It appears from a new report of the Social Protection Committee that the income disparity has increased throughout the EU during the last decade of economic growth. This is among others the result of precarious employment relationships such as temporary employment contracts and part-time work. The share of people excluded from the labour market remained at a constant rate of 10 %. The risk of poverty in the EU has also not been reduced. Social security systems in the Member States are an important means to redistribute income and to reduce poverty. In particular in cases of Member States with high debts and low social protection it is doubtful whether their national social security systems will be able to cushion the effects of the crisis.
This Tuesday, the report “Growth, Jobs and Social Progress in the EU“, which was prepared in cooperation with the Social Protection Committee that includes experts from all Member States and the Director General Employment and Social Security, was presented to the public. This report examines the interaction of economic growth, employment and social policies within the EU Member States over the last decade. The results of the report should be included in the draft of a new EU strategy for growth and employment.

Growth has led to increasing disparity
During the last decade, economic growth in the Member States has contributed to a rise in living standards and to more investments in social systems; on the other hand, however, economic growth also resulted in a more imbalanced distribution of income. One of six households in the EU lives in poverty. Over the last years, the poverty rate within the EU has either stagnated or increased. In the last decade, the risk of poverty rose particularly strongly with regard to children (0-17 years). In 2007, ca. 12 % of all Austrian households lived in poverty.

The impact of redistributing social security systems within the EU is more progressive than redistributing taxes, whereby there is a high degree of variation with the EU. On average, social benefits (whereby pensions were not included) reduce the poverty risk in the EU27 by 36 %. In Austria, social benefits even reduce the poverty risk by more than 50 %; higher values only exist in Scandinavian countries and in Hungary.

A job is the best protection against poverty, but …
Prior to the crisis, the employment rate within the EU rose in particular due to the higher employment rates of women and elderly workers, whilst unemployment was reduced. The report comes to the conclusion that a job is generally the best protection against poverty; in spite of this, one third of the workforce across the EU has been affected by poverty! This among others is the result of an increase in precarious employment relationships. The number of employees between 25-49 working under temporary employment contracts has increased by a quarter during the period 2000-2008 and the increase of part-time employment is also following this trend.

The share of the working population, who is excluded from the labour market, has not been reduced over the last decade and stands at ca. 10 %. This affects in particular sole earners, migrants and persons with inadequate education.

A new Lisbon Strategy has to address these two problem fields. It must be emphasised that not only the quantity but also the quality of a job is important. Strategies for actively integrating these particularly affected groups must be promoted and supported. In order to drive the poverty risk of these groups and the integration in the labour market forward, it is necessary to invest more into the further education of these groups and to ensure their access to child and health care.

Efficient system – inefficient protection
The modernisation of the social security systems in the Member States has contributed to their financial sustainability; however, at the expense of an adequate protection of the insured. In future, sufficient public pensions will only then be available if employees work more and longer. One hurdle among others for this planned strategy will be the growing disparity within the Member States with regard to the health care of the workforce. Providing access to adequate health services must be the highest priority.

Social benefits as protection against the crisis
Particularly during times of crises it is important to have a well functioning network of social benefits as they act as automatic stabilisators. Will the social security systems also in the near future be able to cushion the impact the crisis has on the population of the Member States? The report anticipates severe problems in particular for those states, whose social security systems provide little protection against poverty and who are highly indebted (Estonia, Lithuania, Latvia and Rumania).

Further information:

Information page of the Director General Employment with report for downloading