why this study? - combat poverty · senior research internship combat poverty agency ... analysis...

Combat Poverty Agency Research Seminar - 2 October 2007

Paul Rocks

Senior Research InternshipCombat Poverty Agency

Low Income Working Families: EU-SILC analysis

2/10/07

[Work in Progress – Final Report due end 2007]

Why this study? In 1992 there was 1.1 million in employment. By 2006 there was over 2 million in employmentService and Construction sector were mainly responsible for employment growth Increased job flexibility (more part-time work; fixed-term/ temporary contracts)Wage moderation is enshrined in the social partnership agreementsLow tax regime↑ personal consumption but ↓ share of wealth to workers

Government and the work-poverty relationship

‘the best safeguard against social exclusion is a job’ –The Lisbon Strategy

‘Employment is the main route out of poverty’ –National Action Plan for Social Inclusion 2007-2016

A work-poverty policy focused on income supports, services, activation and good quality employment which ‘recognises the continuing challenges faced by those in work but on low incomes’ - National Action Plan for Social Inclusion 2007-2016

National Action Plan for Social Inclusion 2007-2016 focus on consistent poverty

Consistent poverty is defined as being below 60% median income and experiencing one of the following:

1. Inability to afford two pairs of strong shoes2. Inability to afford waterproof coat3. Inability to afford to buy new rather than second-hand clothes4. Unable to afford to eat meals with meat chicken, fish (or

vegetarian equivalent) every second day5. Unable to afford to have a roast joint (or its equivalent) once a

week6. Had to go without heating during the last 12 monthes through

lack of money7. Unable to afford a substantial meal through lack of money8. Going into debt to meet ordinary living expenses

National Action Plan for Social Inclusion 2007-2016 perspective on the at ‘risk-of-

poverty’ rate

The at ‘risk-of-poverty’ rate is defined simply as being below 60% median incomeTakes no account of overall living standardsCannot track changing trends in real incomeMain value is in identifying particular groups which may have difficulty keeping pace with living standards generally

Even so, the at ‘risk-of-poverty’ rate is a proxy for many other forms of

disadvantage in societyAccess to healthParentingEducational opportunityAccess to cultureSecurityUseful to use in conjunction with other measures


Defining ‘low-income working households’/ ‘working poor’

Households that receive their primary income through paid work and yet are still precluded from having a standard of living that is regarded as acceptable by Irish society generallyConsistent poverty; at ‘risk-of-poverty’; minimum essential budgetsLabour market wage does not take account of how many individuals wage/ salary must be distributed over, unlike welfare benefitsPossible role for state intervention

EU-SILCYearly survey on income and living conditions carried out in all EU member states2005 Irish sample: 15,539 individuals and 6,085 householdsRepresentative sampleData is weighted age, sex, region and household compositionWorkers have been defined as such if they answered ‘at work’ to the Principal Economic Status questionWorking households are households with at least one individual whose principal economic status is ‘at work’

1.7% of people ‘At Work’ are in consistent poverty

Whole population risk of Consistent Poverty- 60% median income

1.7

21.6

11.29.4

3.3

17.415.2

10.6

0

5

10

15

20

25

At work

Unemplo

yed

Studen

t

Home D

uties

Retired

Ill/ D

isable

d

Other In

activ

e Pers

on

Aged <

16

%

2.9% of people in Working Households are in consistent poverty

Household risk of consistent poverty at 60%

2.9

21.9

7

0

5

10

15

20

25

Working Inactive Population

%

But… 32.6% of the consistently poor live in working households

Compostion of the consistent poor

33%

67%

Working Inactive

93,978 people live in working households that are in

consistent poverty


10.7% of people living in working households ‘at risk of poverty’

Household percentage at 'risk-of-poverty'- 60% median income

10.7

46.8

18.5

05

101520253035404550

Working Inactive Population

%

45.7% of those at ‘risk-of-poverty’live in working households

Compositon of individuals at 'risk-of-poverty'

Working46%Inactive

54%

350,035 people live working households that are at ‘risk-

of-poverty’

‘the majority of children in poverty live in jobless households’ - NAPS

Composition of children at 'risk-of-poverty'

Working50%

Inactive50%

Composition of children in consistent poverty

Working34%

Inactive66%

34,047 children living in working households are in

consistent poverty

AND

102,318 children living in working households that are

‘at risk-of-poverty’

Spatial Analysis

Where are low-income working households?


Risk of working households

suffering basic deprivation

Basic Deprivation

0.7

0.8

0.9 - 1.1

1.2

Dublin1.2

Border1.2

West0.8

Mid-East1.0

Midlands1.0

South-East0.8

Mid-West1.1

South-West0.7

National distribution of working households suffering deprivation

National distribution of people living in working households experiencing basic deprivation (old)

12.8

5.4 7.1

35.5

11.58.9 8.1

10.6

0

5

10

15

20

25

30

35

40

Border Midland Western Dublin Mid-East

Mid-West

South-East

South-West

%

‘Working poverty’ odds ratio (60% at risk of

poverty)

Working Poor Risk

0.4 - 0.8

# # ## # ## # #

0.9 - 1.1

1.2 - 1.5

1.6 - 1.8

1.9 - 2.2

# # # # # # # ## # # # # # # # ## # # # # # # # ## # # # # # # # ## # # # # # # #

# # # # # # ## # # # # # #

# # #

# # # # ## # # # # ## # # # # ## # # # # # #

# # # # # ## # # # # #

# # # ## # #

# ## # # ## # # #

# # # ## # # # # # ## # # # # # # # # # ## # # # # # # # # # ## # # # # # # # # # ## # # # # # # # # # #

# # # # # # ## # # # # ## # # # # # # ## # # # # # # # # ## # # # # # # # # ## # # # # # # # #

# # # # # # # ## # # # # # # #

# # ## #

Dublin0.4

Border2.2

West1.8

Mid-East0.7

Midlands0.9

South-East1.2

Mid-West1.8

South-West0.7

21.8

4.9

1513.8

7.9

13.3 12.310.9

0

5

10

15

20

25

Border Midland Western Dublin Mid-East Mid-West South-East

South-West

%

National distribution working households at ‘risk-of-poverty’

Does employment type distinguish low-income

workers from other workers?

EmploymentBreakdown of national employment by sector

6.5

23.4

63.4

6.7

0

10

20

30

40

50

60

70

Agriuclture Industry Services Other

%


Employment- Agricultural sector most at risk of low-income employment

Employment sector risk of being at 'risk-of-poverty'- 60% median income

19.3

5.9 5.7

11

0

5

10

15

20

25

Agriculture Industry Services Other

%

But… Service workers are the largest group of low-income workers

Composition by employment sector of workers at 'risk-of-poverty'- 60% median income

18 19.7

51.3

11

0

10

20

30

40

50

60

Agriculture Industry Services Other

%

Breakdown of service sectorBreakdown of risk and composition of service which is

at 'risk-of-poverty'- 60% median income

7.19.9

5.1 52.7 3.2 4.7

7.3

27.7

14.7

9.36.7 6.8 6 4.7

7.3

0

5

10

15

20

25

30

Retail

Hotels

Tran

sport

Finan

ce

Real e

state

Public

admini

strati

on

Educa

tion

Health

%

% of individual sector at risk

Percentage each individual sector constitutes of all 'at-risk' service workers

Breakdown of ‘service’ sectorBreakdown of service sector workers at 'risk-of-poverty'-60%

median income by occupation

220

87.575.2

58

31

72.386.3

100

12.6

8267.2

13.8

50.8

18.121.8

49.2 41.9

020406080

100120

Retail

Hotels

Transp

ort

Financ

e

Real e

state

Public

admini

strati

on

Educati

onHea

lth

Service

Sector

Ove

rall

%

Highly and Lowly Skilled non-manual Highly skilled manual and Elementary

What are the characteristics that distinguish low-income working households from other working

households?

Worker characteristics included in model

EducationEmployment SectorOccupationHours workedEmployee/ self-employedWork contractTenure status

AgeUrban/ RuralGenderNationalityRegionMarital StatusHealthSupervisory roleOff-farm employment


Household characteristics included in the model

Children (yes/ no)HH has more than one workerHH has an unemployed personHH has a retired personHH work intensity

One person householdHH has five or more personsHH has person with disabilityHH has person on home dutiesHH has student

Working households- 60% at ‘risk-of-poverty’

1.592Craft and related: (as opposed to highly skilled non-manual)

3.510Elementary: (as opposed to highly skilled non-manual)

3.715Highly skilled manual: (as opposed to highly skilled non-manual)

2.339Lowly skilled non-manual: (as opposed to highly skilled non-manual)

0.308Household has two or more workers

3.454Student in household (as opposed to no student)

2.323Supervisory Role: No (as opposed to yes)

R squared = 0.365

Likelihood that working household is at ‘risk-of-poverty’

Significant Variables

Continued… Working households- 60% at ‘risk-of-poverty’

1.603Lower secondary or below education (as opposed Upper secondary and above)

0.587Southern and Eastern (as opposed to Border, Midland and Western)

2.023Non-Irish (as opposed to Irish)

1.935Female (as opposed to male)

1.871Location: Rural (as opposed to Urban)

0.378Permanent job (as opposed to temp/ part-time job)

1.9145 or more individuals in the household (as opposed to less than 5)

Welfare benefits and tax contributions

Social transfers are essential if poverty is to be eliminated

Household at 'risk-of-poverty' rates (60% meidan income) pre and post social transfers

20.9

73.2

10.7

46.8

0

10

20

30

40

50

60

70

80

Working Inactive

%

Risk of poverty- 60% meidan income pre social transfers excluding old age and survivalbenefitsRisk of poverty- 60% meidan income post social transfers

Family Income Supplement (FIS)To ensure the incomes of families with children in work are significantly higher than incomes out of workDual purpose: ‘incentive to work’ and ‘poverty reduction’ (primarily child poverty)Eligibility is determined by: (1) Households working >19 hours per week; (2) The presence of children in the household and;(3) Household net disposable income being below specific income thresholds dependent on the number of childrenPayment is 60% of the difference between net household income and the eligibility threshold


FIS- Consistent Poverty reduction

Sample size is small. Only 84 households receive FIS.Before the FIS payment 13 households out of the total 84 households receiving the payment are in consistent povertyAfter receiving FIS only 7 (8.3%) are in consistent poverty. Therefore, FIS has 46.2% success at reducing consistent poverty

FIS- At ‘risk-of-poverty’ reduction

Before the FIS payment is made 33 households out of the total 84 households receiving the payment are at ‘risk-of-poverty’After receiving FIS 20 households are at ‘risk-of-poverty’. Therefore, FIS has 39.4% success at reducing those at ‘risk-of-poverty’

Is the effectiveness of the FIS influenced by the number of children in the household?

5

4

3

2

1

Number of children

40%35

50%24

14.2%67

45.5%611

50%24

Poverty reduction

success rate

At ‘risk-of-poverty’ after

FIS

At ‘risk-of-poverty’ before

FIS What about those working families on low incomes but not receiving

FIS?

Of the 195 working households with children/students who were at ‘risk-of-

poverty’, only 20 are receiving FIS

At ‘risk-of-poverty’ reduction if potential recipients received FIS

28%18€4,603254

67%3€5,65295

34.1%27€2,746413

39.2%31€3,212512

32.7%33€2,575511

Success Rate

At ‘risk’After FIS

Mean Payment

At ‘risk’Before

FIS

N Children

FIS ConclusionsAverage success rate = approximately 40%Increasing take-up has the potential to seriously reduce the number of households with children at ‘risk-of-poverty’Even so, FIS would barely scrape a ‘D’ in an exam at poverty reduction Raising income eligibility thresholds/ withdrawlrate will lead to further gains in poverty reduction


Housing AllowanceHouseholds at 'risk-of-poverty' receiving housing

allowance

62.9

19.2

0

10

20

30

40

50

60

70

Inactive Working

%

Tax and social contributionsHouseholds at 'risk-of-poverty'- 60% median

income - tax and social contributions

11.5

71.7

01020304050607080

Inactive Working

%

Tax and social contributionsWorking households at 'risk-of-poverty'- 60%

median income, paying tax and social contributions

54.3

79.6

0102030405060708090

No Children Children

%

Annual Finances

1672,978HH tax and social contributions

12,76918,574Total Net disposable income

8,0097,547Equivalised income after social transfers

12,93321,552Gross HH income after social transfers

Inactive working age

households at ‘risk-of-poverty’

Working households at ‘risk-of-poverty’

Policy Options

Labour market intervention vs. benefit supports

New employee/ employer wage legislationImproving FISExtending Housing allowanceImproved Tax credit systemSystem of automatic take-upCreating a support for low-income workers without childrenNot mutually exclusive

why this study? - combat poverty · senior research internship combat poverty agency ... analysis...

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