Welfare State Institutions, Unemployment and Poverty- A comparative study of EU

countries 1994-2000

M. Azhar Hussain (mh@sfi.dk)

& Olli Kangas (olk@sfi.dk )

Danish National Institute of Social Research

Herluf Trolles Gade 11

DK-1052 Copenhagen

Structure of the presentation / paper

• the aim of the paper

• data

• institutional set ups of national unemployment insurance schemes

• the incidence of poverty in Europe

• institutions and consequences

The aim of the paper• is to study how various institutional set ups of national

social security / unemployment insurance programs mitigate the effects of unemployment (or employment)

• more specifically the paper addresses these questions:– what is the incidence of poverty among the employed and

unemployed in different countries– how is the risk of poverty changed when the individual is

employed (year t) and than becomes unemployed (year t+1): poverty problems

– what are the poverty risks for long-term unemployed (unemployed in t and t+1): social exclusion problems

– what happens when the individual gets employment (unemployed t, employed t+1): disincentive problems

Data on unemployment insurance• Characteristics of the unemployment insurance system: 1)

level of income loss compensations (net benefits in relation to net wages) = generosity of the unemployment insurance systems. 2) the degree of universality (what is the proportion of labour force covered by the scheme). And 3) the duration of the benefit period and qualification conditions.– these data come mainly from Social Citizenship Indicators Project

(SCIP) housed at the University of Stockholm.– replacement levels for different income groups are derived

from OECD data bases– Gre, Por & Spa data are from OECD

• The second data-base is the European Community Household Panel (ECHP) that contains panel data for most European Union countries for 1994-2001.

The European Community Household Panel (ECHP)

• survey based, standardised questionnaire• annual interviewing of a representative panel of households

and individuals in each country– covering a wide range of topics: income, health, education,

housing, demographics and employment characteristic, etc.

• The total duration of the ECHP was 8 years, running from 1994 to 2001.

• In the first wave, i.e. in 1994, a sample of some 60,500 nationally represented households - i.e. approximately 130,000 adults aged 16 years and over - were interviewed in the then 12 Member States.

• Austria (1995) and Finland (1996) have joined the project since then.

• Data for Sweden are available only for 1997

Generosity I

r = .77**

GENEROSITY FOR APW

908070605040

GE

NE

RO

SIT

Y F

OR

0,6

7*A

PW

100

90

80

70

60

50

UK

SWE

SPA

POR

NL

ITA

IRE

GRE

GER

FRA

FIN

DEN

BEL

AUT

r = .74*

GENEROSITY FOR APW

908070605040

GE

NE

RO

SIT

Y F

OR

1,5

*AP

W

90

80

70

60

50

40

30

UK

SWE

SPA

POR

NL

ITA

IREGRE

GERFRA

FINDEN

BEL

AUT

Generosity II• those who are

good for the good are good also for the poor

r = .60*

GENEROSITY FOR 1,5*APW

90807060504030

GE

NE

RO

SIT

Y F

OR

0,6

7*A

PW

100

90

80

70

60

50

UK

SWE

SPA

POR

NL

ITA

IRE

GRE

GER

FRA

FIN

DEN

BEL

AUT

Overall Generosity (MEAN FOR 0.65, 1 AND 1.5

APW) AND Universalityr = .27

UNIVERSALITY

110100908070605040

OV

ER

AL

L G

EN

ER

OS

ITY

90

80

70

60

50

40

UK

SWE

SPA

POR

NL

ITA

IRE

GRE

GERFRA

FINDEN

BELAUT

Correlations between indicators of unemployment insurance

0,67APW APW 1,5APW UNIV WAIT DAYS

APW .77*

1,5APW .60* .74**

UNIV .14 .51 .05

WAIT DAYS

.57 .36 .28 -.12

DURATION

-.21 -.35 -.21 .12 .00

Table 1. Labour market status of individuals, 1994-2000WORK UNDER E UNEMPL DISCO NO IN LF MISS All # OBS

Spain 39.5 1.6 9.9 0.7 48.3 0.0 100 103,815Italy 42.9 1.1 7.4 1.3 47.3 0.0 100 115,759Greece 44.7 0.9 5.2 0.6 48.5 0.0 100 76,329Belgium 47.6 2.5 3.1 0.7 45.8 0.3 100 40,123Ireland 48.3 3.3 5.6 1.3 41.5 0.0 100 49,093France 48.4 0.7 5.5 0.3 43.0 2.1 100 85,052Netherlands 50.9 8.1 2.7 0.1 38.2 0.0 100 63,533Germany 51.5 3.8 4.2 0.3 40.0 0.1 100 27,238Finland 53.2 2.0 6.7 1.0 37.0 0.0 100 36,345Austria 55.8 2.0 2.2 0.3 39.7 0.1 100 40,315UK 55.8 3.8 5.6 0.4 34.4 0.0 100 25,843Portugal 58.0 2.2 3.0 0.5 36.3 0.0 100 80,522Denmark 60.0 4.3 3.9 0.5 31.4 0.0 100 33,031

Changes in LM-status from t to t+1E-E E-UE UE-E UE-UE O-O O-E O-UE E-O E-O

Spain 33,8 2,0 3,4 4,6 45,0 2,7 3,0 2,4 3,0 100Italy 39,6 1,1 1,6 3,7 44,9 1,8 2,5 2,4 2,4 100Greece 40,7 1,3 1,7 2,2 44,8 2,6 1,4 3,6 1,7 100Ireland 43,5 0,9 2,1 2,5 40,1 4,5 1,7 2,7 2,1 100France 44,9 1,3 1,7 2,5 41,0 2,7 1,6 2,7 1,6 100Belgium 45,2 0,7 1,1 1,2 45,5 2,0 1,1 1,9 1,4 100Netherlands 46,6 0,4 1,1 0,8 41,8 3,6 1,3 2,9 1,5 100Germany 47,7 1,2 1,6 1,8 40,2 2,6 1,1 2,3 1,5 100Finland 48,1 1,7 2,5 2,8 34,5 3,2 2,1 3,1 2,0 100UK 51,4 1,7 2,0 2,2 33,2 2,8 1,2 4,0 1,5 100Austria 52,8 0,7 0,9 0,8 38,4 2,3 0,7 2,7 0,6 100Portugal 54,0 1,0 1,4 1,0 34,3 3,5 1,0 2,9 0,9 100Denmark 56,0 1,1 1,9 1,3 30,5 3,3 0,9 3,7 1,3 100

Figure 2. Poverty risk of normally working, 1994-2000. 60% poverty line

0

5

10

15

20

AU BE DK FI FR GE GR IR IT NL PT SP UK

1994 1995 1996 1997 1998 1999 2000 Avg.

Figure 1. Poverty risk of unemployed, 1994-2000. 60% poverty line

05

101520253035404550

AU BE DK FI FR GE GR IR IT NL PT SP UK

1994 1995 1996 1997 1998 1999 2000 Avg.

Labour market transitions and poverty rates in year t

E->E E->UE UE->E UE->UEDenmark 3,4 6,7 10,3 10,1Finland 4,3 9,3 11,2 24,5Netherlands 4,6 9,3 23,0 27,2Austria 7,4 11,8 18,6 22,6Ireland 4,9 12,3 29,5 45,2Portugal 14,6 14,8 21,7 27,5Germany 6,1 16,7 26,8 40,6UK 6,9 17,4 31,9 42,2France 6,5 17,9 25,7 35,7Belgium 5,0 19,9 21,6 34,9Greece 14,5 24,9 26,9 32,8Spain 10,3 25,8 29,1 37,5Italy 10,8 37,5 30,9 49,0ALL 7,6 17,3 23,6 33,1

Unemployment insurance indicator

Poverty among the unemployed

Poverty among those who became unemployed

Poverty among those who unemployed in 2 consecutive years

Difference[ in poverty rates between employed and:

Those who became unemployed

Those who unemployed in 2 consecutive years

Generosity for 65*APW

-.64* -.28 -.61* .32 .62*

Generosity for APW

-.56* -.58* -.52 .57* .44

Generosity for 1.5*APW

-.34 -.21 -.30 .31 .34

Overall generosity

-.56* -.39 -.52 .45 .51

Waiting days .51 .45 .39 -.44 -.33

Duration -.46 -.46 -.54 .34 .40

Coverage -.23 -.70** -.27 .41 -.02

Correlations between insurance characteristics and poverty rates

Generosity of unemployment insurance and poverty (%, mean for the whole period) among the unemployed.           

(r = -.64*)

GENEROSITY FOR 0.67*APW

9080706050

POVE

RTY

50

40

30

20

10

UK

SPA

PORNL

ITA

IRE

GRE

GER FRA

FIN

DEN

BEL

AUT

(r = -.56*)

GENEROSITY FOR APW

8070605040

POVE

RTY

50

40

30

20

10

UK

SPA

PORNL

ITA

IRE

GRE

GERFRA

FIN

DEN

BEL

AUT

 

Generosity of unemployment insurance and poverty (%) among those who were employed but became unemployed and difference in poverty rates among the employed and those who became unemployed.

EMPLOYED THAT BECAME UNEMPLOYED

(r = .57*)

GENEROSITY FOR APW

908070605040

DIFF

EREN

CE IN

PO

VERT

Y RA

TES

10

0

-10

-20

-30

UK

SPA

POR

NL

ITA

IRE

GRE GERFRA

FINDEN

BEL

AUT

EMPLOYED WHO BECAME UNEMPLOYED

(r = -.58*)

GENEROSITY FOR APW

908070605040

POVE

RTY

RAT

E

50

40

30

20

10

0

UK

SPA

POR

NL

ITA

IRE

GRE

GERFRA

FINDEN

BEL

AUT

                

Generosity for .67*APW and poverty rate among long-term unemployed and changes in poverty rates (%-units) for the employed and long-term unemployed.

LONG-TERM UNEMPLOYED

(r = .62*)

GENEROSITY FOR 0.67*APW

1009080706050

DIFF

EREN

CES

IN U

NEPL

OYME

NT LE

VELS

0

-10

-20

-30

-40

-50

UK

SPA

POR

NL

ITAIRE

GRE

GER

FRA

FIN

DEN

BEL

AUT

LONG-TERM UNEMPLOYED

(r = -.61*)

GENEROSITY FOR 0.67*APW

1009080706050

POVE

RTY

RATE

60

50

40

30

20

10

0

UK

SPA

PORNL

ITAIRE

GRE

GER

FRA

FIN

DEN

BEL

AUT

                    

Incentives

Generosity of unemployment scheme and transitions in labour market statuses t to t+1

OVERALL GENEROSITY

908070605040

TRA

NS

ITIO

N F

RO

M W

OR

K T

O U

NE

MP

L

2,5

2,0

1,5

1,0

,5

0,0

UK

SPA

POR

NL

ITA

IRE

GREGERFRA

FIN

DEN

BELAUT

OVERALL GENEROSITY

908070605040

TRA

NS

ITIO

N F

RO

M U

NE

MPL

TO

EM

PL

4,0

3,5

3,0

2,5

2,0

1,5

1,0

,5

UK

SPA

POR

NL

ITA

IRE

GREGERFRA

FIN

DEN

BEL

AUT

Generosity of unemployment scheme and transitions in labour market statuses t to t+1

• no relationship at macro level

• there might be relationship at micro level

OVERALL GENEROSITY

908070605040

UN

EM

PL

OY

ED

IN

2 Y

EA

RS

IN

RA

W

5

4

3

2

1

0

UK

SPA

PORNL

ITA

IRE

GRE

GER

FRA

FIN

DENBEL

AUT