Minimum income protection in the EU: policy developments

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Presentation by Istvan Vanoylos, Policy officer, European Commission, DG EMPL D.2 on the occasion of the EESC hearing on European minimum income and poverty indicators (Brussels, 28 May 2013)

Presentation by Istvan Vanoylos, Policy officer, European Commission, DG EMPL D.2 on the occasion of the EESC hearing on European minimum income and poverty indicators (Brussels, 28 May 2013)

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  • 1. Minimum income protection in theEU: policy developmentsDG Employment, Social Affairsand Inclusion, EuropeanCommissionEuropean Economic and SocialCommittee opinion onminimum incomeBrussels, 28 May, 2012
  • 2. The active inclusion approachTarget group“people excluded from the labour market” [Art, 153(1)(h) of TFEU]: working-age populationsuffering from multiple disadvantages (at-risk-of-poverty or social exclusion as a proxy):approximately 115,5 million people in the EU-27 in 2010)Strategy:1)Adequate income support2)Inclusive labour markets3)Access to quality services which are essential to supporting active social and economicinclusion policies: social assistance services; employment and training services; housing supportand social housing; childcare; long-term care services; health services.Key steps:- Council Recommendation 92/441/EEC- Recommandation on Active Inclusion 2008/867/EC- Council Conclusions 17 December 2008- European Parliament Resolution – May 2009- COM (2010) 2020 – Europe 2020 – A strategy for smart, sustainable, and inclusive growth- COM(2010) 758 – The European Platform against Poverty and Social Exclusion
  • 3. Adequate income support• The focus of the adequate income support strand in theactive inclusion strategy is on minimum income (MI)schemes for working-age people across EU MemberStates. These schemes provide cash benefits aimed atensuring a minimum standard of living to individualsand their dependants having no, or insufficient, othermeans of financial support (including contributory cashbenefits and support from other family members).• MI schemes are "schemes of last resort". Theyprovide a safety net, aimed at preventing destitution ofpeople not eligible for social insurance benefits orwhose entitlement to such benefits has expired. In thissense, they play an even more important role in acontext of the crisis.
  • 4. Minimum income schemes• Challenges of minimum income schemes:• Adequacy• Coverage• Non-take up• Work disincentives• Various definitions on adequacy:• European Parliament calls for 60% of the medianhousehold income• EAPN - Anne van Lanker: Framework Directive onMinimum Income• Few Member States have that level; little politicalwillingness to discuss• Moving beyond rhetoric; finding a common ground
  • 5. Summary of main policy characteristics onactive inclusion (CSWD 39 of SIP)First pillar Second pillar Third pillarUnemployment benefitsfirst level of safety netsOther benefitssecond level of safety netsInclusive labour markets Access to servicesGroup ACZ FR NLAT SI SE(CY PL)High coverage (SI)Medium to high generosityLong duration (CY)High disincentivesHigh coverageMedium to high generosityHigh disincentives (especially forsecond earners)Low segmentation (FR)High activation (SI, AT)No low wage trapHigh childcare use (NL, AT)High participation ineduc/training (FR)Group BBE DK DEFI UKVery high coverage (UK)High generosityHigh disincentives (UK)Long duration (UK)High coverageHigh generosityHigh disincentives (especially forsecond earners) UKHigh activation (UK)Low wage trapHigh childcare (UK)Medium participation ineduc/trainingGroup CIrelandMedium coverage?Very high generosityHigh disincentivesHigh coverage?Very high generosityHigh disincentivesLow activationLow child careLow participation ineducation and trainingGroup DBG HUIT MT PLMedium coverage (BG, PL)Low generosityLow disincentivesLow coverage (MT, HU)Low generosityLow disincentivesHigh segmentationVery low activation (IT, MT, PL)Low wage trap especially for2nd earnerLow childcareLow participation ineducation and training (PL)Group EEE ES LVLT PT SKLow coverageLow generosityLow disincentives (LT LV)Low coverageLow generosity (except LT forlone parents)Low disincentives (except for2nd earners in LT, LV)High segmentationHigh activationNo low wage trapMedium childcare (SK)Medium participation ineduc/training (PT ES)Group FEL ROVery low coverageVery low generosityLow disincentivesVery low coverageVery low generosityLow disincentivesLow activation (RO)No low wage trapLow childcare useVery low participation ineducation and training
  • 6. The level of net social assistance in EU-27*countries – 2010Single householdSource: Eurostat and OECD*Cyprus and Italy not included
  • 7. Minimum income in the context ofthe Social Investment Package• The SIP Communication calls on Member States to: "Setreference budgets that ensure adequate livelihoods byconsidering consumption patterns, costs of living, different lifesituations and types of households on the basis of themethodology designed by the Commission in cooperation withthe SPC. Progress should be reflected in the NRPs."• The Communication further states that "the implementationof the Active Inclusion Recommendation and Guidance is keyin this respect. Measures must match the need of theindividual rather than be tied to the nature of the benefit orthe “target group” a person happens to be in. One stop shopsand individual contracts are examples of a simplifiedapproach that matches peoples needs. Setting referencebudgets are part of this."
  • 8. Reference budgets• What are reference budgets?Reference budgets contain a list of goods and services that a family of a specific sizeand composition needs to be able to live at a designated level of wellbeing, along with theestimated monthly or annual costs thereof. Reference budgets are usually tailor-made –taking into account the family composition, living environment, age, etc.Reference budgets better reflect the diversity of consumption patterns and costs ofliving across the Member States than minimum incomes set as a certain percentage ofthe median household income (such as 50 or 60%).Reference budgets can be used to more meaningfully compare minimum incomesupport across Member StatesReference budgets can act as catalysts for policy debates on adequacy of incomesupport – especially in Member States with very low minimum income supportReference budgets also face challenges. A 2011 Commission study suggests thatmethods based on the mobilisation of experts and focus groups usually produce quite„generous‟ baskets of goods, leading to thresholds "to be at or above relative povertythresholds."• Possible approaches• Expert-based (data-driven, looks at consumption patterns)• Focus group approach (based on self-assessment, negotiation)• Others
  • 9. Building on accumulated knowledge• In 2009, in the framework of a project financed by the EuropeanCommission, the European Consumer Debt Network has developedreference budgets for nine countries (Austria, Belgium, Bulgaria, Spain,Finland, Germany, Ireland, Sweden, and the UK). See:www.referencebudgets.eu.• Peer review in Belgium 2010: Using reference budgets for drawing upthe requirements of a minimum income scheme and assessingadequacy(http://ec.europa.eu/social/main.jsp?catId=1024&langId=en)• In the framework of the FP7-SSH Research Project ImPRovE (PovertyReduction in Europe: Social Policy and Innovation - http://improve-research.eu/) a common methodology for the construction of cross-nationally comparative reference budgets will be developed and appliedto five EU member states.
  • 10. Suggested policy option for theimplementation of adequate livelihoods• In the framework of the Social Investment Package: coverage,take-up, and link to activation (through individualcontracts) and enabling services are also crucial for aneffective strategy, as well as, implementation of one-stop-shops.• Designing reference budgets:• Use of common methodology across all EU-27. This will allowmeaningful comparison at European level.• Reference budgets should be developed for all Member States. Therehave been a number of past initiatives that developed reference budgetsfor specific regions, or limited number of countries.• Reference budgets should focus on adequacy while avoiding creatingdisincentives to work. Thus, the role of other benefits (such asunemployment), as well as, of the minimum wage should be taken intoconsideration.• The adopted methodology should allow for easy and timely updates.• Reference budget calculators should allow the interested parties toassess, compare various scenarios on a user friendly interface(Examples: in Flanders: http://www.menswaardiginkomen.be/index.php,and in Ireland: http://www.misc.ie/)