Poverty as a social phenomenon; policies of social security

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

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 Poverty and social security

3. Social context of poverty • Cultural context of poverty (example of Indian rural women or St. Franciscus) • Association with the concepts of • life chances (RalfDahrendorf 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 Poverty and social security

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

5. 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). Poverty and social security

6. How to measure distribution of wealth What is the difference between various indicators of income level? Poverty and social security

7. How to measure distribution of wealth The Gini coefficientcan 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. B. Lorenz Curve for aTypical Income Distribution A. Complete Income Equality 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 the5-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. Poverty and social security

8. 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. Poverty and social security

9. Incidence of poverty under Communism Poverty and social security

10. Comparison of income distribution in socialist Czechoslovakia and United Kingdom Poverty and social security

11. Poverty in the beginning of the transformation – East and West Poverty and social security

12. Poverty in the beginning of the transformation – East and West Per cent of median income 50% 60% Nordic countries Denmark 1992 7.1 14.2 Finland 1991 5.8 11.2 Norway 1991 6.1 12.1 Sweden 1992 6.3 11.1 Continental Europe Austria 1987 6.7 12.2 Belgium 1992 5.5 11.4 France 1989 9.4 15.8 Germany 1989 5.8 11.7 Luxembourg 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 Europe Italy 199110.919.0 Spain 199010.517.9 Anglo-Saxon countries Australia 198912.019.4 Canada 199111.4 17.1 Ireland 198711.719.9 United Kingdom 199114.623.0 United States 199118.0 24.2 Central and Eastern Europe Czech Republic 19922.16.0 Hungary 19928.6 14.7 Poland 19929.9 16.3 Russia 199219.7 26.4 Slovak Republic 19922.0 5.8 Poverty and social security

13. Median household income in income quartilesSource: EQLS data, Fahey, T. (2004) Poverty and social security

14. 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) Poverty and social security

15. 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 Poverty and social security

16. GDP per capita and quality of lifeSource: EQLS data, Fahey, T. (2004) Poverty and social security

17. 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 Poverty and social security

18. Some social policy concepts Poverty and social security

19. Social security as an instrument of redistribution Poverty and social security

20. How social policy operates Poverty and social security

21. Distribution of incomes before and after social transfers in Canada Poverty and social security

22. Reduction of poverty by social transfers – comparison of EU 15Source: Joint report on social inclusion (2004) Poverty and social security

23. Redistributive impact of social benefits Poverty and social security

24. Impact of social expenditure on poverty – EU 15Source: Joint report on social inclusion (2004) Poverty and social security

25. Are income differences in your country too large: distribution of answers, affluent democracies Poverty and social security

26. Are income differences in your country too large: distribution of answers, post-communist countries Source: ISSP (1999), own calculations Poverty and social security

27. 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

28. Poverty and Social Security • Beveridge, W.: Social Insurance and Other Services. London, Her Majesty‘s Stationery Office 1942 (reprinted 1966). • Dahrendorf, R.: Life Chances. London, Weidenfeld & Nicolson 1979. • Fahey, T.: Living Standards Graphs, Berlin, Social Science Center, October 2004. Powerpoint presentation at the seminar. • 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. • Hills, J.: Taxation for the Enabling State. • Joint report on social inclusion. Brussels, Council of the EU, 5. March 2004. • Luxembourg Income Study (LIS) micro database. • Ringen, St.: The Possibility of Politics. Oxford, Clarendon Press 1987. Poverty and social security