The EU Commission makes an interesting observation on in-work poverty:
‘ . . . in-work poverty is certainly becoming more prominent in policy discourse and action . . . However, the concept of “in-work poverty” is often not used as such, and discourse focuses on alleviating poverty in general.’
That’s not surprising. It is difficult for many policy-makers and commentators to discuss in-work poverty for the simple reason that employment is portrayed as way out of poverty.
When it is shown not to be for significant sections of the population, the pathway argument collapses.
Similarly, in Ireland: ‘in-work poverty’ is not generally discussed (though there has been considerable discussion of the Living Wage). Hopefully, the Nevin Economic Research Institute’s latest findings will contribute to changing that.
There are a number of ways to measure in-work poverty. The main statistical measurement is relative, or ‘at-risk’, poverty. This measures the percentage of workers whose income is 60 percent below the national median income.
The national median income is the midway point (50 percent above, 50 percent below) for all people in society, not just those in work. On this measurement Ireland looks good when compared with our EU peer group.
However, when comparing median incomes we’re not on the same pitch. This means that in Ireland, work income would have to be significantly lower than the other countries to be classified as ‘at-risk of poverty’, or 60 percent of median incomes.
That’s because Irish median income is significantly poorer.
That is why when using relative measures we have to look at not only the rate but the denominator (median income) as well. This is not to dismiss relative measures; only that we need to be aware of what we are measuring.
There are other measurements – soft measurements. These are not statistically based like ‘at-risk of in-work poverty’. These measurements, collected by the CSO and Eurostat, are based on asking people about their living standard.
This is what NERI presented last week, using two measurements: deprivation and inability to afford an unexpected expense.
The CSO defines deprivation as experiencing two or more deprivation experiences ranging from an inability to keep house warm, affording two pair of strong shoes or a warm waterproof coat, to affording a substantial meal every two days, or a morning/evening out in the last fortnight.
NERI’s findings are concerning:
Over 10 percent of permanent full-time employees are officially classified as living in deprivation conditions while part-time, temporary (fixed-term) and occasional employees come in at approximately 20 percent. These are dismal numbers.
Deprivation rates are still well above pre-crash averages (the average for 2002 – 2008) despite significant increases in national income. They have, at least, declined from recession highs. For instance, deprivation among full-time employees was 16.7 percent in 2014.
However, between 2016 and 2017, the rate barely fell by 0.2 percentage points. In fact, in 2017 the deprivation rate for two-income households actually rose over the previous year – from 9.2 percent to 10.7 percent.
(b) Inability to Afford an Unexpected Expense
Nearly 30 percent of permanent full-time employees are unable to afford an unexpected expense. This rises to nearly 40 percent for part-time employee and even higher for temporary employees.
Occasional and casual workers fare the worst with over half unable to afford an unexpected expense. The numbers are significantly higher than pre-crash numbers.
Unfortunately, we don’t have European comparisons for either deprivation or unexpected expenses for those in work. The following looks at deprivation rates among all 18-65 year olds.
This, at least, captures the working age population. The unexpected expenses data relates to those above the relative poverty threshold so, again, this is likely to be largely made up of people in work.
While indicative, the data shows Ireland topping the deprivation and unexpected expenses tables.
There is no magic bullet that can bring down rates of deprivation and precarious living conditions. One thinks of increasing the minimum wage – and there’s nothing wrong with that.
However, we shouldn’t assume that all the households affected are on the minimum wage.
Much depends on circumstances. If you’re paying €1,500 a month in rent, a few extra Euros in the pocket isn’t going to make much of a difference.
However, cutting rent by a couple of hundreds of Euros would be a significant gain in living standards.
Similarly, with families facing childcare costs, school costs, etc. – reducing these costs would go much further than a wage increase.
Getting a few extra hours of work would have significant benefit for those on low-hour precarious contracts.
Addressing these issues requires a number of inter-locking strategies:
Reduction in living costs
Reduction in precarious work contracts
Stronger statutory or sectoral wage floors
If we truly want employment to be a route to prosperity, if we want to reduce poverty in the economy, we need to take in-work poverty seriously. The first step is to start actually naming it so we can start debating it. These are the first steps to eventually abolishing it.
Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.