The unequal impact of the crisis by age: An analysis based on National Transfer Accounts

Giorgos Papadomichelakis (UB)Ció Patxot (UB)Elisenda Rentería (CED-UAB)Meritxell Solé (UB)Guadalupe Souto (UAB)

• The risk of poverty for children is, in general, higher than for other age groups

• The welfare state protects basically the elderly, but not (to the same extent) the children

• The situation has worsen with the crisis in a significant number of countries

Some facts:

Population at risk-of-poverty in the EU before and after social transfers

Source: Eurostat, 2016

35.6% 36.7%32.0% 34.0%

87.2% 88.0%

20.3% 21.2%14.7% 17.1% 18.9%

14.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2015 2008 2015 2008 2015

0-17 18-64 65 and more

before social transfers after social transfers

Source: Authors’ elaboration from NTA data (www.ntaccounts.org)

Net public transfers to the children and to the elderly in NTA countries(% of their own consumption)

Change in child (0-18) poverty rate and social exclusion

0 10 20 30 40 50

Poland

Slovakia

Switzerland

Norway

Finland

Romania

Blegium

Sweden

Austria

Czech Rep

Germany

Bulgaria

Malta

Netherlands

Portugal

Denmark

U. K.

Slovenia

Cyprus

Hungary

France

Estonia

Italy

Louxembourg

Spain

Lithuania

Ireland

Croatia

Latvia

Greece

Iceland

Canada

USA

Japan 2008 2012

In 20 out of 31 European countries child proverty has increased with the crisis

People at risk of poverty in Europe (households with children)

0

5

10

15

20

25

30

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

SPAIN

FINLAND

SWEDEN

UK

FRANCE

GERMANY

ITALY

European Union (27 countries)

Source: Eurostat, 2016

People at risk of poverty or social exclusion by age in Spain

Source: Eurostat, 2016

0

5

10

15

20

25

30

35

2006 2007 2008 2009 2010 2011 2012 2013

(% o

f tot

al p

opul

atio

n)

Less than 18 years From 18 to 64 years 65 years or over total

People at risk of poverty by type of household in Spain

5.310.6

0

5

10

15

20

25

30

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% of

tota

l pop

ulatio

n

Households without dependent children

Households with dependent children

5,3 10,6

Source: Eurostat, 2016

• Using NTA to explore the unequal impact of the crisis by age inSpain.

• Estimating NTA for 2012 and comparing results to previousavailable years (2000, 2006 and 2008).

Our contribution:

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

0 2 4 6 8 1012141618202224262830323436384042444648505254565860626466687072747678808284868890

2000 2006 2008 2012

Per capita labor income profile(in constant euros of 2012 per year)

Lower labor income for the young

Higher labor income for

older workers

Per capita consumption profile(in constant euros of 2012 per year)

Youngers’ consumption has come back to 2000’s level.

The effects on the elderly are smoother

Per capita Lifecycle Deficit profile(in constant euros of 2012 per year)

LCD extends from age 26 to 30!

The surplus size clearly shrinks

Financing aggregated Lifecycle Deficit of children (0-19)

-50

0

50

100

150

200

2000 2006 2008 2012

billi

ons

of €

TF TG ABR

Public transfers to the children have significantly decreased with the crisis.

Private transfers could not compensate that decrease.

61,2% 62% 53% 58%

40,3% 42%48% 41%

-20%

0%

20%

40%

60%

80%

100%

120%

2000 2006 2008 2012

Financing aggregated Lifecycle Deficit of the elderly (65+)

Public transfers significantly increased between 2000 and 2006, and practically remain the same with the crisis (2008-2012)

Private transfers are very small. Interestingly, they turn back to negative values in 2012.

-50

0

50

100

150

200

2000 2006 2008 2012

billi

ons o

f €

TF TG ABR

-13%3% 2%

-4%

63%77%

70% 76%

50% 20% 28% 28%

-20%

0%

20%

40%

60%

80%

100%

120%

2000 2006 2008 2012

Per capita profile of net public transfers (TG) in Spain

-10000

-5000

0

5000

10000

15000

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90

euro

s/ye

ar

2000 2006 2008 2012

Returning to the pre-crisis level

Increasing TG for ages

65-82

Young workers paying less taxes

Older workers paying more taxes

Per capita profiles of public transfers inflows (transfers received)

0

5000

10000

15000

20000

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90

euro

s/yea

r

2000 2006 2008 2012

Sharp decrease in 2012 for children

Significant increase for ages 65-82

Increase for working-age (unemployment)

Decrease for old workers

Per capita profiles of public transfers inflows: education (E), health (H) and contributory pensions (P)

0

2000

4000

6000

8000

10000

12000

14000

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90

E-2008 E-2012

H-2008 H-2012

P-2008 P-2012

Sharp decrease in education

Significant increase for pensioners aged 65-80

Per capita profiles of public transfers outflows (taxes and contributions)

02000400060008000

100001200014000160001800020000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90

Public Transfers, Outflows 2000 Public Transfers, Outflows 2006

Public Transfers, Outflows 2008 Public Transfers, Outflows 2012

Taxes paid (per capita) have not decreased with the crisis. Only the age group 25-35 pays slightly less in 2012

Per capita profiles of net private transfers

-15000

-10000

-5000

0

5000

10000

15000

20000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90

2000 2006 2008 2012

The most important flow isfrom parents to children

Important reduction with thecrisis

Net public transfers to the children and the elderly in Spain (in % of their own consumption)

2000

2006

2008

2012

30%

35%

40%

45%

50%

55%

60%

65%

70%

30% 40% 50% 60% 70%

TG/C

youn

g

TG/C elderly

Main findings

• Children received much less public and private transfers during the crisis, so their consumption has significantly decreased

• Labor income has decreased specially for younger workers

• However, children pay similar taxes (or even higher) than before the crisis

• On the contrary, public transfers to the elderly have increased

Why high-income societies are highly averse to old-age poverty while they seem to accept child poverty quite naturally?

Welfare state systems have proven to be a very effective tool in improving intergenerational redistribution and reducing inequalities…

Thank you

The unequal impact of the crisis by age: An analysis based on National Transfer Accounts