Joint Report on Social Protection and Social Inclusion 2008

MEMO/08/112

Brussels, 25 February 2008

What is the Joint Report and what does is cover?

The report examines the Member States' integrated national strategies on social inclusion, pensions, healthcare and long-term care. It reviews the main trends across the EU and at national level. The 2008 report focuses on child poverty, older workers, private pension provision, health inequalities and long-term care.

The EU's system of common objectives, assessment and reporting for social protection and inclusion – the 'open method of coordination' – operates in parallel with the strategy for growth and jobs. The Joint Report on Social Protection and Social Inclusion will be presented to EU leaders and will feed into the conclusions of the Spring European Council.

Social inclusion and child poverty

How many children live in poverty in the EU?

In 2006, 19% of children were at risk of poverty, against 16% for the total population. In most EU countries children are at a greater risk of poverty than the rest of the population, except in Denmark and Finland (10%), Slovenia (12%), Republic of Cyprus (11%), Germany (12%) and Belgium (15%). In almost half of the EU countries, the risk of poverty for children is above 20%, reaching 25% in Italy, Lithuania, Hungary and Romania, and 26% in Latvia and Poland.

Figure 1: At-risk-of poverty rate in the EU (%), total population and children, 2005

[ Figures and graphics available in PDF and WORD PROCESSED ]

Source: SILC (2006) - income year 2005 (income year 2006 for IE and the UK); except for BG and RO - estimates based on the 2006 national Household Budget Survey.

The standards of living of “poor” children vary greatly across the EU as illustrated by the poverty thresholds expressed in purchasing power standards. In 11 of the 15 “old” Member States, the monthly income under which a family with 2 adults and 2 children is considered at risk of poverty varies from €PPS-1500 to €PPS-1900, while it ranges from €PPS-400 to €PPS-650 per month in 9 of the 12 “new” Member States.

How many children live in jobless households?

Living in a household where no-one works affects both the current living conditions of children and their future development. In 2007, almost 10% of EU-27 children lived in jobless households ranging from less than 4% in SI, CY, EL and LU, to more than 14% in HU and the UK. In the EU as a whole, the situation has not improved over the last 5 years and in half of EU countries, the general increase in employment rates did not benefit those families that are furthest away from the labour market. BG, EE, EL, ES, IT, LT, and to a certain extent DK, LU and the UK are the only countries to have shown signs of improvement.

Figure 2: Adults and children living in jobless households (%), EU-27, 2007 [ Figures and graphics available in PDF and WORD PROCESSED ] Source: Eurostat Labour Force Survey, spring results 2007; 2006 data for DK, FI; data missing for SE.

What about poverty among those with parents in work?

Not all children whose parents are in work are protected from the risk of poverty. 13% of children living in households in work are living under the poverty threshold. This rate ranges from 7% or less in the Nordic countries to more than 20% in ES, PT and PL. In-work poverty results from various combinations of low wages and low work intensity.

Figure 3: At-risk-of-poverty rates of children and adults living in households at work, EU-25, 2005

[ Figures and graphics available in PDF and WORD PROCESSED ]

Source: SILC (2005) - income year 2004 (income year 2005 for IE and the UK). Households at work are households where at least half of the working age adults were employed over the whole year.

To what extent do social transfers reduce the risk of poverty for children?

On average in the EU social transfers other than pensions (such as family and unemployment benefits) reduce the risk of poverty for children by 42%, which is more than for the overall population (38%). The impact of social transfers is higher on child poverty than on overall poverty in most EU countries. In DK, DE, FR, AT, SI, FI and SE, these transfers reduce the risk-of-poverty for children by 55% or more. In EL, ES, and LV this reduction is less than 20%.

Figure 4: Impact of social transfers (excl. pensions) on the poverty risk for children and for the overall population (in % of the poverty risk before social transfers), 2006

[ Figures and graphics available in PDF and WORD PROCESSED ]

Source: SILC (2006) - income year 2005 (income year 2006 for IE and the UK); except for BG estimates based on 2006 national household budget survey

How does the situation differ among the 27 Member States?

The report provides a broad diagnosis of the main causes of child poverty across the EU and highlights complex interactions between three main factors: joblessness or low work intensity, in-work poverty and insufficient income support to families. The countries achieving the best outcomes are those that perform well on all fronts (Group A), notably by combining strategies facilitating access to employment with enabling services (child care, etc) and income support. Four groups of countries have been identified depending on the nature of the main challenge they face.

Group A (AT, CY, DK, FI, NL, SE, SI) comprises countries that achieve relatively good child poverty outcomes by performing well on all fronts. They combine relatively low levels of joblessness and of in-work poverty among households with children with relatively effective social transfers. These countries need to continue monitoring the developments of child poverty at national level, since in some of them it has recently increased.

Group B (BE, CZ, DE, FR, EE, IE) comprises countries with relatively good to below average poverty outcomes. The main matter of concern in these countries is the high number of children living in jobless households. Policies aimed at making work pay and at enhancing access to quality jobs for those parents furthest away from the labour market may contribute to reducing child poverty in these countries.

Group C (HU; MT, SK, UK) comprises countries that record average or poor child poverty outcomes, and combine high levels of joblessness and in-work poverty among parents. Some of these countries partly alleviate child poverty through relatively efficient transfers, or because parents are still able to rely on strong family structures. Different policy mixes may be needed to give parents in jobless households access to quality jobs, to enhance the labour market participation of second earners and to provide adequate support for the incomes of parents at work.

Group D (EL, ES, IT, LV, LT, LU, PL, PT) comprises countries recording relatively high levels of child poverty. While they have low shares of children living in jobless households, they are characterised by very high levels of in-work poverty among families and low impact of social transfers. These countries may need to adopt comprehensive strategies to provide better support for family income and to facilitate access to quality jobs, especially for second earners.

Pensions

How is the EU doing on employment rates for older workers?

Reducing the decline in employment in the 55-59 age bracket can make a huge contribution to increasing the employment rates of older workers, and is also a necessary step in any attempt to increase employment rates among older workers (60-64 and 65+). For instance, reducing the drop in employment rate in the 55-59 age brackets to the best levels observed in the EU would alone reach the Lisbon target of 50% employment for those aged 55-64.

Direct transitions from employment to retirement among those aged 55-64 are slightly increasing in the EU15, though a decline can be observed between 2000 and 2006 in the EU25. Only about half of older workers leave their last job or business to take up a pension. They are also often either unemployed (13%), long term sick, or disabled (12%). At higher ages the share of older workers who leave their last job or business to take up a pension increases steadily, while the percentages leaving for unemployment and, to a lesser extent, for long term sickness or disability decrease sharply. Exits directly to pension withdrawal are particularly low in some Member States (notably BE, ES and CY). The share of exits through unemployment is around 15% on average and rarely lower than 10% (except in LU) and can exceed 25% (DE, ES, FR, LT, PT, FI and SE). The share of exits due to long term sickness or disability is also generally around 15% (lower than 10% only in IT but around or often higher than 25% in AT, EE, ES, CY, HU, LT, NL and FI).

The graph below represents economic activity by age in all Member States indicating that, in addition to a significant decline in employment rates when workers get older, the share of inactive (for sickness or other reasons) increases significantly from 50-54 to 55-59 and then remains roughly constant between 60 and 64 before declining slightly from 65.

Figure 5: Economic activity by age in EU27 (2006)

[ Figures and graphics available in PDF and WORD PROCESSED ]

Source: LFS.

Is the situation the same for all older workers?

More and less qualified older workers have benefited from the increase in employment rates, but these differ according to the level of education. Since 2000 the increase in employment rates among 55-64 year olds has been relatively slower for the less qualified within the EU25: 5 percentage points for the less qualified compared to 6 or 7 points for medium or highly qualified. These uneven employment trends have raised some concerns about the future adequacy of pensions, as working longer is central to accruing pension rights. More effort should be made in targeting groups that have made slower progress.

Figure 6: Employment rates of older workers by level of education [ Figures and graphics available in PDF and WORD PROCESSED ]

Source: LFS.

Health and long-term care

What about inequalities in health?

Available information suggests that all EU countries are faced with substantial inequalities in health within their populations. Indeed, on average disadvantaged social groups are shown to have shorter lives, suffer more disease and illness and feel their health to be worse than more well-off groups. Health inequalities are not randomly distributed, but arise because of systematic differences between people depending on social group, physical and social environments, material conditions, exposure to positive and negative factors, and differences in access to health services.

For example, access to health care and proximity to hospitals or primary care should not depend on individual socio-economic characteristics such as income. The table below shows the percentage of people who did not receive medical treatment when they needed it for three reasons assumed to be closely related to social protection: affordability, waiting times and distance to care. While the available data do not allow cross-country comparisons because of cultural differences and different organisation of healthcare systems, there is a clear link between this unmet need and income levels. People living on low income are more often deterred from seeking care when they need it than those living on high income. This is quite independent of the frequency of doctors' consultations, i.e. the fact that in some countries people tend to visit the doctor more often than in others.

Table 5 - Doctors consultations per capita[1] and self-reported unmet need[2] for medical examination or treatment due to affordability, waiting times and distance to care, by income quintile [ Figures and graphics available in PDF and WORD PROCESSED ]

Source: OECD health data and EU-SILC (2005)

Annex 1: Benchmarking child poverty on the basis of the EU agreed indicators

Table 1 summarises the main findings of the analysis of the main determinants of the risk of child poverty presented above. In the first column, countries are assessed according to their relative performance in child poverty outcomes[3] from +++ (countries with the highest performance) to --- (countries with the lowest performance). In the next three columns, countries are assessed according to their relative performance with regard to three main factors influencing the child poverty risk, namely: children living in jobless households, children living in households at risk of in-work poverty and the impact of social transfers on the risk of child poverty. Countries are gathered into 4 groups (A-D) according to which combination of the 3 key factors predominantly affects their risk of poverty.

Table 1: Relative outcomes of countries related to child poverty risk and main determinants of child poverty risk

Source: See Supporting document to the 2008 Joint Report on Social Protection and Social Inclusion. Annex 2: Tables - NB: Figures have been updated on 1 February 2008 and some figures might not correspond to the data published in the supporting document to the Joint Report 2008. [ Figures and graphics available in PDF and WORD PROCESSED ]

[1]Source: OECD Health Data. Doctor's consultations are the number of contacts with an ambulatory care physician divided by the population.

[2] Source: Eurostat: EU-SILC. The table's figures represent the frequency of respondents replying 'yes, there was at least one occasion when the person really needed medical examination or treatment but did not'. The reference period is the previous 12 months. The 3 categories included in the table are 'Could not afford to (too expensive)' 'Waiting list' and 'Too far to travel/no means of transportation'. Eurostat has identified some discrepancies in the interpretation of the guidelines and the translation of the questions for the "Unmet need" SILC variables that hamper cross-country comparability of the 2005 SILC results.

[3]Child poverty outcomes are assessed by a score summarising the relative situation of children in a country with regard to: a) the poverty risk for the overall population in that country, b) the average child poverty risk for the EU as a whole, and c) the average intensity of the poverty risk for children (poverty gap) at EU level.