These aggregates serve to bring out the complex mix that must be taken into account in seeking to understand and assess the evolution of social protection expenditure, particularly in what was a most unusual macroeconomic context in the Irish case. A deeper understanding would require in-depth investigation of trends over time at the level of specific contingencies and schemes, which is beyond the scope of this study. However, the broad picture described in this chapter should serve as background to the analysis of policy options at the level of contingencies and schemes, to which the bulk of the study is devoted.
3.
I
NTERNATIONAL
E
VIDENCE
A
key feature of the EU’s “open method of coordination” for social policy is the comparison of each country’s social policies with “best practice” in the area. In this chapter, we look at evidence on risks of poverty (Section 3.2) in order to identify those countries which attain the best outcomes in this area. In Section 3.3, we explore possible reasons for the gap between the at-risk-of-poverty rate in Ireland and in the countries with the lowest risks of poverty. Section 3.4 briefly reviews the findings of a major study on future options for the Dutch welfare state. The main conclusions are drawn together in Section 3.5.3.1
Introduction
T
here are two main sources of internationally comparable data on risks of poverty. Table 3.1 presents information drawn from the Luxembourg Income Study, which includes microdata from a range of countries including the US, Canada and Australia as well as a set of European countries (EU and non-EU). The countries are ranked in “league table” form, from those with the lowest poverty risk to those with the highest risk (at the 60 per cent of median income cut-off). The equivalence scale is one specifically developed by researchers from the Luxembourg Income Study. It depends simply on the number of persons in the household, making no distinction between the income needs of adults and children. The scale is the square root of the number of persons in the household. Thus, the LIS scale is 1 for a one-person household, 1.4 approximately for a two person household and 1.73 for a three-person household. EU and OECD calculations tend to be based on what is termed the modified OECD scale, which allows 1 for the first adult, 0.5 for other adults, and 0.3 for each child. Thus, a two-adult household would have a scale of 1.5 (as against 1.4 in the LIS scale) and a two-adult two-child household would have an OECD scale of 2.1, as against a LIS scale of 2).3.2
Cross-
Country
Evidence on
Risks of
Poverty
Table 3.1 shows the results of the LIS-based analysis. The best performing countries, in terms of low risks of poverty, are the Scandinavian countries, along with the Netherlands (the best ranked country) and Luxembourg. Poverty risks for these countries are about 11-12 per cent. The highest risk of poverty, above 20 per cent, are found in four English- speaking countries (the US, Ireland, Australia and the UK) and two Mediterranean countries (Greece and Spain). Some of the continental European countries (Germany, Austria, Switzerland and France) have risks of poverty which are one or two percentage points higher than the Scandinavian countries, and well below those observed elsewhere. The rank
Table 3.1: “At Risk of Poverty” Rates for Industrialised Countries from Luxembourg Income Study, 2000 or Nearest Year
Country 50 Per Cent of Median Income 60 Per Cent of Median Income Netherlands (1999) 4.9 11.1 Sweden 6.5 12.3 Norway 6.4 12.3 Finland 5.4 12.4 Luxembourg 6.1 12.4 Denmark 5.4 13.1 Germany 8.4 13.4 Austria 7.7 13.4 Switzerland 7.7 13.5 France 7.3 13.7 Belgium 7.9 16.1 Canada 12.1 18.6 Spain 14.2 20.8 United Kingdom (1999) 12.5 21.1 Greece 14.3 21.4 Australia (2001) 13.0 21.6 Ireland 16.2 22.5 United States 17.7 24.2
Source: Luxembourg Income Study, key statistics.
ordering by risk of poverty at 50 per cent of median income is very similar. There is some re-ranking within the main groups identified (low, high and medium risk) but no country moves from low to medium risk or vice versa. More systematic comparisons are possible with the group of EU countries, where harmonised surveys (the European Community Household Panel and the EU Survey of Income and Living Conditions (SILC)) have been conducted for about 10 years. This means that we can look at more recent data (2005 instead of 2000) and also examine how stable the ranking is over time.
Table 3.2 documents the Eurostat results for EU countries, which are based on the modified OECD scale. The countries are ordered by the risk of poverty in the latest available year, 2005. Again, the risks found in the Scandinavian countries and the Netherlands are the lowest. Poverty risks in some of these countries (Denmark and Finland) have risen slightly, while that in Austria has fallen, bringing it into this group. Once again, a set of continental European countries (Germany, where risks have fallen as living standards in the former East Germany have risen, Luxembourg and France) have risks only marginally higher than the lowest risk group of countries. The highest risks are found, once again, in the southern countries along with Ireland, where the poverty risk is around 20 per cent. There have been some falls in poverty risk for the high risk group – from 20 to 18 per cent for the UK, and from 23 to 20 per cent for Portugal.
Table 3.2: “At Risk of Poverty” Rates for EU-15 Countries, 1995, 2000 and 2005 1995 2000 2005 Sweden 9 Netherlands 11 11 11 Finland 11 12 Austria 13 12 12 Denmark 10 12 Germany 15 10 13 Luxembourg 12 12 13 France 15 16 13 Belgium 16 13 15 UK 20 19 18 Italy 20 18 19 Spain 19 18 20 Ireland 19 20 20 Greece 22 20 20 Portugal 23 21 20 EU-15 17 15 16
New Member States 17
Source: Eurostat database based on ECHP and EU- SILC, http://epp.eurostat.ec.europa.eu Table 3.3: “At Risk of Poverty” Rate by Gender, EU-15 Countries, 2005
Total Males Females
Sweden 9 9 10 Netherlands 11 11 11 Denmark 12 12 12 Austria 12 11 13 Finland 12 11 13 Germany 13 12 14 France 13 12 14 Luxembourg 13 13 13 Belgium 15 14 15 United Kingdom 18 18 19 Italy 19 17 21 Ireland 20 19 21 Greece 20 18 21 Spain 20 19 21 Portugal 20 20 21
European Union (15 countries) 16 15 17
New Member States (10 countries) 17 17 17
Are risks higher for men or for women, and to what extent? Table 3.3 shows male and female poverty risks for EU countries in 2005 (at the 60 per cent income cut-off). Countries are again ranked by overall poverty risk, from lowest to highest. In the three countries with lowest risk (Sweden, the Netherlands and Denmark) the risks are the same for men and women. In the other countries with below average poverty risk, the
rate for women is typically two percentage points above that for men. This is also the modal situation for countries with a risk higher than the average, including Ireland: the risk for men is one percentage point below the overall, and the risk for women is one percentage point above the overall risk. Only in Italy is a more substantial gap found, with the risk for women four percentage points higher than for men.