In-Work Poverty

GINI Discussion Paper Number 51 by Ive Marx (University of Antwerp) and Brian Nolan (University College Dublin)

Introduction

While in-work poverty is not a new problem, the degree of attention it is receiving in Europe is more recent, reflecting at least two concurrent sources of concern (Andreβ and Lohmann 2008; OECD 2008; European Foundation 2010; Fraser et al. 2011; Crettaz 2011; European Commission 2011).

Deindustrialisation, intensifying international trade and skill-biased technological change are said to be threatening if not effectively eroding the (potential) earnings and living standards of some workers in advanced economies.

Yet at the same time, policy at EU level and in many countries has become focused on increasing the number of people relying on earnings, and particularly on drawing into the labour market those with the weakest education and work history profiles.

The Europe 2020 target of boosting employment rates to 75 per cent of the population aged 20 to 64 shows this drive to be undiminished. Sharply increased unemployment in some countries following on from the onset of the economic crisis has only served to increase the emphasis on getting people into jobs. In light of these trends, there would appear to be legitimate concern that larger sections of the workforce are being expected to rely on jobs that do not generate sufficient income to escape poverty.

This paper starts with a discussion of current debates about in-work poverty and underlying driving forces. It turns to issues of definition and measurement of in-work poverty, which are central to adequate analysis and policy formulation, and then examines the variation across countries and over time in-work poverty using data from EUSILC.

With low-paid work often seen as a key driver, we look at the empirical evidence first about the extent and nature of low pay, and then at its complex relationship with in-work poverty.

This brings out that in-work poverty is strongly associated not so much with low hourly pay per se but rather with single-earnership and low work intensity at the household level, as well as working part-time or part-year or on temporary contract at the individual level.

Against this background, the remainder of the paper is devoted to what policy can do to prevent or address in-work poverty, starting with an examination of what an incremental augmentation/modification of the traditional minimum income protection provisions for workers could potentially achieve.

We then ask whether innovative options such as EITC/WTC type negative income taxes offer a model for emulation. Finally we discuss the broader implications for effective anti-poverty tools and strategies, and how these may differ across institutional settings.

Full text (PDF 48pp)

Published by GINI: Growing Inequalities’s Impacts, Amsterdam Institute for Advanced Labour Studies, University of Amsterdam in July 2012