- Observatory: EurWORK
- Pay and income,
- Job quality,
- Social protection,
- Working poor,
- Labour market change,
- Published on: 05 April 2010
Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.
Working poor rates in Spain are among the highest in Europe, partly due to the increase in precarious forms of employment. The main social policies pertain to unemployment and non-contributory pensions for elderly and disabled people, while transfers directed at households with economically active members have less importance. Social dialogue is predominantly successful in topics such as retirement, unemployment and dependency; however, it focuses less on in-work poverty.
Definitions and aims of study
The ‘working poor’ are a section of the population that is difficult to define not only due to a lack of specific data but also because the concept combines two levels of analysis: the working status of individuals and the wages that they earn from employment (individual level), and the extent to which they have a poverty-level of income within the household context (collective level).
The aim of the comparative analytical report is fourfold:
to obtain an insight into the extent of in-work poverty in different European countries and the characteristics of those affected;
to examine policies in place to tackle the problem of people in work on low levels of income and any assessments which have been carried out into the effectiveness of such policies;
to consider the views of social partners towards the working poor;
to investigate the effect of the current economic recession on the scale of in-work poverty.
For the purpose of the study, the working poor are defined in the same way as the indicator used by the European Commission to assess and monitor in-work poverty. Therefore, the working poor are those who are employed and whose disposable income puts them at risk of poverty. The expressions ‘working poor’ and ‘in-work poverty’ are thus used interchangeably.
‘Employed’ is defined here as being in work for over half of the year and ‘risk of poverty’ is defined as having an income below 60% of the national median. Income is measured in relation to the household in which a person lives and covers the income of all household members, which is shared equally among them after being adjusted for household size and composition. Accordingly, if persons are at risk of poverty, this may not be simply because they have low wages but because their wages are insufficient to maintain the income of the household in which they live at a certain level. Equally, a person can earn a very low wage but not be at risk of poverty because the income of other household members is sufficient to raise the overall household income above the poverty threshold. The study covers people on low wages, or low earnings in the case of self-employed persons. Low wages, defined in an analogous way as low income – that is, below 60% of the median earnings of those in full-time employment – potentially put individuals at risk of poverty. The risk is likely to increase in the current economic crisis as companies introduce various measures to try to cut wage costs while keeping people in employment by reducing their working hours, giving them extended leave or simply cutting wages.
The characteristics of the people concerned are also important, particularly their age, with young people and, in some cases, older workers being more likely to be employed in low-paid jobs. Women are more likely than men to be employed in low-paid jobs, even allowing for the relatively large number of women working part time. However, the statistics show that, if they are in work, women are on average across the European Union less likely than men to live in households with a poverty-level of income. Nonetheless, they are more likely than men to live in circumstances which put them at particular risk of poverty, such as being a lone parent in many countries. In addition, migrants are particularly vulnerable to being among the working poor, since they tend to combine various adverse characteristics, such as working in low-skilled jobs with low rates of pay and living in single-earner households.
A set of tables containing the data available at EU level on the working poor and on people with low wages was included in an annex to the questionnaire (see Annex 1 of the overview comparative analytical report). The data concerned derive from the EU Statistics on Income and Living Conditions (EU-SILC) for 2007, which are the latest available data and relate to the position in 2006. The national correspondents are asked to comment on the table findings for their country and to supplement the data included with data from national sources where possible and where these help to interpret the situation or add to the information included in the tables. The EU-SILC tables, for example, do not cover the position of migrant workers. The correspondents are also asked to specify the source of any additional data and the definitions used where these differ from those on which the table is based.
1. Scale and nature of in-work poverty
The high Spanish rate of employed people at risk of poverty undermines the deeply-rooted image of work as a guarantee for welfare (VI FOESSA Report (in Spanish) of the FOESSA Foundation – Promotion of Social Studies and Applied Sociology (Fomento de Estudios Sociales y Sociología Aplicada)). The increase in precarious and low-quality jobs in Spain has given rise to a significant proportion of wage earners below the poverty line; indeed, this proportion is one of the highest in Europe. According to the EU-SILC data (2007) – counting only employed people aged 18 years and over – the proportion of workers who live at risk of poverty (working poor) is 11% of the total employed population, compared with a rate of 8% for Europe.
If figures from previous years are considered, the EU-SILC data show that the lowest at risk of poverty rate among working people was in 2000, at 8%. During the following years, the rate has been higher, at 10%, except for the even higher 11% registered in 2004 and 2007.
As might be expected, at risk of poverty rates are greater if the overall population is considered. For people aged 18 years and over, and without considering the working status, the rate corresponding to the total population of Spain is 19% – compared with a rate of 15% for the 25 EU Member States before the accession of Bulgaria and Romania in 2007 (EU25) and 16% for the 15 EU Member States prior to the accession of 10 new Member States in 2004 (EU15). When differentiating according to working status, the highest rates in Spain correspond to unemployed people (36%), followed by other economically inactive people (30%) and those not employed (28%).
However, although employed people show the lowest at risk of poverty rates, a high heterogeneity arises within that working group. In principle, poverty and social exclusion are related to the lack of quality in employment status and precarious forms of employment, such as temporary work or low-paid jobs. In fact, fixed-term employment contracts lead to a higher probability of suffering from poverty not only in the short term, but also in the medium and long term. Nevertheless, the situation has many different features. Thus, the available data show that having a low hourly wage does not always coincide with living in a poor household. In the Spanish case, of the 11.5% of employees whose hourly wage is less than 60% of the median, only 19.6% live in households at risk of poverty.
Concerning gender analysis, and according to the EU-SILC data, 17.3% of Spanish female workers have hourly wages under 60% of the median salary in comparison to 8.2% among men. However, this situation should not necessarily be associated with poverty. In fact, only 9% of the total Spanish working women can be defined as working poor, compared with 12% among men.
Meanwhile, age considerations show that 28.4% of young people aged 18–24 years have low hourly wages of less than 60% of the Spanish median, compared with 10.1% among people aged 25 years and older. In Spain, it is generally accepted that in the first stages of their work career people have lower incomes and that these wages increase as they gain work experience; in fact, part of the salary is linked to the number of years working in a company. In addition, young people in Spain tend to leave their parental home in their early 30s, which is later than in other European countries. This higher presence of young men and women living with their parents explains why the proportion of working poor among young people is lower than in other age groups: 7% of Spanish workers aged 18–24 years can be defined as working poor in comparison to 11% among workers aged 25–54 years and 12% among workers aged 55–64 years.
Thus, from a Spanish perspective, it could be said that receiving a low hourly wage and being working poor not only are analytically distinct situations but are often also not strongly connected. In other words, the situation of poverty risk is more related to the characteristics of the household than those of the individuals.
In Spain, family has traditionally been an important factor in softening the effects of labour market risks and social exclusion. Notwithstanding this situation, family structures and support models are rapidly changing and greater difficulties appear among new family forms, such as single-parent families with dependent children or elderly people living alone. The integrative and protective nature of families is weakening, which implies new social exclusion risks for Spanish society.
According to a study published by a research group in the northern University of Oviedo in Spain (Working poor and low salaries in Spain (215Kb PDF)), numerous variables may have an influence on the risk of poverty experienced by households.
Existence of dependent relatives – wage earners who live in households under the poverty line can be found in greater measure in families with dependant children (14%), especially in single-parent ones (23%), or when the wage earner lives in a household where there are more than two adults with one or more children (14%).
Household’s work intensity, as defined in the EU-SILC (the number of months of the year worked by members of the household of working age relative to the total number of months if each of them worked throughout the year) – the probability that a wage earner lives in a poor household decreases as the work intensity increases: 10% of full-time workers can be defined as working poor, compared with 14% among part-time workers.
Type of occupation – manual workers, especially skilled workers in agriculture, unskilled workers and workers in the services sector have a higher probability of becoming working poor.
Educational attainment – workers with low levels of education are more likely to be working poor (16% of them can be defined as working poor) in comparison to workers with a medium and high educational level (11% and 5%, respectively). Low education is defined as ISCED 0–2, according to the International Standard Classification of Education (ISCED), meaning no education beyond compulsory schooling. Medium education is defined as ISCED 3–4, meaning at least three years of education or training successfully completed after compulsory schooling. High education is defined as ISCED 5–6, meaning a third-level qualification.
Sector of economic activity – a high proportion of poor households and low earnings are associated with the agriculture and fishing sectors. High proportions are also found in the hotels and restaurants sector and in domestic and cleaning services, which are characterised by temporary work and job rotation.
Other variables – the association between poor households and low wages and small-sized companies is strong. In addition, low-income and temporary jobs are other variables affecting poverty distribution: for example, only 5% of Spanish workers with permanent employment contracts can be considered as working poor, whereas 12% of all temporary workers are in this situation.
2. Policies towards working poor
The Spanish System of Social Assistance comprises several subsystems such as pension schemes, the unemployment subsidy and services, and social services. The system is also complex because of the different levels of government involved: the central government (in some cases only in terms of basic legislation), the regional governments (with many regulatory, organisational and financial competences) and the local authorities (often in charge of the final service provision). Decentralisation has enhanced innovation and has brought policies closer to citizens. On the other hand, it has led to significant territorial inequalities, together with inter-institutional conflicts.
The main programmes comprising the Spanish System of Social Assistance are the following.
Supplements to minimum pensions (Complementos a mínimos) – they are aimed at retired people, disabled persons and survivors. Given that the Spanish pension system establishes minimum pension levels, insufficient contributory careers are supplemented so that all pensioners can reach a minimum pension.
Social transfers for unemployed people – these are targeted at: unemployed persons who are no longer eligible for the contributory unemployment benefit (subsidios de desempleo); agricultural labourers in the southern autonomous community of Andalusia and the western autonomous community of Extremadura (subsidio de desempleo agrario); and long-term unemployed people aged over 45 years (renta activa de inserción). These transfers are all subject to means testing based on the family situation.
Non-contributory pensions – they are aimed at elderly and disabled people, and conditioned to family means. Disabled persons can also apply for an individual pension, a measure passed by the Law for Integration of Disabled Persons in 1982.
Family allowances (Prestaciones familiares de la Seguridad Social) – these consist of transfers directed at low-income families with dependent minors. Families with disabled children are also entitled to social transfers, which increase when they become adults. In recent years, social protection for large families has slightly increased.
Minimum income schemes – they are run by the autonomous regions and were introduced between 1988 and 1995. They show large disparities among regions both in terms of the number of beneficiaries and the amounts of the transfers. From the mid 1990s, the amount of transfers was slightly augmented and increasingly tied to activation measures.
Among these schemes, those devoted to unemployment and to non-contributory pensions for elderly and disabled people consume the greatest part of resources.
From a time dynamic perspective, the expansion of social assistance has been notable in terms of both the number of beneficiaries and expenditure. The number of transfers has increased from under half a million in the early 1980s to a current total of one and a half million. The present social assistance system was mainly developed during the last two and a half decades, but the period showing the highest intensity of introducing new schemes ranges from the early 1980s to the mid 1990s; austerity and zero deficit policies subsequently changed this trend.
According to a study by the University of Oviedo (Protecting the working poor in Spain: A comparative overview (355Kb PDF)), since the mid 1990s, consecutive reductions in tax rates diminished the capacity of the public administration to manage income redistribution and inequality reduction. Thus, after a number of years of getting closer to European levels in social assistance, the gap between Spain and Europe has widened again since the early 1990s onwards as almost no new schemes have been created and conditions of access have tightened. Beneficiaries of social assistance decreased from almost two million transfers in 1993 to the one and a half million at present.
Interestingly, the University of Oviedo study makes a comparative analysis among a group of countries – Germany, Spain, Sweden and the United Kingdom (UK) – concerning social transfers and poverty rates. The first relevant finding is that the Spanish poverty rate after social transfers is, on the whole, the highest in the group of countries under study, both among men and women. This result shows the relatively low level of development of Spanish social policies in comparison to other well-developed EU Member States.
Furthermore, according to the University of Oviedo study, the combined result of primary income and social transfers provides varied poverty rates for different types of households. In Spain, the results show greater difficulties in reducing poverty in households comprising only an elderly member, especially if it is a woman, as well as single-parent households and households with several dependent minors.
In conclusion, social assistance in Spain appears to be relatively weak, fragmented and territorially unequal. Although it has expanded significantly during the last two decades, it seems to have a limited capacity to reduce poverty. As already mentioned, family structures are changing, but public policies are still based on the traditional family model. Regarding in-work poverty, the Spanish system is mainly aimed at addressing income loss due to incapacity and/or unemployment. Hence, the working poor group would not be adequately covered.
3. Attitudes of the social partners to the working poor
Generally speaking, social dialogue is one of the main instruments for the development of social policies in Spain. The main outcomes deriving from collective bargaining practices include minimum wages, pay increases, working time, contractual flexibility and lifelong learning.
In addition, trade unions’ typical demands usually refer to improving the structure and organisation of collective bargaining, guaranteeing equal treatment and opportunity rights, improving working conditions, reducing the accident rate among workers, strengthening stable employment and introducing a sectoral minimum wage.
However, collective agreements do not normally deal with working poor matters. The closest issue to in-work poverty could be the debate on the minimum wage (Salario Mínimo Interprofesional, SMI), which is usually based on macroeconomic and budgetary objectives and is predominantly established by the government after consultation with the social partners.
Consequently, social dialogue tends to be predominantly focused and biased towards the needs and demands of the relatively stabilised working population segments – or those with relative levels of precariousness – while socially excluded groups still have a low representation in social dialogue.
This lack of attention towards these groups is compensated by the action of non-governmental organisations (NGOs) and voluntary associations. Hence, non-profit social entities are playing an important role in supporting the most excluded social groups, as public policies to combat poverty are limited. In Spain, organisations such as the Roman Catholic agency Caritas or the Red Cross (Cruz Roja) – or a wide range of non-profit entities at regional and local level – support groups experiencing in-work poverty (VI FOESSA Report).
Indeed, since the 1980s, charity or voluntary organisations have acted as a major player in social debate concerning poverty and exclusion. In 2001, the Spanish government implemented the National Action Plans for Social Inclusion (Planes Nacionales de Acción para la Inclusión Social), fostering the participation of NGOs in their development and evaluation in an active and open way. The growing political importance of the fight against poverty has enhanced the debate and investigation by different NGOs in a context of high fragmentation of these entities. However, the presence of social action NGOs at national, regional and local levels has progressively consolidated over the last five years, due to social intervention and consultation.
4. Effect of current economic recession on in-work poverty
The tough economic conditions of the current global crisis are having a clear influence on the labour market. Employment precariousness is based on temporary contracts, low wages and informal work, and it is directly related to the economic cycle. In the current downturn situation, these factors are expected to increase.
To give an example, the number of Spanish unemployed people has grown in an alarming way, to the extent that the unemployment rate was 17.36% for the first quarter of 2009, compared with a rate of 9.63% for the same quarter in 2008. In other words, at the beginning of 2009, a total of 4,010,700 persons were unemployed – 1,836,500 more than 12 months before, according to the Survey on Active Population (Encuesta de Población Activa, EPA) of the National Statistics Institute (Instituto Nacional de Estadística, INE).
This situation means greater costs in public policies concerning transfers for unemployed people. Moreover, as noted, the Spanish social assistance system is less developed than in other countries in many aspects, such as infrastructure, personnel and resources. Not surprisingly, the consequences of the economic crisis are putting pressure on the capacity of the public services, and the role of non-profit social entities and NGOs is increasing.
Indeed, during 2008, Caritas had to help 50% more people than the year before. Representatives from this institution for social action complain that, despite the difficult economic situation in Spain, the public social services budget for helping excluded people is the same as it was in 2007 (Trampas y miserias del Estado de Bienestar, El País, 5 July 2009).
On the other hand, an important variable affecting the economic health of Spanish families is the high level of housing expenses – basically mortgages, Spain being primarily a proprietor country, with an underdeveloped rent market – in relation to household income. In this respect, the Family Financial Survey conducted by the Bank of Spain in 2005 showed that 11.7% of households have to devote more than 40% of their income to housing costs. In a number of cases, and when one of the partners becomes unemployed, the economic situation of the household obviously deteriorates, resulting in a number of difficult and complex financial situations for the household as a whole. Therefore, the government has implemented special measures to help people who become unemployed to pay their mortgage.
The increasing flexibility of the labour market and the widening of wage disparities have led to an upsurge in new and problematic situations among low-wage workers, who are facing growing poverty risks. This situation is especially severe in Spain, where precarious forms of employment such as low-paid jobs and fixed-term contracts are common and working poor rates are among the highest in Europe.
In addition, the Spanish social assistance system is not fully developed in comparative terms. Neither public policies nor social agents pay enough attention to in-work poverty; thus, NGOs and non-profit social entities are currently one of the main supports for this group. Unfortunately, and bearing in mind the current economic downturn, it is expected that the situation of the working poor will get worse and that the number of people in that group will increase – many of them in fact losing their precarious jobs.
It is also interesting to note that in the Spanish case the situation of poverty risk is more related to the features of the household than to the characteristics of the job itself. Therefore, the characterisation of households is of the utmost importance in order to move families away from poverty. Consequently – and considering that family structures are changing – it is recommended that public policies adapt to the current needs of the new emergent models of Spanish families.
Eurostat, European Union Statistics on Income and Living Conditions (EU-SILC), Luxembourg, 2007.
Foessa Foundation, VI Report on social exclusion and development in Spain (VI Informe sobre exclusión y desarrollo social en España), Madrid, 2008.
García-Espejo, I. and Ibáñez, M., Working poor and low salaries in Spain: An analysis of occupational and household factors related to different situations of poverty, draft, University of Oviedo, Spain, 2006.
Gutierrez, R. and Guillen, A., Protecting the working poor in Spain: A comparative overview, University of Oviedo, Spain, 2007.
National Statistics Institute (INE), Survey on Active Population (Encuesta de Población Activa, EPA), Madrid, 2008 and 2009.
Jessica Duran and Iñigo Isusi, IKEI