The document summarizes research on projected changes to child poverty rates in Ireland during the 2020 pandemic recession. It finds that: 1) Child poverty rates are estimated to rise by about a quarter under a scenario with no economic recovery, and by about an eleventh under a scenario with moderate recovery. 2) Households falling into poverty due to job losses could see income losses of over 50%. 3) Emergency supports like pandemic unemployment payments and wage subsidies may help limit increases in child poverty but an economic recovery remains important to mitigate rises.

1. @ESRIDublin #ESRIevents #ESRIpublications www.esri.ie
Child Poverty in Ireland and
the Pandemic Recession
DATE
7th July 2020
AUTHORS
Mark Regan
Bertrand Maître

2. 2
1. Document child poverty trends from 2004-2018 using the Survey
on Income and Living Conditions (SILC) data sets
2. Show how poverty levels changed during the Great Recession for
children across households
3. Estimate income poverty rates for 2020 using a tax-benefit
microsimulation model, Euromod
• In absence of an economic recovery
• With a moderate economic recovery
Objectives

3. 3
• Poverty will decrease living standards of children in the short-run,
but will also have long-run effects
• Early life poverty reduces the odds of completing secondary
education, worst for children who suffer years of poverty (Duncan et
al., 1997)
• Impacts adult earnings and hours of work (Duncan et al., 2012)
• A $3,000 increase to family income of poor children (aged
under 5) would translate to a 17% increase in adult earnings
in later life
• Smaller effects if the income increase occurs after age 5
Why is child poverty a concern?

4. 4
1. At-risk of poverty (AROP) rate
• Portion of people living in households with income <60% of
median equivalised household disposable income
• Relative measure
• For a given household, poverty is a function of their income
and the income of other households
2. Basic deprivation
• Inability to afford at least 2 out of an 11 list item of basic
consumables
• Absolute measure
• Poverty is only a function of a household’s self-reported ability
to afford items
Measures of poverty

5. 5
Trend in AROP rates
0
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
%
Less than 18 Aged 18 to 64 Aged 65+ Unemployment rate
Child AROP rates fell from 23 per cent in 2004 to 15 per cent by 2018
Notes: Authors’ analysis using SILC Research Microdata file. Year
refers to the SILC survey year.

6. 6
Trend in AROP rates
0
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
%
Less than 18 Aged 18 to 64 Aged 65+ Unemployment rate
AROP rates didn’t change during the Great Recession, relative measure flaw
Notes: Authors’ analysis using SILC Research Microdata file. Year
refers to the SILC survey year.

7. 7
Trend in AROP rates
0
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
%
Less than 18 Aged 18 to 64 Aged 65+ Unemployment rate
AROP rates have generally been lower for adults
Notes: Authors’ analysis using SILC Research Microdata file. Year
refers to the SILC survey year.

8. 8
• AROP rates do not track the business cycle well- show no upswing
during the Great Recession
• Income losses households incurred are reflected in a lowering of the
poverty threshold (60% of median equivalised household disposable
income), rather than in the AROP metric
• Absolute measures of poverty, such as the basic deprivation rate,
can be more useful in a large recession
• Using a constant poverty line can also help untangle income poverty
changes from changes to median incomes
AROP rates

9. 9
AROP rates using the 2004 poverty line
0
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
%
Less than 18 Aged 18 to 64 Aged 65+ Unemployment rate
We see a cyclical pattern in child AROP rates if we use a fixed poverty line
Notes: Authors’ analysis using SILC Research Microdata file. Year refers to
the SILC survey year. 2004 poverty line is indexed in line with inflation.

10. 10
Basic deprivation rates
0
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
%
Less than 18 Aged 18 to 64 Aged 65+ Unemployment rate
Rapid rise from 15 per cent in 2007 to over 35 per cent by 2013
Notes: Authors’ analysis using SILC Research Microdata file. Year
refers to the SILC survey year.

11. 11
Child deprivation rate by household head
status
0
10
20
30
40
50
60
70
At work Unemployed OtherInactive
%
2008 2013 2018
Employment substantially reduces the risk of a child being deprived
Notes: Authors’ analysis using SILC Research Microdata file. Year
refers to the SILC survey year.

12. 12
• Deprivation and fixed income poverty rates rose rapidly over the
Great Recession
• By 2018 these were as low as during the Celtic Tiger period
• Parental employment substantially reduces the likelihood of a child
facing deprivation or living in income poverty
• Given recent unprecedented job losses, how are child poverty rates
likely to evolve in 2020?
Summary

13. 13
• Estimate how income poverty will evolve over the course of 2020
• Make use of a harmonised European tax-benefit model, Euromod
• Use the 2017 Irish EU-SILC file with incomes increased to
start of 2020 levels
• Simulate widespread job losses and emergency income support
measures
• Pandemic Unemployment Payment (PUP)
• Temporary Wage Subsidy Scheme (TWSS)
Simulating changes in child poverty (I)

14. 14
• Simulate a baseline 834,000 job losses in Mid-March
• 584,000 receive PUP
• 250,000 receive the TWSS
• Job losses are calibrated to match observed uptake of TWSS
and PUP by industry at the end of April
Simulating changes in child poverty (II)

15. 15
• Also model a labour market recovery
• Allow a certain portion of displaced workers to return to work in
Mid-June and at the end of September - based on quarterly
unemployment estimates from Central Bank (2020)
Incorporating uncertainty:
1. Allow the scale of job losses and labour market recovery to vary
with a 10 percentage point spread (depth of recession and speed of
recovery can be smaller/larger than the baseline)
2. Estimate the modelled results 100 times and report min., average
and max. income poverty changes- Monte Carlo approach
Simulating changes in child poverty (III)

16. 16
• No Pandemic Baseline
• Normal economic activity for all of 2020
• Tax-benefit rules for as at January 1st in place the whole of 2020
• Scenario A: No economic recovery
• Large employment losses from Mid-March for the entirety of 2020
• TWSS and PUP in place for the remainder of 2020
• Scenario B: Economic recovery
• Large employment losses from Mid-March for a 12-week period
• Workers return to work in Mid-June and end of September
• Between 61 and 82 per cent of displaced workers return to work by
end of September
• TWSS and PUP in place for the remainder of 2020
Scenarios and assumptions

17. 17
What does our simulated economic
recovery look like?

18. 18
0
100
200
300
400
500
600
700
800
31-Jan 29-Feb 31-Mar 30-Apr 31-May 30-Jun 31-Jul 31-Aug 30-Sep 31-Oct 30-Nov 31-Dec
Thousands
TWSS: Revenue
2. 12-week lockdown 3. Recovery1. Normal

19. 19
0
100
200
300
400
500
600
700
800
31-Jan 29-Feb 31-Mar 30-Apr 31-May 30-Jun 31-Jul 31-Aug 30-Sep 31-Oct 30-Nov 31-Dec
Thousands
PUP- Simulated TWSS- Simulated
2. 12-week lockdown 3. Recovery1. Normal

20. 20
0
100
200
300
400
500
600
700
800
31-Jan 29-Feb 31-Mar 30-Apr 31-May 30-Jun 31-Jul 31-Aug 30-Sep 31-Oct 30-Nov 31-Dec
Thousands
PUP- Simulated TWSS- Simulated
2. 12-week lockdown 3. Recovery1. Normal
Notes: Dashed line are bounds on the extent of employment losses

21. 21
0
100
200
300
400
500
600
700
800
31-Jan 29-Feb 31-Mar 30-Apr 31-May 30-Jun 31-Jul 31-Aug 30-Sep 31-Oct 30-Nov 31-Dec
Thousands
PUP: DEASP TWSS: Revenue PUP- Simulated TWSS- Simulated
2. 12-week lockdown 3. Recovery1. Normal
Notes: Dashed line are bounds on the extent of employment losses. Shapes
are administrative figures of recipients of TWSS and PUP on a fortnightly
basis.

22. 22
Income Poverty Estimates
Notes: The “No Pandemic Baseline” poverty line is the poverty threshold in all scenarios.
Authors’ analysis using EUROMOD over 100 iterations of each scenario.
Shapes are averages, capped tails are minimum/maximum simulated poverty rates.

23. 23
Income losses for newly poor households
Scenario A
(No Recovery)
Scenario B
(Recovery)
Not Poor
(%)
Poor
(%)
Not Poor
(%)
Poor
(%)
No
Pandemic
Baseline
Not Poor -8.5 -67.6 -4.4 -50.3
Poor 19.1 -1.6 15.3 0.1
Notes: The table tabulates average disposable income changes of households
based on their poverty status in the No Pandemic Baseline and Scenarios A and B
respectively. Average income change over 100 iterations shown.

24. 24
Scenario A
(No Recovery)
Scenario B
(Recovery)
Not Poor
(%)
Poor
(%)
Not Poor
(%)
Poor
(%)
No
Pandemic
Baseline
Not Poor -8.5 -67.6 -4.4 -50.3
Poor 19.1 -1.6 15.3 0.1
Notes: The table tabulates average disposable income changes of households
based on their poverty status in the No Pandemic Baseline and Scenarios A and B
respectively. Average income change over 100 iterations shown.
Income losses for newly poor households
Households falling into poverty lose >50% of household income

25. 25
Scenario A
(No Recovery)
Scenario B
(Recovery)
Not Poor
(%)
Poor
(%)
Not Poor
(%)
Poor
(%)
No
Pandemic
Baseline
Not Poor -8.5 -67.6 -4.4 -50.3
Poor 19.1 -1.6 15.3 0.1
Notes: The table tabulates average disposable income changes of households
based on their poverty status in the No Pandemic Baseline and Scenarios A and B
respectively. Average income change over 100 iterations shown.
Income losses for always poor households

26. 26
Scenario A
(No Recovery)
Scenario B
(Recovery)
Not Poor
(%)
Poor
(%)
Not Poor
(%)
Poor
(%)
No
Pandemic
Baseline
Not Poor -8.5 -67.6 -4.4 -50.3
Poor 19.1 -1.6 15.3 0.1
Notes: The table tabulates average disposable income changes of households
based on their poverty status in the No Pandemic Baseline and Scenarios A and B
respectively. Average income change over 100 iterations shown.
Income losses for always poor households
Households poor in the baseline incur small average income changes

27. 27
Scenario A
(No Recovery)
Scenario B
(Recovery)
Not Poor
(%)
Poor
(%)
Not Poor
(%)
Poor
(%)
No
Pandemic
Baseline
Not Poor -8.5 -67.6 -4.4 -50.3
Poor 19.1 -1.6 15.3 0.1
Notes: The table tabulates average disposable income changes of households
based on their poverty status in the No Pandemic Baseline and Scenarios A and B
respectively. Average income change over 100 iterations shown.
Some households rise out of poverty

28. 28
Scenario A
(No Recovery)
Scenario B
(Recovery)
Not Poor
(%)
Poor
(%)
Not Poor
(%)
Poor
(%)
No
Pandemic
Baseline
Not Poor -8.5 -67.6 -4.4 -50.3
Poor 19.1 -1.6 15.3 0.1
Notes: The table tabulates average disposable income changes of households
based on their poverty status in the No Pandemic Baseline and Scenarios A and B
respectively. Average income change over 100 iterations shown.
A very small portion of households rise out of poverty- due to income gains
from PUP. Less than 1% of children gain from this occurrence.
Some households rise out of poverty

29. 29
• Child income poverty estimates rise by an average of:
• One-quarter in No Recovery Scenario, to 21.1%
• One-eleventh in Recovery Scenario, to 18%
• Even with emergency measures like PUP and TWSS in place for the
entire year, an economic recovery will be important to mitigate a
rise in child income poverty
• Increasing the child allowance for social welfare payments would
help combat this rise
Conclusions

30. 30
Thank you.
Questions/Comments?

31. 31
AROP rates using the 2004 poverty line
0
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
%
Less than 18 Aged 18 to 64 Aged 65+ Unemployment rate
Again, child AROP rates are usually higher than adult an elderly rates
Notes: Authors’ analysis using SILC Research Microdata file. Year refers to
the SILC survey year. 2004 poverty line is indexed in line with inflation.

32. 32
Basic deprivation rates
0
5
10
15
20
25
30
35
40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
%
Less than 18 Aged 18 to 64 Aged 65+ Unemployment rate
Deprivation is highest among children and lowest among the elderly
Notes: Authors’ analysis using SILC Research Microdata file. Year
refers to the SILC survey year.

33. 33
Scenario A
(No Recovery)
Scenario B
(Recovery)
Not Poor
(%)
Poor
(%)
Not Poor
(%)
Poor
(%)
No
Pandemic
Baseline
Not Poor 78.5 4.9 81.5 1.9
[77.2, 80.2] [3.2, 6.3] [80.5, 82.3] [1.1, 3.0]
Poor 0.4 16.2 0.6 16
[0.1, 1.1] [15.5, 16.5] [0.2, 1.2] [15.4, 16.4]
Child poverty transition matrix

34. 34
Child deprivation rates by household type
0
10
20
30
40
50
60
70
1 adult with children 2 adult, 1-3 children Other households with
children
%
2008 2013 2018
One-adult households have consistently higher deprivation rates
Notes: Authors’ analysis using SILC Research Microdata file. Year
refers to the SILC survey year.