New recommendations for reducing poverty in Europe

The EU-funded IMPROVE project has outlined its key policy recommendations on how European governments can better tackle poverty and improve social cohesion through evidence-based policymaking.

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The IMPROVE project focussed on policies undertaken by European governments before, during and after the Great Recession of 2008/09 that have been specifically enacted as a means to reduce poverty and increase social cohesion.

Its key findings were unveiled during the project’s final conference in Antwerp, Belgium, from 3-5 February 2016.

Demographic change and employment’s impact on poverty

The overall key message from the project is that poverty is not a static phenomenon and that the drivers between poverty entry and exit vary between countries.

One of the key drivers identified was that demographic changes are relatively more important than other factors for tackling poverty, particularly for Northern European countries. The rate of poverty entry was more prolific in Southern European economies that have been facing a prolonged demographic crisis of a rapidly ageing population.

Another finding was that employment rises did not strongly reduce poverty before the economic crisis, but that the employment and poverty rates often mirrored each other.

‘Overall, a 10 % employment rise will be associated with a 2.5 % drop in poverty rates, but allowing for country differences and varying patterns over time reduces the effect to 1.9-2.5 %,’ explained Professor John Hills from the London School of Economics (LSE). ‘In short, employment doesn’t solve everything.’

However following the onset of the crisis, there was a much clearer correlation between dropping employment rates and rapidly rising poverty, especially in central, eastern and southern European countries.

Effective policies to reduce poverty

In some of the worst-hit countries during the crisis, some austerity measures were fair in design, the project concludes. Cuts in public sector pay had progressive effects, particularly in Greece, Portugal and the Baltic states.

Changes in direct taxation and social insurance policies were also generally positive. Pension reduction reforms and other social benefit changes had varying results across countries and closely depended on their structural design.

The project also discovered that increasing the minimum wage did not dramatically decrease poverty levels, as most individuals on the minimum wage were already above the official poverty line.

However, increasing the income tax threshold was even less effective, with the UK and Belgium being used as examples.

On the other hand, increasing child benefit allowance was found to be much more effective in reducing poverty, with the project looking at case studies in Greece, Estonia, Italy and Hungary. The project did note though that this is also a very expensive option and could be much more difficult for poorer EU countries to effectively implement.

Lessons for 2020 and beyond

The project team strongly emphasised that each country has had its own unique experience on reducing poverty, depending on its economic strength, welfare system, and its record on effectively implementing public policy.

The 2000s was a ‘lost decade’ for poverty reduction in Europe, with governments often making changes to social systems that had the opposite of the intended effect.

Overall the project results argue that the annual monetary adjustment of social benefits and tax thresholds can have a larger impact on poverty reduction than deeper structural reforms.

If these thresholds aren’t regularly updated to take economic factors into account, such as the rate of inflation, then other policy instruments have to work much harder to have a noticeable impact on reducing poverty.

Speaking at the end of the conference, Stefaan Hermans the Head of Cabinet for Marianne Thyssen, European Commissioner for Employment, Social Affairs, Skills and Labour Mobility stated the importance of linking the EU’s policy agenda with the research agenda championed by the IMPROVE project.

‘It is clear that when we want to make progress on poverty reduction in Europe, we need to have the methodologies, reliable data, a common discourse and a common understanding,’ he concluded.

Countries

Belgium