How to measure poverty First analytical interest in the causes of poverty originated

from detrimental living conditions of the working class in England in the early phase of industrialization, the first half of the XIX. century. Tradition of social statistics.

Poverty indicators:Absolute poverty: income below the defined threshold (2 or 1

$ per day – used by UN). Relative poverty: defined share of people below what is

perceived as „normal“ income: 60% (50%) of median income in a given country – used by EU.

(Mind the difference between average, median and modus income- see next slide!)

Living conditions: access to what is defined as a prerequisite of Quality of Life

Approaches to set up the threshold: minimum consumption basket – Beveridge 1942) Officially set up social minimum (subsistence minimum).


How to measure distribution of wealth

What is the difference between various indicators of income level?


How to measure distribution of wealthThe Gini coefficient can be understood by looking at the Lorenz curve, which plots the proportion of total income held by each percentile of the population, ranked in order of income.A. Complete Income

EqualityB. Lorenz Curve for a Typical Income Distribution

Population share (%) Population share (%)The Lorenz curve of Diagram A represents complete equality of income, and is the 45-degree line joining the bottom left-hand corner of the diagram to the top right-hand corner. Here, the bottom 10 per cent of the population receives 10 per cent of total income, the bottom 20 per cent receives 20 per cent of the total income and so on. Complete inequality would be represented by a Lorenz curve which was made up of the horizontal axis and the vertical axis on the far right-hand side. Diagram B shows the Lorenz curve for a typical income distribution. The curve lies below the line of complete equality. The Gini coefficient is the ratio of the area between the Lorenz curve and the 5-degree line, i.e. the shaded area in Diagram B, to the total area under the 45-degree line. If incomes become more unequally distributed, the Lorenz curve bulges further away from the complete equality line and the area between the curve and the 45-degree line increases. Thus the Gini coefficient rises with rising inequality and falls with falling inequality.


How to measure distribution of wealth

The point P is where the Lorenz curve has slope equal to that of the

line of equality OB (i.e. 45°) and indicates the mean: OC of the

population are below the mean, and CA are above.

The distance CD is the share of total income that those below the

mean would receive if incomes were equal, and the distance CP is their

actual share. The Robin Hood Index is the difference between CD and CP. It is the maximum vertical distance between the Lorenz curve and the

line of equality OB.

Robin Hood index:

Decile (quartile) ratio:

The ratio between incomes of the highest and the lowest decile (quartile) of the cumulative income scale.


Incidence of poverty under Communism


Comparison of income distribution in socialist Czechoslovakia and United Kingdom


Poverty in the beginning of the transformation – East and West


Poverty in the beginning of the transformation – East and West

Per cent of median income 50% 60%

Nordic countriesDenmark 1992 7.1 14.2Finland 1991 5.8 11.2Norway 1991 6.1 12.1Sweden 1992 6.3 11.1Continental EuropeAustria 1987 6.7 12.2Belgium 19925.5 11.4France 1989 9.4 15.8Germany 1989 5.8 11.7Luxembourg 1991 4.2

12.1 Netherlands 1991 6.7 11.8

Source: Computations from Luxembourg Income Study (LIS) micro database.

Relative poverty rates: persons below a fraction of median income, 22 industrialized countries, early 1990s

Southern EuropeItaly 1991 10.9 19.0Spain 1990 10.5 17.9Anglo-Saxon countriesAustralia 1989 12.0 19.4Canada 1991 11.4 17.1Ireland 1987 11.7 19.9United Kingdom 1991 14.6 23.0United States 1991 18.0 24.2Central and Eastern EuropeCzech Republic 1992 2.1 6.0Hungary 1992 8.6 14.7Poland 1992 9.9 16.3Russia 1992 19.7 26.4Slovak Republic 1992 2.0 5.8


Median household income in income quartiles Source: EQLS data, Fahey, T. (2004)

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Household poverty (% at risk of poverty at country level and EU level - below 60% of country medians and EU25 median) Source: EQLS data, Fahey, T. (2004)

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Global poverty Half the world — nearly three billion people — live on

less than two dollars a day. The GDP (Gross Domestic Product) of the poorest 48

nations (i.e. a quarter of the world’s countries) is less than the wealth of the world’s three richest people combined.

Nearly a billion people entered the 21st century unable to read a book or sign their names.

Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen.

1 billion children live in poverty (1 in 2 children in the world). 640 million live without adequate shelter, 400 million have no access to safe water, 270 million have no access to health services. 10.6 million died in 2003 before they reached the age of 5 ( roughly 29,000 children per day) Source: http://www.globalissues.org/TradeRelated/Poverty.asp


GDP per capita and quality of life Source: EQLS data, Fahey, T. (2004)

2 3 4 5 6 7 8 9

Number of quality of life deficits (scale: 0-19)

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How to fight poverty

„Problem of poverty is the problem of the rich.“

„Policy matters“Stein Ringen (1987)

Social policies: Preventive: to prevent social

marginalization and exclusion caused by poverty

Ameliorative: to help people in need, on the edge of poverty, poor

A mixture of both


Some social policy concepts

Narrow: social assistance

Broad: creating social conditions favourable for human lives

Ameliorative: to help the people in need, on the edge of poverty, poor

Active: to prevent social marginalization and exclusion caused by poverty

Social consumption as nonproductive spending

Social investment: nurturing human resources for future societal development


Social security as an instrument of redistributionLayers of social security →Criterium ↓

State social support

Social insurance

Social assistance

Recipients Demogrants

Wage earners and people whose insurance is paid by the state

The poor(needy)

Technique of redistribution

Categorized benefits

Insurance benefits

Means-tested services and benefits

Delivering institutions

State State, public bodies, increasingly commercial sector

State, municipalities, civic organizations


How social policy operates


Distribution of incomes before and after social transfers in Canada


Reduction of poverty by social transfers – comparison of EU 15 Source: Joint report on social inclusion (2004)


Redistributive impact of social benefits


Impact of social expenditure on poverty – EU 15Source: Joint report on social inclusion (2004)


Are income differences in your country too large: distribution of answers, affluent democraciesStrongly

agreeAgree

Neitheragree nordisagree

DisagreeStronglydisagree

TOTAL

Austria 41.6 44.7 9.1 4.5 0.1 100

Canada 26.7 41.5 16.3 12.5 3.1 100

France 60.0 26.8 7.4 5.0 0.8 100

Germany 29.4 52.8 10.7 6.5 0.6 100

Great Britain 30.6 50.7 12.3 5.8 0.6 100

Japan 38.6 30.5 18.3 7.5 5.0 100

Netherlands 15.7 48.2 21.7 12.6 1.8 100

New Zealand 29.4 43.8 13.5 11.8 1.6 100

Norway 22.4 50.1 13.8 12.0 1.8 100

Portugal 82.2 13.8 1.8 1.4 0.9 100

Spain 35.9 53.4 7.4 3.1 0.3 100

Sweden 29.2 41.9 18.1 8.4 2.4 100

Switzerland 18.8 36.1 37.0 7.3 0.7 100

Av. OECD 35.4 41.1 14.4 7.6 1.5 100


Are income differences in your country too large: distribution of answers, post-communist countries

Stronglyagree

AgreeNeither

agree nordisagree

DisagreeStronglydisagree

TOTAL

Bulgaria 84.0 12.8 1.4 0.8 0.9 100

Czech Rep 60.3 27.5 6.0 4.2 2.1 100

Hungary 68.2 25.0 3.5 2.9 0.3 100

Latvia 57.2 39.5 1.8 1.3 0.2 100

Poland 47.7 41.6 6.3 3.5 0.9 100

Russia 79.1 16.7 1.9 1.1 1.3 100

Slovenia 49.7 41.3 4.8 3.6 0.6 100

Av. CEECs 63.8 29.2 3.7 2.5 0.9 100

Source: ISSP (1999), own calculations


Global fight against poverty In 2000, 189 United Nations countries signed the

Millennium Declaration, which led to the adoption of the Millennium Development Goals, a set of eight goals to be achieved by 2015: Eradicate extreme poverty and hunger Achieve universal primary education Promote gender equality and empower women Reduce child mortality Improve maternal health Combat HIV/AIDS, malaria, and other diseases Ensure environmental sustainability Develop a global partnership for development.

Source: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/


Poverty and Social Security

1. Beveridge, W.: Social Insurance and Other Services. London, Her Majesty‘s Stationery Office 1942 (reprinted 1966).

2. Dahrendorf, R.: Life Chances. London, Weidenfeld & Nicolson 1979.

3. Fahey, T.: Living Standards Graphs, Berlin, Social Science Center, October 2004. Powerpoint presentation at the seminar.

4. Förster, M.F. – Tóth, I.G.: Poverty, ineqalities and social policies in the Visegrad countries. In: Economics of Transition, 1997, Vol. 5 (2), pp. 505-510.

5. Hills, J.: Taxation for the Enabling State.6. Joint report on social inclusion. Brussels, Council of the EU, 5.

March 2004.7. Luxembourg Income Study (LIS) micro database.8. Ringen, St.: The Possibility of Politics. Oxford, Clarendon Press

1987.

Documents

Poverty as a social phenomenon; policies of social security European Social Policy course