Opening up a new perspective on work and poverty in Europe Wiemer - - PowerPoint PPT Presentation

The household distribution of jobs: Opening up a new perspective on work and poverty in Europe

Wiemer Salverda AIAS and AMCIS, U. of Amsterdam

Conference on Dual labour markets, minimum wage and inequalities IBS, Warsaw 8-9 October 2014

Lay out

• 1. Background of growing inequality
• 2. The concept of in-work poverty
• 3. A growing complexity
• 4. The distribution of workers over households
• 5. Ensuing interhousehold job competition:

Combination scenarios

• 6. Policy implications

• 1. Growing inequalities
• The top-incomes project, the OECD, and the GINI

research project all find growing inequality in many countries

• Below the surface of inequality there are also

significant tectonics (irrespective of inequality growth): labour incomes are important at the top, and they also seem to be moving upwards

• ver the distribution
• Household joblessness needs to be taken into

account (drawing zeros in the jobs lottery)

Labour households concentrate towards the top

• f the income distribution

20 40 60 80 100 D1 D2 D3 D4 D5 D6 D7 D8 D9 D10

Fraction (%) of labour households within income deciles; EU, 2009

EST LVA SWE SVN LTU BEL SVK DEU FIN DNK BGR ROM POL HUN NLD LUX PRT ESP UK AUT CZE FRA GRC ITA Average

Calculations on SILC 2010

Individual employment growth benefits households less

Blundell and Etheridge, RED, 2010

60 62 64 66 68 70 72 74 76 78 80 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Employment rates (%): Individuals versus Households; UK, 1978-2005

household personal

• 2. Concept of in-work poverty
• Poverty is leading; it is defined by needs of the

worker’s household, depending on household composition

• There are different definitions of poverty – here

the standard 60% of the median will be used; it is annual, after tax and equivalised

• Earnings are before tax and shall be annual and

summed over individual household members

• Annual earnings result from the level of (hourly)

pay times the hours worked during the year

• Individual earnings are not necessarily low, and

in-work poverty low pay (US max k$52)

• 3. Growing complexity
• Households are changing: Increasing shares of

singles in many countries

• Tax treatment is (always) subject to change
• Individual pre-tax hourly pay gets more unequal
• Growth in part-time work affects the distribution
• f working hours over individuals
• The distribution of hours & earners shifts over

households: Demise of the single breadwinner and rise of jobless households

• Individual (hourly) earnings and household

(annual) incomes: A tale of two literatures

Individual low pay is more frequent than in-work poverty, implying low pay in other households

Eurostat, SES 2010 and SILC

5 10 15 20 25 30 EU-28 EA-18 BEL BGR CZE DNK DEU EST IRL GRC ESP FRA HRV ITA CYP LVA LTU LUX HUN MLT NLD AUT POL PRT ROM SVN SVK FIN SWE UK

Incidence (%) among all employees of low pay and in-work poverty; EU, 2010

Low-wage incidence In-work poverty employees

• 4. Workers and households
• Workers scatter over single-, dual- and multi-

earner households

• This distribution is strongly skewed over annual

household earnings

• Tectonics of (labour in) the income distribution

depend on the combining of earnings

Household-earner types distribution is skewed; dual- and multi-earners trump single earners

Calculations on SILC 2010

11% 17% 26% 36% 45% 53% 60% 64% 63% 61% 1% 1% 2% 3% 5% 7% 11% 14% 19% 24% 89% 82% 72% 62% 50% 40% 29% 22% 17% 15% 45% 9% 47%

0% 20% 40% 60% 80% 100% 1 2 3 4 5 6 7 8 9 10

Shares of households within deciles of hh earnings; EU avg., 2009

Single earners Multiple earners Dual earners

Poland: 11% multi-earners; 22% single-earners at top-10%

Employees distribution by household-earner types is strongly skewed

Calculations on SILC 2010 Single 27%, dual 52%; multi 21%; Poland very similar

0,7 1,7 3,1 4,4 5,7 6,6 7,4 7,7 7,5 7,0 0,1 0,1 0,3 0,6 1,0 1,6 2,6 3,6 4,8 6,1 4,8 5,0 4,3 3,6 2,8 2,2 1,5 1,0 0,8 0,7 5,6 6,8 7,7 8,5 9,5 10,4 11,5 12,3 13,1 13,8

1 2 3 4 5 6 7 8 9 10

Shares of employees over deciles of hh earnings, EU avg., 2009

Dual earners Multiple earners Single earners

• 5. Interhousehold job competition
• Additional earners in households pursue

combination scenario(s), holding part-time and/or low-paid jobs, and competing on different terms

• Such jobs are often found at low occupational

levels, where low-skilled labour supply needs full- time employment for a living – thus stimulating in-work poverty or joblessness

• At same time additional earners also reduce in-

work poverty, for their own types

More-earners link to lower individual earnings than single earners (here at the top)

Calculations on SILC 2010

10 20 30 40 50 60 70 80 90

AUT BEL BGR CZE DEU DNK EST ESP FIN FRA GRC HUN IRL ITA LTU LUX LVA NLD POL PRT ROM SWE SVN SVK UK Avg

Dual- and multiple-earner pay, as % of single earner pay, top 10%; EU, 2009

Dual: household average Multiple: household average Dual: main earner Multiple: main earner

Low-paid (hourly) workers found up to the top (10-year older figures, unfortunately)

Calculations on ECHP

1 3 1 3 2 2 2 2 3 2 3 5 3 7 9 4 4 5 4 3 3 4 1 5 5 5 8 3 5 5 1 5 7 7 8 8 7 9 1 1 3 9 5 5 9 7 1 1 2 1 2 8 8 4 8 7 5 10 15 20 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 NLD DEU DNK

Households with low-paid jobs over deciles, by FT/PT; all low-pay hh = 100

FT only PT+FT PT only Total percentage of households with a low-paid worker NLD DEU DNK 17 22 15

Part-time employees are found up to the top

Calculations on SILC 2010 Poland less part-time (at bottom) but rest equally spread

5% 10% 16% 24% 31% 37% 43% 46% 47% 47% 0% 1% 1% 2% 3% 4% 7% 10% 14% 17% 64% 71% 66% 56% 46% 37% 27% 20% 16% 14% 5% 7% 10% 12% 14% 16% 17% 18% 16% 14% 0% 1% 1% 1% 2% 3% 4% 4% 6% 7% 25% 11% 6% 5% 4% 3% 2% 2% 1% 1%

0% 20% 40% 60% 80% 100% 1 2 3 4 5 6 7 8 9 10

Shares of employees within deciles of hh earnings, by PT/FT, EU avg., 2009

Single earner PT Multiple earners PT Dual earners PT Single earners FT Multiple earners FT Dual earners FT PT % employees PT % households

Poverty is very high among single earners but much reduced among dual- and multi-earners

Calculations on SILC 2010

3 6 9 12 15 18 21 24

AUT BEL BGR CZE DEU DNK EST ESP FIN FRA GRC HUN IRL ITA LTU LUX LTV NLD POL PRT ROM SWE SVN SVK UK AVG

Poor households (%) among household earner types; EU 2009

Single earners Dual earners Multiple earners

• 6. Policy implications (1)
• To the extent that low-paid workers are present

all over the income distribution, augmenting the minimum wage or lowering its taxation as a social policy, will not reduce inequality

• As taxation is on annual earnings, similar effects

may result from part-time employment, even if it is better paid by the hour

• This blunts redistributive tools aimed at lowering

(in-work) poverty – which may have worked in a single-earner world; money spent will be substantial and largely ineffective

• 6. Policy implications (2)
• ‘Additional’ low-wage /part-time work diminishes

employment (hours) chances for low-skilled

• To mend this an Earned Income Tax Credit (EITC,

USA) is cheaper and more effective, as it focuses directly on households in need that may get a part-time job or a too-low-paid job only

• An adequate minimum wage will keep the costs
• f EITC in check, and can still also serve fairness in

the labour market and at the work place.

• Now is the chance for EU, with a MW in Germany

Further reading

• Eric Crettaz. Fighting Working Poverty in Post-industrial Economies:

Causes, Trade-offs and Policy Solutions. Edward Elgar, 2011.

• Salverda and Haas. “Earnings, Employment and Income Inequality”.

In: Salverda, Nolan et al., editors. Changing Inequalities in Rich Countries: Analytical and Comparative Perspectives. Ch.3. Oxford University Press, 2014.

• Salverda and Checchi. “Labour-market Institutions and the

Dispersion of Wage Earnings”. In: Atkinson and Bourguignon,

• editors. Handbook of Income Distribution. Volume 2B, Ch. 18.

Elsevier/North Holland (forthcoming). [http://ftp.iza.org/dp8220.pdf]

• GINI project: www.gini-research.org