Extent of working poverty in the European Union

People in employment are less likely to experience poverty than those who are not working. However, work does not necessarily guarantee an escape from poverty. The phenomenon of ‘working poverty’ is estimated to affect approximately 14 million people in the EU25. Eurostat has developed indicators and variables to measure the overlap between work and poverty.

A recent Eurostat study (362Kb pdf) outlines methodological approaches to measuring working (or in-work) poverty at EU level and examines the incidence and distribution of poverty risk. Harmonised data are available for the EU15, based on the European Community Household Panel (ECHP). For the new Member States, only partial data exist, on a not fully comparable basis.

Working poverty is determined by interrelating factors in the labour market and household structure. The common indicator, used in the context of the European Employment Strategy and the Open Method of Coordination on social inclusion, defines the working poor as individuals who are employed (employees and self-employed) and whose household disposable income is below 60% of the national median income.

Profile of the working poor

In the EU25 in 2001, 7% of the employed population, amounting to an estimated 14 million people, lived in households with an income below the national poverty line.

In the same year, about a quarter of the population aged 16 years and over in employment in the EU15 were at risk of poverty. Some 11 million workers were living in a household with an income below the national poverty threshold. Taking all household members into account, 20 million people were affected by working poverty - equalling 6% of the total population and 36% of the population at risk of poverty.

A number of factors have an impact on the likelihood of falling into the category of working poor, such as employment status, sex, age, educational level, contractual status, and working time arrangement (Table 1).

Table 1: Risk of working poverty, by personal and job characteristics, EU15, 2001 (%)
Risk of working poverty, by personal and job characteristics, EU15, 2001 (%)
Characteristic %
Total 7
Employees 6
Self-employed 15
   
Personal characteristics  
Women 7
Men 8
   
Age  
16 to 24 years 10
25 to 54 years 7
55 years and over 9
   
Educational level  
Low 12
Medium 5
High 3
   
Job characteristics (employees only)  
Type of contract  
Permanent contract 4
Temporary contract 10
   
No. of weekly hours worked  
<= 30 hours 10
> 30 hours 5

Source: Eurostat; based on the ECHP UDB (users’ database) version December 2003; Reference population: employed people aged 16 years and over

The presence of children in the household increases the risk of working poverty. Lone parents or sole earners with children are particularly vulnerable in this respect (Figure 1).

Working poverty and household characteristics, EU15, 2001 (%)

‘Work intensity’ of the household

Households are categorised by their composition (presence of dependent children or not) and also by their ‘work intensity’. The work intensity of the household is based on the number of months per year for which household members of working age were in employment. Eurostat defines four categories of work intensity for households with dependent children and three categories for households without children.

Table 2 illustrates that the risk of poverty is clearly higher for people in jobless households. For jobless households with dependent children, the poverty risk is as high as 63%, compared to a risk of 30% in such households without children. This contrasts with the risk of only 5% in households where all of the working-age adults are working for the full year - whether there are children or not.

Table 2: Incidence and distribution of poverty risk, by work intensity of household, EU15, 2001 (%)
Poverty risk of the household members by the work intensity of their households, EU15, 2001 (%)
Households with: Incidence of poverty risk Proportion of individuals who are at risk of poverty
- No dependent children    
Jobless household 30 16
Either less than full-year work for some or all household members, or only some adults at work 10 13
Full-year work for some or all working-age household members 5 6
     
- Dependent children    
Jobless household 63 13
Less than half year work for some or all household members 40 14
Between half and full-year work for some or all household members 17 29
Full-year work for some or all working-age household members 5 10

Source: Eurostat; based on the ECHP UDB (users’ database) version December 2003; Reference population: people living in households with at least one working-age adult

Degree of working poverty among working households

The study reveals, perhaps surprisingly, that, in the EU15 as a whole, as many as 37% of the working poor live in a household where all working-age adults are employed (Table 3). However, this can be explained by the extent of part-time employment, low pay or by the presence of dependants in the household.

Table 3: Distribution of poor employed working-age people, by household work intensity, EU15, 2001 (%)
Distribution of poor employed working-age people, by household work intensity, EU15, 2001 (%)
Households with: Distribution
No dependent children  
Either less than full-year work for some or all household members, or only some adults at work 19
Full-year work for some or all working-age household members 20
Dependent children  
Either less than full-year work for some or all household members, or only some adults at work 44
Full-year work for some or all working-age household members 17

Source: Eurostat; based on the ECHP UDB (users’ database) version December 2003; Reference population: Poor employed working-age adults

Tackling the issue

The Foundation report Working poor in the European Union emphasises that working poverty is difficult to tackle through any single approach. For example, the issue of being long-term, full-time employed poor demands a different approach than being working poor as a result of household characteristics. Quality of employment is central to addressing the problem of working poverty. It appears that those working in non-standard employment are at a significantly higher risk of being or becoming working poor.

Anni Weiler, AWWW GmbH ArbeitsWelt - Working World

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