Decent Incomes for the Poor: Which role for Europe?

TL;DR: In this paper, the authors argue that European minimum standards are the place to start, including principles for minimum social security and minimum wages, as the European social objectives cannot be attained without guaranteeing adequate incomes to those in and out of work, and social coordination should thus go beyond broad outcome goals such as the reduction of the number of households at risk of poverty or social exclusion.

Abstract: EU social policy has generally been limited to the definition of non-binding social outcome targets, a governance model known as ‘second order output governance’. However, many EU Member States have failed to make progress in fighting poverty. This begs the question of whether a more performant EU-level involvement in the field of social policy is conceivable. In this paper, we argue that European minimum standards are the place to start, including principles for minimum social security and minimum wages, as i) the European social objectives cannot be attained without guaranteeing adequate incomes to those in and out of work, and ii) social co-ordination should thus go beyond broad outcome goals such as the reduction of the number of households at risk of poverty or social exclusion. We propose to include policy indicators regarding minimum income protection in the recently revised EU monitoring process of the European Semester.

Summary

Introduction

• Ever since the Lisbon Strategy, the European Union (EU) has declared poverty reduction one of its main social goals.
• Confronted with shifting context factors and in combination with the huge disparity in social outcomes across the EU Member States, the EU has more and more felt the need to take a stance on social issues.
• Conceptually, scholars distinguish in this regard between input and output, and first-order and second-order governance (Vandenbroucke et al., 2013).
• The currently used set of indicators should therefore be improved through the inclusion of indicators that offer more clear and concrete social standards not only on the level and the distribution of employment but also on adequate minimum incomes.

2. A Broad Focus on Minimum Incomes

• The authors understand minimum income protection as the income floor that is in principle guaranteed to all citizens.
• Likewise, on several occasions both the European Parliament and the Council of Europe have expressed concerns about minimum wage levels across Europe.
• In the spirit of the 2008 Recommendation, a thorough assessment of minimum income protection necessitates a synthetic view on the income floors for those out of work as well as in work, including social assistance and minimum wages.the authors.
• Second, there needs to be robust evidence and enough consensus that they contribute significantly to higher level objectives such as jobs, growth, competitiveness, social inclusion and fairness or financial stability.
• Including carefully selected input indicators in the streamlined EU policy monitoring process, on top of the currently used outcome indicators, has a number of advantages.

4. Data

• The authors present the policy indicators they propose to include in the European monitoring effort.
• This requirement excludes commonly used spending indicators.
• The model family should therefore be carefully selected and contextualised.
• The authors assume this lone parent household to have no savings or social insurance entitlements.
• The simulated income packages are extracted from CSB MIPI, a dataset on minimum income protection hosted by the Herman Deleeck Centre for Social Policy at the University of Antwerp, as this dataset specifically comprises information on minimum wages.

5. Minimum Incomes in Europe: A Wake-up Call

• The authors measure the adequacy of minimum income protection by comparing the rights-based net income packages of the model family to the EU at-risk-of-poverty threshold.
• These are represented by the white circle markers in Figure 1.
• In fact, only two countries of their sample guarantee a net disposable income above the at-risk-of-poverty threshold to out-of-work lone parents.
• Countries are ranked according to the level of the net income at social assistance, also known as Notes.
• This suggests that at least some countries tend to accommodate low gross minimum wages by social and tax spending while in some others relatively high minimum wages are taxed and used as a source for welfare state funding.

Conclusion

• Europe and its Member States are facing disappointing poverty trends among the working-age population.
• But more worryingly, there has been a lack of progress in the fight against poverty in the prosperous pre-crisis years as well.
• Against this background, recent developments at the EU governance level may prove important for strengthening the steering and co-ordination of social policies in order to meet common social objectives.
• Importantly, the Five Presidents' report emphasises the use of benchmarking and cross-examining performance in order to achieve convergence.

Figures

Table 1: Correlations between the proposed indicators, all expressed as % of the poverty threshold, 2012

Full text

This item is the archived peer-reviewed author-version of:
Decent incomes for the poor : which role for Europe?
Reference:
Cantillon Bea, Marchal Sarah, Luigjes Chris.- Decent incomes for the poor : w hich role for Europe?
Journal of common market studies - ISSN 0021-9886 - 55:2(2017), p. 240-256
Full text (Publisher's DOI): https://doi.org/10.1111/JCMS.12486
To cite this reference: https://hdl.handle.net/10067/1391200151162165141
Institutional repository IRUA

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Decent Incomes for the Poor: Which Role for Europe?
Bea Cantillon
1
, Sarah Marchal
1
and Chris Luigjes
2
1
University of Antwerp, Belgium.
2
University of Amsterdam
Abstract
EU social policy has generally been limited to the definition of non-binding social outcome
targets, a governance model known as ‘second order output governance’ (Vandenbroucke et
al., 2013). However, many EU Member States have failed to make progress in fighting
poverty. This begs the question of whether a more performant EU-level involvement in the
field of social policy is conceivable. In this paper, we argue that European minimum
standards are the place to start, including principles for minimum social security and
minimum wages, as i) the European social objectives cannot be attained without guaranteeing
adequate incomes to those in and out of work, and ii) social co-ordination should thus go
beyond broad outcome goals such as the reduction of the number of households at risk of
poverty or social exclusion. We propose to include policy indicators regarding minimum
income protection sensu lato in the recently revised EU monitoring process of the European
Semester.
Keywords: Social Europe; minimum income protection; EU governance; social monitoring;
social indicators
 The research for this paper has benefited from financial support by the European Union's Seventh Framework
Programme (FP7/2012-2016) under grant agreement No. 290613 (ImPRovE: Poverty Reduction in Europe:
Social Policy and Innovation; http://improve-research.eu). Sarah Marchal gratefully acknowledges a PhD
scholarship from the Research Foundation Flanders. The authors would like to thank John Hills, Tim Goedemé,
Rudi Van Dam and Frank Vandenbroucke, as well as the participants at the May 2015 Improve meeting in
Antwerp, for helpful suggestions and comments. The authors are solely responsible for any remaining
shortcomings and errors.

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Introduction
Ever since the Lisbon Strategy, the European Union (EU) has declared poverty reduction one
of its main social goals. This was reaffirmed by the ambitious Europe 2020 target aiming for a
reduction of the number of persons living in poverty, jobless households or material
deprivation by 20 million. Yet, despite this ambition, progress has been disappointing to say
the least (Gábos et al., 2015). Whereas the situation has worsened considerably after the onset
of the financial crisis, it is mainly the lack of progress in the pre-crisis years that indicates the
existence of structural constraints against which the EU social governance was even then
powerless (Cantillon and Vandenbroucke, 2014). Substantively, the EU social agenda
promoted ‘social investment’ and ‘work oriented welfare reform’ as a political recipe for
success in the field of social inclusion (Cantillon and Vandenbroucke, 2014). Prior to the
crisis this strategy could be regarded as a success in the field of employment (Van Rie and
Marx, 2012). It however largely failed to deliver on its promise to decrease poverty among the
working age population. At that time in many countries work poor households benefited less
from job growth (Corluy and Vandenbroucke, 2014) while the poverty reducing capacity of
social protection decreased to the detriment of these households in particular (Cantillon et al.,
2014). During the crisis in many countries the number of job poor households increased,
contributing to an overall increase of poverty while the effectiveness of social systems further
declined in many countries (Gábos et al., 2015).
In this paper, we ask what role the EU can play in facilitating progress towards the Europe
2020 targets and which instruments might be put in place. We argue that a broad approach to
minimum incomes, including minimum standards in social assistance and minimum wages, is
the place to start. The European social objectives can only be attained if a new balance is
struck in the investment concept that is often referred to within the EU: effective employment
strategies should be supplemented by efficient social spending and adequate incomes for

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those in and out of work. To that end, the EU should support the Member States on a systemic
level. As a first step, a set of well-thought-out indicators of minimum income policy packages
could balance and strengthen the monitoring arrangements underpinning the social Open
Method of Co-ordination (OMC) and the European Semester, leaving room for subsidiarity,
monitoring and mutual learning, starting from a broad view of the overall quality of social
policy. Using a comprehensive database of gross and net minimum wages, in-work-benefits
and employment incentives for low-productive workers, we show how these indicators could
be instrumental in pointing to country-specific policy mixes and point to possible imbalances,
policy failures and successes.
This article is organised as follows. In the next section, we outline the social policy
governance issues the EU is confronted with when putting social objectives on the policy
agenda. We proceed by presenting minimum income protection as a policy area where
increased EU social governance is both conceivable and needed. In section 3, we propose to
include selected minimum income protection policy indicators in the social governance
framework of the EU, in order to render the different policy choices explicit, and to enable a
more transparent monitoring of policy effort towards adequate minimum income protection.
We then discuss the data and method on which the proposed indicators build. In section 5, we
use these indicators to capture the current variation in levels of minimum incomes relating
them to minimum wages, gross-to-net efforts and unemployment traps. Finally, we conclude.
1. Social Subsidiarity and Weak ‘Outcome’ Governance
Social policy within the EU is structured around the principle of subsidiarity. An ex-post
evaluation suggests that despite the absence of a supra-national social policy, in the post-war
period the old EU Member States have succeeded in developing strong welfare state
architectures. However, crucial changes have taken place ever since. The increased economic

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and financial integration has led to stricter standards (and sanctions) for fiscal discipline
which -- in combination with the more recent increased monitoring throughout the European
Semester -- seriously inhibit the national room to manoeuvre (Costamagna, 2013). Moreover,
creeping economic integration and continuous expansion have given rise to fears of welfare
tourism and social dumping within the EU. Famous cases such as Rüffert, Laval and Viking
illustrate how the European Court of Justice (ECJ) challenges nationally based social
regulation (Ferrera, 2012; Leibfried, 2010). These cases, combined with the 2004
enlargement, have only fostered such fears, as exemplified by recent proposals to limit
exportability of benefits and limit access to employment related benefits (Cameron, 2013).
Even recent ECJ decisions reflect fears of benefit tourism (Verschueren, 2015).
Confronted with shifting context factors and in combination with the huge disparity in social
outcomes across the EU Member States, the EU has more and more felt the need to take a
stance on social issues. In line with the social subsidiarity principle, the EU’s involvement has
remained however limited to soft governance initiatives, such as the formulation of non-
binding policy targets (the Europe 2020 social targets) and the monitoring of Member States’
progress towards these targets in the OMC and, more recently, in the revised European
Semester. Hence, the Union relies on (non-binding) outcome targets that leave it to the
Member States to outline policy strategies. Important in the present context are the
employment related indicators and the European poverty line at 60 per cent of median
equivalent income in any given country. Various other indicators build on this notion,
including those relating to poverty risks in jobless households, and the depth and duration of
poverty risks. These employment and income indicators are prominently present within the
portfolio of indicators.
Conceptually, scholars distinguish in this regard between input and output, and first-order and
second-order governance (Vandenbroucke et al., 2013). Second-order governance merely