Working poor in Western Europe: What is the influence of welfare state provisions and labour market institutions?

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1 Working poor in Western Europe: What is the influence of welfare state provisions and labour market institutions? Henning Lohmann University of Cologne Conference of the EuroPanel Users Network (EPUNet-2006) 8-9 May 2006, Barcelona (Universitat Pompeu Fabra), Spain

2 1. Introduction

3 1. Introduction welfare state reform: one aim is to bring the workless poor into the labour market: activation, strengthening of work incentives, workfare re-commodification (see e.g. Haveman 1997, Lødemel/Trickey 2000) against this background increasing interest in working poor in Europe work in comparative perspective: Marx/Verbist 1998, Strengmann- Kuhn 2003, Peña-Casas/Latta 2004, Bardone/Guio 2005 studies in single European countries: especially France, Switzerland, Germany, Ireland however: not much work on the explanation of country differences in in-work-poverty 1

4 1. Introduction Welfare states and in-work-poverty: availability and level of transfers direct reduction of poverty and implicit minimum wages (decommodification; Esping-Andersen 1990/99, Scruggs/Allan 2006) dual-earner policies higher number of earners per household (de-familisation/female autonomy; Lister 1994, Orloff 1993, O Connor 1993) family solidarity care and protection for family members, but negative consequences for needs of households of workers (de-familisation/young or oldage dependence; McLaughlin/Glendinning 1994, Millar/Waxman 1996, Hantrais 1999) 2

5 1. Introduction Labour market institutions and in-work-poverty: bargaining centralisation and coordination influence wage distribution and extent of low-wage work (Lucifora 2000, Blau/Kahn 1996, Wallerstein 1999) minimum wages secure a lower wage bond: influence on poverty depending on level of minimum wage (Lucifora 2000) however: personal earnings are only one source of income, earnings of other household members and transfers are also relevant 3

6 1. Introduction Hypotheses (I): higher level of de-commodification lower level of inwork-poverty higher level of de-familisation lower level of in-workpoverty but: higher needs of households of workers protection of (younger) low-wage workers via family solidarity centralisation of wage bargaining lower in-workpoverty 4

7 1. Introduction Hypotheses (II): higher level of de-familisation (female autonomy) lower in-work-poverty of families with small children lower level of de-familisation (young age dependence) lower in-work-poverty of younger workers centralisation of wage bargaining lower in-workpoverty of low-skilled workers 5

8 2. Data and indicators

9 2. Data and indicators micro: European Community Household Panel (includes all EU countries before Eastern enlargement, Sweden had to be dropped) 14 countries observation period: , 5-8 years of observation for each country macro: various sources (OECD, Golden-Lange-Wallerstein 2006, European Industrial Relations Observatory, Künzler et al. 1999) observation period: around

10 2. Data and indicators poverty rate: relative income poverty 60 percent of median equivalised monthly net household income (using non-modified OECD scale) based on current household income sample: working population in working age (17-64) working defined on the basis of current employment status 7

11 2. Data and indicators independent variables (macro) de-commodification: net unemployment benefit replacement rate (in % of wage of average production worker) de-familisation I: children under 3 years in childcare per 100 children de-familisation II: number of household members 16+ years (country average) wage bargaining: centralisation (plant-level national level) and number of union members as a % of all employees (trade union density) 8

12 3. Descriptive results

13 3. Descriptive results Figure 1: Poverty rate by country (working age population, years) % DK A B FIN IRL UK D ES PT LUX F I NL GR country working living in working hh total Source: ECHP 2001, own calculations. 9

14 4. Multivariate analysis

15 4. Multivariate analysis modelling strategy I. panel regression models with fixed country effects (random effects, ) micro perspective: needs, resources and restrictions II. multilevel models with macro variables (two levels, random intercept, 2001) micro + macro perspective: de-commodification, de-familisation and wage bargaining 10

16 4. Multivariate analysis (I)

17 4. Multivariate analysis (I) Table 2: Coefficients (log-odds) from random-effects logit models on probability of being poor (working population, years) M1 M2 country (ref.: DK) NL *** *** BE *** * FR *** *** IRL *** *** IT *** GR *** ** ES *** *** PT *** *** AT *** *** FIN *** DE *** *** LUX *** * UK *** *** age in years *** in years squared *** gender (ref.: male) female education (ref.: ISCED 0-2) ISCED *** ISCED *** no of children/persons in hh 0-2 years *** 3-5 years *** 6-14 years *** 15+ years *** marital status (ref.: married, never married, widowed) divorced/seperated *** (continued) 11

18 4. Multivariate analysis (I) Table 2 (continued) working time < 15h *** 15-29h *** no of workers in household (by working time) < 15h *** 15-29h *** 30+ h *** employment status (ref.: employee, non-low wage) self-employed/family member *** low-wage worker *** occupation (ref.: professional) legislators, senior officials, managers *** technicians, associate professionals *** clerks *** service workers, shop/market sales workers *** skilled agricultural/fishery workers *** craft workers, plant/mach. operators, assemblers *** elementary occupations *** year (ref.: 1994) ** *** *** *** intercept *** rho N (observations) N (persons) Source: ECHP , own calculations. Notes: significant at p < 0.1 (***), < 1 (**), < 5 (*). 12

19 4. Multivariate analysis (I) poverty risks (summary of model 2): young age / old age low education living in larger households divorce / separation part-time work self-employment / low-wage work living in single earner household (second earner working part-time already reduces poverty risk) agricultural occupations 13

20 4. Multivariate analysis (I) Models with subsets of variables of model 2 M3 M4 M5 M6 sociodemographic householdcomposition householdcomposition and employment selfemployment/lowwage work age, age squared, gender, marital status, education number of persons in household by age group (0-2, , 15+ years) number of persons in household by age group (0-2, , 15+ years), number of employed persons in household by working time, working time of individual employment status + low wage work M7 occupation 8 occupational categories 14

21 4. Multivariate analysis (I) Figure 5: Absolute change in country coefficients in comparison to model 1 variables: full model [M2] variables: socio-demographic [M3] 0 0 log odds log odds ES GR IT PT AT BE DE FR IRL UK FIN NLLUX ES GR IT PT AT BE DE FR IRL UK FIN NLLUX variables: hh-composition [M4] variables: hh-comp.+employment [M5] 0 0 log odds -.6 log odds ES GR IT PT AT BE DE FR IRL UK FIN NLLUX ES GR IT PT AT BE DE FR IRL UK FIN NLLUX variables: self-empl.+low-wage [M6] variables: occupation [M7] log odds log odds ES GR IT PT AT BE DE FR IRL UK FIN NLLUX ES GR IT PT AT BE DE FR IRL UK FIN NLLUX Notes: Information on full model (M2) see table 2. Results from other models not reported. 15

22 4. Multivariate analysis (II)

23 4. Multivariate analysis (II) Table 3: Coefficients (log-odds) from multilevel logit models on prob. of being poor M1 M2 decommodification/defamilisation replacement rate (unempl.) persons 16+ y. per hh (country mean) *** childcare (places per 100 children) *** wage setting bargaining level union density *** cross-level interactions persons 16+ y. per hh * age childcare * child 0-2y. in hh bargaining level * low-skill occupations n (obs.) n (groups) change of deviance (vs. micro model) *** * Source: ECHP , macro indicators see appendix, own calculations. Notes: significant at p <0.1 (***), <1 (**), <5 (*), <10(+). MXa: controlling for age/age-squared, sex, no of children in hh (under 3/6 years), marital status, year. MXb/c: additionally controlling for education, no of children (under 15 years), no of persons 15+ years, working time, working time of household members (instead of no of additional workers in hh), occupation. 16

24 4. Multivariate analysis (II) Table 3: Coefficients (log-odds) from multilevel logit models on prob. of being poor M3 M4 M5 decommodification/defamilisation replacement rate (unempl.) * persons 16+ y. per hh (country mean) *** childcare (places per 100 children) wage setting bargaining level * union density *** cross-level interactions persons 16+ y. per hh * age * childcare * child 0-2y. in hh *** bargaining level * low-skill occupations n (obs.) n (groups) change of deviance (vs. micro model) * Source: ECHP , macro indicators see appendix, own calculations. Notes: significant at p <0.1 (***), <1 (**), <5 (*), <10(+). MXa: controlling for age/age-squared, sex, no of children in hh (under 3/6 years), marital status, year. MXb/c: additionally controlling for education, no of children (under 15 years), no of persons 15+ years, working time, working time of household members (instead of no of additional workers in hh), occupation. 16

25 5. Conclusion

26 5. Conclusion There is large variation of in-work-poverty in Europe. These differences are reduced by controlling for country differences in individual and household-related characteristics. However, differences in composition are not exogenous. The incidence of low-wage work has an influence on the extent of in-work-poverty but there are other, partly more important factors. At the macro level such differences are a bit hard to grasp, but there is evidence that de-commodification, defamilisation and wage-setting play a role. Changes in welfare state and labour market institutions changes in in-work-poverty? 18

27 Working poor in Western Europe: What is the influence of welfare state provisions and labour market institutions? Henning Lohmann University of Cologne Conference of the EuroPanel Users Network (EPUNet-2006) 8-9 May 2006, Barcelona (Universitat Pompeu Fabra), Spain

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