Europe’s social polarisation and the generational struggle

This post, written by Bruegel's Olga Tschekassin, discusses the latest results on Europe's poverty rates, unemployment rates and income inequalities. The post is a part of the Wikiprogress Series on Jobs and Earnings.

According to the latest Eurobarometer survey on the social impact of the crisis, 80% of respondents believe that poverty has increased in their country over the past 12 months. Over 30% of respondents in Greece, Latvia, Lithuania, Bulgaria, Romania and Hungary reported that their household ran out of money to pay for ordinary bills, food and other daily consumer items at some point during the previous 12 months. These alarming numbers are reflecting the perception of European citizens. But what do indicators measuring different dimensions of poverty and inequality actually show?

The best publically available indicator to assess poverty is the ”Severe Material Deprivation Rate” (SMDR). It is an absolute measure of poverty and represents the proportion of people who cannot afford at least four out of nine basic needs, like utilities, regular hot meals or heating to keep the home adequately warm. As you can see in the interactive map below, there is a strong dispersion across Europe. While Bulgaria has the highest rate (44.1%), in Luxembourg only 1.3% of people are severely affected by a lack of resources. The average rate in EU27 countries increased from 9% percent in 2007 to 9.9% in 2012. Even though this increase does not seem to be as dramatic as the survey implies, it is worth highlighting that a share of almost 10% is unacceptable and against the objective of promoting the well-being of EU citizens.

(To view an interactive version of this map, see the original post here.)
 

There were opposite developments for young and old people in the EU: the SMDR stood at 11.7% for those under 18 at the end of 2012, while the rate for the elderly (over 65) reached 7.5%. The evolution of these rates since 2007 is divergent: Between 2007 and 2012, in 20 out of 28 EU countries the elderly SMDR declined on average by 4.5 percentage points (pp). At the same time, however, in 16 out of 28 countries the children SMDR has increased on average by 4.4 pp. Therefore, a generational divide is emerging: while the fall in severely materially deprived elderly people is a welcomed development, the adverse development for children is worrying.

Looking at the unemployment rate, we observe an increase in all EU countries in the period 2007–2012 with the exception of Germany, while the rate remained practically unchanged in Austria, Malta, Finland and Poland. The EU28 average unemployment rate stood at 7.2 % of active population in 2007. By the third quarter of 2013, this rate had increased to 10.9%. The countries with the lowest unemployment rates are Austria, Germany and Luxembourg, as opposed to Greece, Spain, Croatia, Cyprus and Portugal, where the rate is very high. Overall we note that there was an increase in the South-North divide in terms of unemployment, which has reached unacceptably high levels in several south European countries and leads to more polarisation across Europe.

Directly related to this indicator is the share of people living in jobless households, which has increased significantly throughout the crisis. The situation is especially alarming in Ireland, where every fifth child lived in 2012 in a household where no one worked. The share of such children was also higher than 15 % in Bulgaria, the UK and Hungary. Besides, the share of young people not in employment and not in any education and training (NEET) more than doubled in seven countries. The reality for young people aged between 15 and 24 years is worst in Greece, Spain and Croatia.

Using the Gini coefficient as an indicator for inequality, we observe the highest levels of inequality in 2012 in Latvia, Spain, Greece and Portugal, while the lowest rates are reported in Slovenia, Czech Republic and Sweden. As Zsolt Darvas and Guntram Wolff outline in their Policy Brief published on the 1st of April 2014, inequality in most advanced economies has been rising since about 1980 and could have been a reason for the pre-crisis increase in household debt and the consequent consumption squeeze during the crisis.

Therefore, developments of various social indicators show a gloomy picture. Social pain has already undermined the citizens’ trust in the EU and their own governments. This could devitalize the acceptability of painful structural reforms and fiscal consolidation measures and, in turn, diminish the reform momentum or even lead to political instability.

- Olga Tschekassin

This blog first appeared here at Bruegel.org on 1 April, 2014.
 

See Also:

European Network on Measuring Progress

Quality of life in Europe: Subjective well-being

Progress Initiatives in Europe

The European Centre for Social Welfare Policy and Research

 

Job Quality - It's not just about having a job

This blog by Anne Saint-Martin, Economist at the OECD, is part of the Wikiprogress focus on the “Well-being in the workplace: Measuring job quality” chapter of the How's Life? 2013.

Workers in high-strain jobs, who lack the support they need to cope with difficult work demands, are more likely to suffer from job burnout, to develop musculoskeletal disorders, hypertension, and cardiovascular disease. The list is long, and worrying. For instance a recent study published by Harvard researchers suggests that women in demanding and stressful jobs have a 38% increased risk of heart disease. Compared with those in low-strain jobs, they have a 67% raised risk of a heart attack, the study shows.

This is worrying as high-strain jobs are relatively widespread. A recent OECD study shows that in Europe, 20% of employees report difficult work situations, facing multiple job 'stressors' without adequate support and resources to cope with. And half of those in high-strain jobs report that work impairs their health, compared to only 15% for those in low-strain jobs.

People spend most of their day and a significant part of their life at work. Employment is not only a major driver of material living standards but also powerful determinants of one’s quality of life.

It is not just a question of having a job, it’s also about of job quality.

So what are the elements that make up a quality job?

The features of a job that contribute to the well-being of workers include interactions with colleagues, support from managers, work content, autonomy in decision-making, earnings and job security. Job quality has multiple facets.

In the current economic climate, insecure employment and in-work poverty are at the heart of policy debates in many OECD countries. But looking beyond these economic aspects and opening the Pandora box of job quality remains a key challenge for economists and policymakers. As a matter of fact, measuring well-being at the workplace, its determinants and its consequences on life quality, is not an easy task. 

People may face a variety of stress factors at work, such as dealing with heavy workload and time pressures, coping with conflicting demands, or performing physically demanding tasks. What matters for their well-being is both the accumulation of such 'stressors' and whether they are given a fair chance to meet these multiple requirements. Without well-defined work goals, sufficient work autonomy, support from colleagues and managers, demanding jobs can impair people’s health. But with adequate resources and support, they can be conductive to personal achievement.

In part due to an increasing awareness of work-related health problems among the public at large, well-being at the workplace has gained momentum in the public debate. This change has emerged alongside a wealth of research in occupational health, epidemiology, management and sociology, indicating that there is a strong relationship between job quality and peoples’ physical and mental health.

But the difficulties of defining and measuring the quality of work organisation and that of workplace relationships in ways that are amenable to comparisons over time and across countries remain a major obstacle to giving more prominence to these aspects of job quality in the policy debate, despite their importance for people’s well-being. Further work is needed to develop cross-country comparable indicators so as to identify best practices. This is in the agenda of the OCDE, as part of a major project on job quality: “Defining, Measuring and Assessing Job Quality and its Links to Labour Market Performance and Well-Being”.

References:

Slopen N., Glynn R., Buring J., Lewis T., Williams D. and M. Albert (2012), “Job Strain, Job Insecurity, and Incident Cardiovascular Disease in the Women’s Health Study: Results from a 10-Year Prospective Study”, PloS ONE, Vol.7, No.7.

OECD (2013), “Well-being in the workplace: Measuring job quality” in How’s life? Measuring Well-Being.

Measuring Progress at the British Business Bank – beyond GDP

This blog by Charles Seaford discusses the recommendations for a state owned business bank from the Good Jobs Taskforce that is presented in the report 'The British Business Bank'. 

By the end of next year, the UK government’s British Business Bank, currently under construction, will have landed. It’s mission? To boost the UK economy by increasing flows of finance to our cash-strapped small businesses.

It’s good news, for sure – but is that all the new institution could do? In a recent report, the new economics foundation (nef) makes the case for dramatically extending the mandate of the British Business Bank. We argue that its core purpose should be to support not just any small businesses, but specifically the kinds that create good, sustainable jobs. That is, jobs that deliver high well-being, contribute to a fairer society, and will remain viable as we move to a low-carbon future.

It’s an easy objective to state. But the details matter. That’s why our report aims to prove that it is possible in practice to create and deliver against a new set of economic policy objectives, beyond simply growing GDP or reducing unemployment.

All this means particular attention has to be paid to the bank’s performance indicator framework, which will be used to guide lending and investment decisions. For these will need to take into account questions such as: how good an employer is the loan applicant? How does its environmental record compare with other similar businesses? Is the business in a sector that is financially sustainable given global trends? What impact will it have on the rest of the regional economy? The report goes into a lot more detail about what such questions mean both for the indicator framework and targets set for the bank’s managers, and for the kind of products and processes they use.

It is important that the bank serves all parts of the country and the indicators would need to be constructed on a regional basis. In addition, international experience suggests the bank should work with a network of partner regional banks. Unfortunately the latter don’t exist in the UK – one of the UK economy’s big problems. However, we do have a possible way of dealing with this: it may be possible to break up the Royal Bank of Scotland (currently 82% owned by the state) to provide the necessary network of branches. This would have a number of other benefits – above all bankers who understand the localities they serve – and we are investigating just how feasible this would be.

Discussion of banking performance indicators may seem a rather dry topic – but this is the kind of low key policy lever that could make a big difference to people and small businesses for years to come.


Charles Seaford
Head of the Centre for Wellbeing at the nef (new economics foundation)

Can good governance solve youth unemployment?

This article by Robbie Lawrence, highlights how young people are very much part of the solution to youth unemployment. This post is part of the Wikiprogress Governance and Civic Engagement Series

“Education is our top priority but, once educated we want to be trained, enabled – and funded – to take action to address the challenges faced by our generation through youth-led development. We want, in Gandhi’s words, to ‘be the change’ we want to see in the world…” World Youth Congress, Hawaii, 1999

On the same day that the Bank of England upgraded its economic forecast, stating that inflation is expected to drop within the next two years, the Trades Union Congress reported that UK unemployment figures grew by 15,000 in the first three months of 2012 to 2.52 million. Rising employment numbers in the latter months of 2012 had offered a level of respite for the British government following a bruising financial year, however, today’s findings show that joblessness is still extensive.

The issue remains embedded among young people, with jobless rates soaring towards the one million mark and standing at 21.2% across the country. The TUC is concerned that while employment prospects for older workers have been improving, those for young people are far worse, and have deteriorated further since mid-2010. The damaging effects of unemployment on young people are well documented, and there is an increasing risk that the UK’s current 15-24 year olds will suffer lasting damage to their earnings potential and job prospects throughout their lives.

Global figures are equally gloomy. Over the last few years we have been inundated with statistics on the deteriorating situation in Europe (particularly Spain) for young job seekers and in Africa well over half of 15-24 year olds are currently out of work. According to a UN led report released last week, the weakening world wide recovery has further aggravated the youth job crisis and as a result the problem will continue growing over the next five years. The International Labour Organization’s ‘Global Employment Trends forYouth 2013: A generation at risk’ estimates that 73.4 million young people (12.6 percent) are expected to be out of work in 2013, and by 2018, this will have reached 12.8 percent.

Graph taken from ILO Report 2013

The report stipulates that young people face persistent unemployment, a proliferation of temporary jobs and growing discouragement in advanced economies; and poor quality, informal, subsistence jobs in developing countries:

“The economic and social costs of unemployment, long-term unemployment, discouragement and widespread low-quality jobs for young people continue to rise and undermine economies’ growth potential,” ILO - Global Employment Trends for Youth 2013 report.

Despite vocal concern around the issue, it seems that governments and organisations have struggled to find an effective means of combating youth unemployment. The recent World Economic Forum in Davos touched upon the subject on a number of occasions with some leaders suggesting that a global fund for unemployment be implemented. Yet there have been murmurings among critics that such steps are simply inadequate when faced with the ‘tidal wave’ of jobless young people sweeping the world’s nations. Lynda Cratton of the London Business School believes that in a similar way to global warming, the sheer complexity of the challenge renders it almost impossible to solve.

Following the release of ‘A generation at risk’ the ILO’s assistant director-general for policy José Manuel Salazar-Xirinachs stated, ‘These figures underline the need to focus policies on growth, massive improvements in training systems and targeted youth employment actions’. 

Two recent Wikichild Spotlight reports look at tackling youth unemployment through effective governance.

- Developed by UNICEF and Save the Children, Children's Rights and Business Principles provides a comprehensive framework for understanding and addressing the impact of business on the rights and well-being of children. The Children’s Rights and Business Principles are built on existing standards and practices and helps to explain the opportunities for business of investing in children.  

- First published in Nairobi last year, UN-HABITAT’s State of the Field in Youth Development sheds light on how youth are positively impacting communities around the world. As part of wider series, this particular report stresses how young people can be beneficial to communities, and how local, national and international governments can implement, engage and support youth and youth led initiatives.

Both reports look to brand young people as ambassadors of change. ‘Children’s Right’s and Business Principles’ recognizes that children are among the most marginalised members of society, yet when provided with the agency to participate, they have shown that they can offer vital alternative viewpoints and make effective contributions. Similarly, ‘State of the Field’ emphasizes the need to have faith in the power of young people to contribute constructively to the good of society. It seems that both publications hope to change the attitude of governing bodies towards young people by showing that they themselves have placed youths at the center of their own projects. The ‘State of the Field’ report lists countless examples of how initiatives led by young people have positively benefited society.

Youth unemployment is undoubtedly one of the greatest challenges facing governments this century and will worsen as populations swell and education becomes more readily available. However, the two publications featured provide hard facts about how the integration of young people in a country’s workforce can catalyse economic prosperity. With the development of more projects similar to the ones mentioned in the ‘State of the Field’ it seems that we can go someway to combating the problem.   

Robbie Lawrence 

Wikichild Coordinator