István György Tóth: Income poverty and income inequality in Hungary


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The presentation of Istvan Gyorgy Toth from TARKI Budapest at the workshop European platform against poverty, 10th October 2011, European Information Centre, Bratislava

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István György Tóth: Income poverty and income inequality in Hungary

  1. 1. Income poverty and income inequality in Hungary István György Tóth Tárki Social Research Institute Budapest Representation of the European Commission in Slovakia Slovak Governance Institute Workshop European platform against poverty 11. October, 2011, Bratislava
  2. 2. Outline <ul><li>Developments in inequalities </li></ul><ul><ul><ul><li>Long-term time series </li></ul></ul></ul><ul><ul><ul><li>The crisis years </li></ul></ul></ul><ul><li>Structure of inequalities </li></ul><ul><ul><ul><li>Socio-economic composition of the income brackets </li></ul></ul></ul><ul><ul><ul><li>Determinants of poverty </li></ul></ul></ul><ul><li>Context and policy constraints </li></ul><ul><ul><ul><li>Labour market: high inactivity and its consequences </li></ul></ul></ul><ul><ul><ul><li>Territorial distribution of disadvantages </li></ul></ul></ul><ul><ul><ul><li>Social cohesion and perception of poverty </li></ul></ul></ul><ul><li>Policy developments </li></ul><ul><ul><ul><li>Summary and lessons for policies </li></ul></ul></ul><ul><ul><ul><li>Directions of current steps </li></ul></ul></ul>
  3. 3. <ul><li>Drivers in Hungary: the first two and a half decades of the systemic change </li></ul><ul><li>1987-1992: structural change, employment losses, </li></ul><ul><li>polarization </li></ul><ul><li>1992-2001: education expansion, technological change, </li></ul><ul><li>schlerosis in the labour market </li></ul><ul><li>2001-2009: (social)politics and crisis management </li></ul><ul><ul><ul><li>(2002-2006: „system change in welfare” i.e. large welfare expansion) winners: lower middle classes (and public employees) </li></ul></ul></ul><ul><ul><ul><li>(2006-2008: consolidation/austerity packages) </li></ul></ul></ul><ul><ul><ul><li>loosers: upper middle classes (and public employees) </li></ul></ul></ul><ul><ul><ul><li>(2008-2009: the crisis and its management) </li></ul></ul></ul><ul><ul><ul><li>loosers: lower strata </li></ul></ul></ul><ul><ul><ul><li>and (to smaller extent) the top decile </li></ul></ul></ul><ul><li>2010 - : ?????? </li></ul>
  4. 4. Share of various per capita income deciles from all incomes between 1962 és 2009 Source: 1962–1987: KSH income surveys, Atkinson–Micklewright [1992] Table HI1.; 1992–1996: HHP waves I–VI., 2000–2009: Tárki Household Monitor. 62-82: levelling down (and up) 82-03: strong growth of upper decile shares, some losses at the bottom 03-07: losses of the top decile, „protected” lower bounds 07-09: losses by the top AND the bottom Hungarian income inequalities on the long run
  5. 5. Distribution of persons in 1996, 2005, 2007 and 2009 between income bands defined by cutpoints of 1987 decile distribution deflated by actual median income growth rates, % Polarization and shrinkage of the middle class between 1987 and 2005: of persons in the 1987 per capita income deciles, based on current incomes deflated to 1987, percent Note: 1987 decile cutpoints are deflated median growth indices. Source: 1987: CSO Income distribution survey, 1996: HHP, 2003, 2005: Tárki Household Monitor. Distribution of persons, current year
  6. 6. During the crisis: inequality has grown, but not shown uniformly by various measures Ratio of lower cutpoint of top decile and upper cutpoint of lowest decile (P90/P10) Ratio of top/bottom decile shares (S10/S1) Gini coefficient Forrás: 1987: KSH jövedelemfelvétel; 1992–1996: Magyar Háztartás Panel I–VI. hullámai, 2000–2009: Tárki Háztartás Monitor. Megj: 95% konf. int. mellett, személyi ekvivalens jövedelmek személyi eloszlása alapján . Szeg. Ráta 1987: e=0 ,73 alapján Relative poverty rate (OECD2: median 60%)
  7. 7. Evolution of income poverty rate (EU definition of at-risk-of poverty), Hungary, 1992-2009 Source: András Gábos’s computations from the Tarki Household Monitor series
  8. 8. <ul><li>We know that … </li></ul><ul><li>Employment schlerosis is still there: </li></ul><ul><ul><li>Unemployment increased (2009: 10,0%, 2010:11,2%) </li></ul></ul><ul><ul><li>Employment did not grow </li></ul></ul><ul><ul><li>Wage dynamics: stagnates (changes a little only) on average </li></ul></ul><ul><ul><li>(though there may be churning inside) </li></ul></ul><ul><ul><li>Net real wages: 09/08: -2,3%, 10/09: 1,9%, 11/10: 1,3%) </li></ul></ul><ul><ul><li>Tax rate changes </li></ul></ul><ul><ul><li>Aggregate value of social incomes stagnates </li></ul></ul><ul><ul><li>(large tax breaks for families, drastic cuts in unemployment </li></ul></ul><ul><ul><li>and social assistance) </li></ul></ul><ul><li>… but – in lack of recent data – no distributional </li></ul><ul><li>effects can be measured </li></ul>… and since??
  9. 9. 1000 2000 3000 4000 Income bands, % median Distribution of persons in various income brackets (defined in % of median) 1987-2009 1987 2009
  10. 10. Distribution of persons in various income categories by age of household head, 1987 and 2009 -34 35-59 60+ Relative shifts of positions of various socio-demographic groups in the income distribution: Polarization of the active age group, older cluster to the middle 1987 2009
  11. 11. Distribution of persons in various income categories by education of the household head 1987 and 2009 Max primary secondary vocational tertiary Relative shifts of positions of various socio-demographic groups in the income distribution: Increase in level of education and differentiation by education 1987 2009
  12. 12. Distribution of persons in various income categories by employment status of the household head, 1987 and 2009 Empl,, only the head Empl, other(s) also Inactive/ unemployed Pensioner + someone empl Pensioner, no empl Relative shifts of positions of various socio-demographic groups in the income distribution: Strong employment polarization 1987 2009
  13. 13. Distribution of persons in various income categories by number of children in the household 1987 and 2009 0 1 2 3+ Relative shifts of positions of various socio-demographic groups in the income distribution: Lower number of children in general, worsening position of large families 1987 2009
  14. 14. Distribution of persons in various income categories by ethnicity 1992 and 2009 Not roma Roma Relative shifts of positions of various socio-demographic groups in the income distribution: roma falling out 1992 2009
  15. 15. A summary of poverty analysis (1): socio-demographic profile <ul><li>Significant increase: between 1992-1996 and 2007-2009 </li></ul><ul><li>Consistent high risk group consistent low risk group </li></ul><ul><li>village Budapest </li></ul><ul><li>3+ children 0 child </li></ul><ul><li>inactive hh head second earner in the hh </li></ul><ul><li>max. primary educ. head at least secondary educ. </li></ul><ul><li>Roma not roma </li></ul><ul><li>high risk, increased: households with at least 1 child </li></ul><ul><li>and for the primary educated </li></ul><ul><li>low risk, decreased: head 60+, </li></ul><ul><li>pensioner headed hh </li></ul>
  16. 16. Summary of poverty analysis (2): multivariate results <ul><li>Settlement type: composition driven, no significant separate effect </li></ul><ul><li>Poverty risk for those in 60+ headed hholds significantly lower than for those in 35-59 headed hholds </li></ul><ul><li>Poverty risk increases with number of children </li></ul><ul><li>Employment position matters: an additional employed decreases poverty risk </li></ul><ul><li>Female headed and roma households are consistently high risk groups </li></ul><ul><li>Education is the key factor (in itself and behind some other dimensions) </li></ul>
  17. 17. 4.6 3.5 13.0 2.8 1.5 1.6 2.9 Material deprivation Income poverty Low work intensity Income poverty, material deprivation and joblessness combined: EU 2020 poverty reduction target categories as of 2008, in % of total population Source: government estimate based on Eurostat Income: 12.4% Material deprivation: 20,9% Low WI: 8.8% Total (at least one risk): 29.9% Total (all combined): 2,8%
  18. 18. Very low employment rates, compared to EU27 countries, 20-64 age group, 2000 and 2009 Source: Eurostat Notes: population data for Jan 2009, except for BE and UK: Jan 2008, estimated France2020 data assumed to be EU proportional for both cohorts Employment data for DE, CY, LV, LT, LU, MT, SE: 2000Q2, FR: 200Q1 The distance from the 2020 employment target varies greatly … HU: very small change between 2000 and 2009 <ul><li>Warnings: </li></ul><ul><li>- illustrative estimates </li></ul><ul><li>- 2009: crisis effect </li></ul><ul><li>age groups alter </li></ul><ul><li>from those of Lisbon </li></ul>
  19. 19. Employment rates by level of education in Hungary 1993-2007 women men
  20. 20. High relative child poverty is also a consequence of incidence of low activity in families with children <ul><li>Every fifth child is at-risk-of-poverty in the EU-27 </li></ul><ul><li>Overall child poverty rates are average in the EU, but the relative poverty risks are among the highests in HU, SK and CZ </li></ul><ul><li>(key challenge behind: joblessness of families with children) </li></ul>At-risk-of-poverty rates: overall population and children, EU-27, 2007 Source: calculations by Gábos, 2010, EUROSTAT data
  21. 21. Source: CSO 2008 (Tájékoztató a kiemelten támogatott kistérségekről, Központi Statisztikai Hivatal, Budapest, 2008. ) Territorial distribution of disadvantaged Regions Distribution of the long term unemployed (registered for more than 180 days in 2009) Source: CSO (KSH T-STAR adatok – VÁTI-TEIR) Proxies of severe poverty combine and cluster in some specific regions Distribution of having at least a secondary education degree, in % of 18+ population, Hungary, 2011 *Without Budapest Source: CSO census data VÁTI-TEIR Share of Roma population in total population in the vaious counties (2003) Forrás Kemény, Janky és Lengyel (2004) 14. oldal, készült: SzMI 2010
  22. 22. Cohesion indicators show divergence? Source: Tárki, Gini-project Some measures of social cohesion, Hungary, 1982-2010
  23. 23. The relationship between relative poverty rates and the perceived poverty rate in EU Member States Notes: The relative poverty rate relates to those with income below 60% of the median in the 2008 income year – from Eurostat, EU-SILC, 2009. Source of the perceived poverty rate: Flash Eurobarometer 276, July, 2009. Chart from Keller, 2011 The share of t hose perceiving poverty as a consequence of social injustice ( % of total population , 2007-2010) Perception is higher than actual poverty rates Perceptions on „w hat make s people poor?
  24. 24. Anger and frustration: Share of those saying there is „too much” tension in the country… .. the rich and the poor … .. managers and workers … .. old and young … .. various ethnic groups … Source: 72.1. Special EuroBarometer, 2009
  25. 25. Target group priorities by the public opinion: Source: Bernát, 2010, based on Tarki omnibusz 2010 february H ow many of 100 persons belonging to the relevant group get social assistance and how many should get? -26 67 41 Disabled -5 53 47 Unemployed „ Gets” „ Should get” Difference Low pensioners 27 60 -33 Large families 43 58 -15 Roma 76 31 45
  26. 26. <ul><li>Lessons: what would be the key steps to reduce poverty? </li></ul><ul><li>A shift in emphasis from ex post treatment to ex ante, preventive measures </li></ul><ul><li>Employment growth: where it is the most difficult (among the lowest educated and the inactives) </li></ul><ul><li>A fundamental improvement needed in education and a decrease of the selectivity of the school system </li></ul><ul><li>Invest in children!! </li></ul><ul><li>Operation of life cycle consumption/income smoothing mechanisms </li></ul><ul><li>Local complex development programs to reduce accumulation of regional multiple deprivations </li></ul><ul><li>(Balanced budget: the political budget cycle made a lot of harm to the country during the last decade) </li></ul><ul><li>Open, experimental social policy, cost benefit analyses </li></ul><ul><li>The public administration needs evidence based feedback while planning and when acting as well </li></ul>
  27. 27. <ul><li>Recent social policy measures (2010-2011) </li></ul><ul><li>Implemented changes: </li></ul><ul><li>Reduced ceiling, shortened eligibility period for unemployment benefit </li></ul><ul><li>Constrained rights to social assistance (one benefit per household principle) </li></ul><ul><li>Flat rate income tax (with large tax breaks for 3+ families) </li></ul><ul><li>Expansion of the conditionality principle (child allowance tied to school visits, </li></ul><ul><li>premium to get kids into kindergarten) </li></ul><ul><li>Plans to </li></ul><ul><li>Lower compulsory education age </li></ul><ul><li>Increase in minimum wage </li></ul>
  28. 28.
  29. 29. Annex: Additional charts
  30. 30. Major economic indicators, Hungary, 2000-2009 GDP growth, % Inflation, % HHold consumption Gross and net real wages Magyarázat: az előző év azonos negyedév=100
  31. 31. Income inequalities in Hungary, (based on individual distribution of per capita household income) Source: Tóth, 2002, 2009
  32. 32. Employment rate in the population of working age (men between the age of 15–59, women between the age of 15–54) Source of data: Munkaerőpiaci Tükör, 2003
  33. 33. Earnings premia of different levels of education ( Primary educated 100%, Based on Mincer regressions) Source: Kézdi, 2004
  34. 34. Employment rate of the Roma and the non-Roma, 16-64 years of old, (Source: Kertesi and Kézdi, 2009 )
  35. 35. The effect of direct taxes and cash benefits on inequalities Source: Alari et al., 2009
  36. 36. E mployment rate by level of education, 2003 Source: OECD, 2005
  37. 37. At-risk-of-poverty rates across European countries (with confidence intervals, source EU-SILC) Source: Lelkes et al. 2009
  38. 38. A különböző összetételű háztartások jövedelmi szerkezete, 2009
  39. 39. Inflation (14%) Average income growth (7%) No change level Change in average incomes of various income deciles (person equivalent incomes, e= 0.73) between 2007 and 2009 Losses of various income deciles between 2007-2009
  40. 40. Wage inequality, P90/P10 1990=100% (among men employed full-time) Source of data: OECD Earnings Database